Availability of Cheap Labor and Technological Advancement leads to Joblessness

Labor around the world has got squeezed by multiple forces beyond its control. The relentless and rapid technological development along with globalization has pauperized the low skilled workforce around the world. Companies and top management are continuously squeezing the workforce to extract the last drop of blood. The massive over supply of labor means that the bargaining power of labor is dropping continuously. Even governments are helpless as MNCs can switch production to other lower wage countries at the drop of a hat.

While the blue collar workforce had been emaciated by the rise of China, the improvement in communications has made even large sections of the white collar workforce poor and redundant. Programming, language translation, customer support and other services are being heavily outsourced to cheaper locations such as India and Philippines where the costs are a fraction of that in developed countries.

This trend is set to increase with better technology and platforms such as Elance and others. Large MNCs are forcing unfair compensation schemes such as variable pay on poor workers who have little or no control over the companies overall performance. Variable pay makes sense for the top management as they have a lot of control over the company’s direction, but for factory workers I don’t get it. However, MNCs can force such schemes as governments are mostly run by lobbyists working for the big Capital.

Robots to replace Humans

Technological advancement is supposed to improve productivity and not impact overall employment. However, recent trends suggest otherwise with a number of instances jobless growth being seen in places like India. Also the increase in jobs is in mostly low paying ones such as restaurant and logistics workers. The pay scale is too low for a decent standard of living in developed countries, while in poor countries these workers lie below the poverty line. The improvement in robot technology is now a big threat to even these low paying jobs. A restaurant in China is now working entirely with robots, while Foxconn which is one of the world’s biggest employers plans to build a million robots to replace Chinese assembly line workers.

Read my earlier article on The Rise of the Robots – Global Labor in more trouble.

Reforms and Possible Solutions

World population is growing rapidly in absolute numbers and we are on target to touch 10 billion by 2050. Not only does this put huge pressure on the planet’s resources, but it leaves a big question mark on how jobs for them will be found. We could see a bifurcated society even in developed countries where a top 1% lives in a utopian society while the rest live in slum like conditions. A number of movies and science fictions stories have been developed on this theme. But given the current developments I think it’s a highly probabilistic outcome. The Wall Street Movement died without too much protests while other protests in Brazil, Israel, India, Turkey and other places have also not made much headway. There is deep disenchantment amongst large sections of the populace but nobody knows what to do nor has a clear vision. Reforms of labor and bureaucracy is one way to unleash the entrepreneurial energies of young people. A Silicon Valley type of culture needs to be implemented in a number of places. Constraints of capital and hurdles in starting a business has made the environment discouraging for entrepreneurs in most places. Large scale corruption, crony capitalism and nepotism in BRICs mean that these places continue to grow large government dependent conglomerates. These companies are more adept at managing regulators than innovation which would create jobs.