Singapore: Technology is transforming jobs and wages in East Asia and Pacific, creating opportunities but the benefits are not being evenly shared. Where technology is adopted depends on which tasks can be automated and profitably so; who benefits depends on whether a worker’s skills are complements to rather than substitutes for the technology.

According to World Bank, industrial robots have become increasingly economically viable, with factories around the world using them for routine tasks such as welding on assembly lines. Their cost and economic viability vary widely across sectors. Robots used in more sophisticated sectors such as electronics and vehicles can cost 10 times more than those used in less sophisticated ones such as rubber and plastics. Over the past decade, EAP countries have increased their use of robots and narrowed the gap with high-income economies. In 2022, the average number of robots per 1,000 manufacturing workers was 17 in high-income countries. China had 12, and Malaysia, Thailand, and Viet Nam each had 8.

Analysis of labor markets in Indonesia, Malaysia, the Philippines, Thailand, and Viet Nam finds that adoption of robots has boosted employment and labor earnings. In Viet Nam, for instance, locations with greater robot use have seen gains in employment and labor income of about 10 percent and 5 percent, respectively. The productivity gains from automation appear to be generating scale effects that more than offset any job displacement effects. The benefits, however, have not been evenly shared. Across these five countries, adoption of industrial robots created around 2 million jobs for skilled formal workers between 2018 and 2022 but displaced 1.4 million low-skilled formal workers who performed routine and manual jobs. The chief beneficiaries have been younger workers equipped with skills that complement robots; many of the people who have been displaced are older assembly-line workers, who have been forced to move to lower-paying, less secure jobs.

AI is increasingly being used to perform tasks such as financial analysis and translation. It is also augmenting human efforts in tasks that involve strategic, creative, and social tasks. But these kinds of jobs are about a third as common in the developing countries of EAP, where just 10 percent of people hold such jobs, than in high-income economies, where the figure is about 30 percent. For this reason, EAP countries appear to be less vulnerable to AI-driven job displacement than high-income countries but also less equipped to benefit from AI. Digitalization is already enhancing the tradability of services, and AI is likely to transform production processes. Developing EAP countries need to harness the potential of AI to ensure that a dynamic services sector is a source of better job opportunities in the future.

Digital platforms, such as China’s Alibaba, Indonesia’s GoTo, and Singapore’s Grab, have improved market intermediation by connecting users to e-commerce, delivery, and ride-hailing services. They have broadened job access for people requiring flexible job hours and people who were previously excluded from the labor force but have also hurt workers in traditional sectors. In Viet Nam, for example, drivers of motorbikes in the informal sector saw a 20 percent income boost after ride-hailing apps emerged, while drivers of traditional taxis saw reduced job security and earnings.

Policy makers can help ensure that technological advances are a blessing rather than a curse. As new technologies become cheaper, their adoption is likely to spread, transforming labor markets even more profoundly than they already have. To prepare for the transformation, policy makers must act now on several fronts: investing in skills development to equip people with deeper technical, digital, and socioemotional skills that complement the new technologies; facilitating capital and labor mobility by tackling barriers that prevent workers from shifting to high-growth regions and sectors and easing firm entry and exit to allow capital reallocation; addressing factor price distortions, such as capital tax exemptions or labor taxes, which have led to excessive automation and stunted job growth in high-income economies; and ensuring social safety net for workers in the new digital informal economy.

The World Bank recently launched a series of in-depth reports exploring the nexus between new technologies, jobs, productivity, and green and service sector-oriented growth in EAP. See the Related links at right to learn more about how new technologies are transforming the region.