Nobel Perspective: How will technology shape the future economy, industry and employment?
New technologies create “new jobs”
In the past 2010s, China’s entire economic and industrial structure has undergone tremendous changes and innovations. One of the biggest driving factors is the power of science and technology represented by the Internet and digital technology.
Technology is a huge opportunity for the entire world, because new technologies can both give rise to emerging industries and transform traditional industries. Thanks to robots and automation, heavy and repetitive physical work has disappeared, the proportion and importance of the service industry has continued to increase, and it has also provided people with more high-quality jobs and life experiences.
Looking at the history of human development, every technological advancement will save labor in traditional industries, but will also give rise to more employment demand in the new economy and new industries. “This is not just digital technology. Any rapid economic development that produces structural changes – creating new and changing jobs and eliminating old jobs – will cause this problem.” As Michael Spence, the 2001 Nobel Prize winner in economics, believes in his column “UBS Nobel Perspective”.
While new technologies are driving economic development, they are also changing the employment structure. According to a survey report by the World Economic Forum (WEF), in the next five years, robots and algorithms in the workplace will improve the productivity of existing jobs, creating 133 million new jobs, and some high-risk, high-repetitive jobs will gradually disappear (75 million jobs). In an interview with Michael Spencer in UBS’s “The Future of Humanity” report: Digital technology represented by robots (with vision, artificial intelligence, etc.) will replace part, possibly most, of labor-intensive production and distribution over time – because it reduces costs.
In addition to changes in new employment, technology may also further accelerate the layout of labor in the global industrial chain. Especially under the impact of the COVID-19 pandemic, trade barriers have subverted the global supply chain, promoted the development of digital trade, and provided some workers with more extensive trade service opportunities, such as writing, translation, and legal services. At the same time, according to the research of the UBS report, the development of technology will reduce the demand for cheap labor, allowing companies to move part of their production back to their local areas.
“As low-cost labor constraints ease, this will lead to some localization of production.” Michael Spencer further added that this actually means a very substantial reordering of the supply chains (internal and external) that define the structure of the global economy.
“There are more and more ‘planes’ hovering over farmland”
It’s just one of the ways technology and economic forces are converging to create a “techno-economics” that is reshaping our lives at work and at play, according to a UBS report.
Northern Tiantu, a Chinese technology startup, has launched an agricultural and forestry plant protection drone, which has begun to fundamentally change the situation of agriculture being “facing the loess and back to the sky”: it not only saves more than 20% of pesticide use and more than 90% of water each year, but also achieves an operating efficiency that is 30 times that of manual labor. It also allows managers to use huge server units to analyze data in real time and deal with problems as soon as possible, greatly improving the safety and efficiency of plant protection work.
There are more and more “planes” hovering over China’s farmland, and a group of professional “drone pilots” have emerged. They are proficient in using drones and other agricultural machinery. Each of them manages hundreds or thousands of acres of farmland on average, becoming the new image of professional farmers in the new era.
“Digital technology brings huge opportunities for farmers to access information… In the future we will have more complex and advanced applications, and more and more farmers will have smartphones and GPS systems and so on. If they have access to this information, it will also help them improve their ability to cope with climate change.” Michael Kremer, the 2019 Nobel Prize winner in economics, encouraged this combination in a video interview in the UBS Nobel Perspective column.
Not only in agriculture, but in almost all fields, the impact of technological revolution on industrial economy is becoming more and more significant. Especially under the pressure of the epidemic, the digitalization of various industries has been greatly accelerated, and has been promoted from the C-end to the B-end, from pilot to large-scale, with remarkable results.
The 2021 China Enterprise Digital Transformation Index, released by the National Industrial Information Security Development Research Center under the Ministry of Industry and Information Technology and Accenture, also confirmed that the leading enterprises in transformation in various industries have shown strong resilience under the impact of the epidemic due to their good digital foundation. Not only has their share increased significantly to 16%, but their digital advantage over other enterprises has continued to expand to as much as 35 points. In short, digital transformation with technology as the core is becoming an important driving force for the high-quality and sustainable development of China’s economy.
China’s technological transformation and investment practices
The changes brought about by the new wave of digital technology revolution are particularly profound in China.
In recent years, China’s economic transformation has accelerated, scientific and technological development has accelerated, and the proportion of scientific research investment in GDP has increased year by year. Despite the huge impact of the epidemic on the global economy in 2020, China’s R&D expenditure still reached 2439.31 billion yuan, and the investment intensity (ratio to GDP) reached 2.40%, a record high in the past 11 years.
Economists also have a positive view on the role of the government. “What the government can do first is to enable companies to adopt new technologies, maintain flexible labor markets, and negotiate with social partners in a way that is beneficial to everyone,” said Sir Christopher Pissarides, the 2010 Nobel Prize winner in economics, in his column “UBS Nobel Perspective”. “In other words, (the government) should encourage the ownership of new technologies.”
In the new round of technology cycle led by 5G+AIoT (Artificial Intelligence Internet of Things), the integration of new technologies is expected to improve the efficiency of many industries, and a new batch of science and technology giants have emerged in the market. At the same time, a major feature of China’s technological development is its strong practicality. Coupled with the drive of industrial policies, it can quickly introduce industries and applications when breakthroughs are made in key areas of the national economy, and obtain leading dividends in a timely manner.
In addition to the technology giants, in the upgrading of traditional industries, domestic substitution and the transformation and upgrading of manufacturing are the general trend, which also indicates the direction for the practice and investment of the technology industry. At the same time, under the guidance of China’s “dual carbon” (carbon peak and carbon neutrality) goals, green and low-carbon technology revolution and industrial investment, such as electric vehicles, smart logistics, clean energy, ESG impact investment, etc., will usher in historical opportunities.
In recent years, China has been more determined than ever to promote technological innovation and industrial development. The next question is how to further accelerate the impact and penetration of technology on future industries and sectors? According to UBS research, based on a lot of data and cases, the technology penetration rate in many industries is still very low. Therefore, the upward curve of technology adoption is at the beginning stage, and digital penetration will be further accelerated. The vast majority of companies need to follow the trend and establish a comprehensive understanding and strong support for technology empowerment and digitalization strategies to enhance their competitiveness in the future.
Innovation drives development, and technology leads the future. The future shaped by technology is surging in China. “Each of us should welcome the development of technology. If we know how to deal with it, we will live better after the transition period.” Christopher Pissarides concluded.