There is a large ground to cover if Central Europe is to be ready for automation and the benefactor of technological changes. If we miss this opportunity by betting on authoritarian strongmen and populist recipes, it will not be just a waste. It will be an actual and very serious threat to our prosperity.
Like many traumatic experiences, the pandemic seems to create a structural break. It affects the way we live and work during the lockdown period, but it may also change our life and the way we go about our jobs and the future of work long after the pandemic crisis has ended.
At once, the possibility of job loss became much more realistic for everyone. To our horror, we also found out it is not only the low-skilled workers who are at risk.
The unemployment rate hit double digits in April in the United States (14,7 per cent) and Canada (13 per cent). The increase of job loss is slower in Europe due to the stimulus packages but most fear it is simply delaying the impact. The expectation is that the employment rate will reach nine per cent across Europe, with South Europe hit the most.
Entrepreneurs also found out that their position is as fragile as everybody else’s. Even large and prosperous companies can be brought to their knees within weeks.
The real threat
This has resulted in so far unseen phenomena such as a strike of entrepreneurs in Poland: businesspeople engaged in an illegal public gathering at night to protest the lockdown.
The real threat to economic interest and the livelihood of many is adding fuel to the spread of disinformation and fringe anti-science groups linking pandemics to the rollout of 5G, chemtrails and Bill Gates. Their popularity may be a fallout from the pandemic that makes it difficult to go forward.
However, this may be but the beginning of the second wave of populism. So far, the rise of illiberalism was mitigated by the EU and high support for the European project, especially in Poland.
While long-lasting attempts to undermine this positive attitude towards the EU have been ineffective, the fear of outside competition damaging the job market may trigger isolationist sentiments.
Feelings of insecurity over job stability could bring back concerns about technological unemployment – and clearly, Western partners are far ahead of Central Europe.
It came quietly and almost unnoticed
Computers changed the way business is done and allowed the creation of multinational corporations. Before integrated Enterprise Resource Planning (ERC) systems, large organisations were basically unmanageable. Yet, the second revolution came quietly and almost unnoticed. The rise of videoconferencing and collaborative tools was mostly seen as merely auxiliary methods for the purpose of streamlining communication. And out of a sudden they are the backbone of businesses during the pandemics.
They are so finetuned that even the companies that had marginal experience with them managed to utilise them to a significant degree.
Suddenly we realise that a lot of things we do can be done quite differently. Unproductive meetings can become emails or short videoconferences. We can save money and the environment by cutting down on the daily commute and gain extra work hours per day.
Of course, such possibilities do not apply to everyone. There is still a sizable portion of the workforce that sees a more balanced career is possible. Meanwhile, managers realise that home-office may even increase productivity. In sum, the return to the status quo ex-ante will not happen.
This shows how our expectations and the way we work can change very rapidly – basically overnight.
Thousands of years people worked basically in the same way. This changed at the end of the eighteenth century with the first industrial revolution, which brought a lot of uncertainty and unrest.
The Luddites were the first to oppose technological progress for fear of how work would change or even disappear. Such fears exist until the present day.
So far, technology has been highly inefficient in eliminating jobs. Since the early twentieth century, only one profession was eliminated due to automation (the elevator operator) but surely it reduced a lot of activities – mostly tedious, repetitive and dangerous ones.
Instead, technology created more jobs than before and in most cases with a higher added value. Many fear however that such an optimal solution may be coming to an end. Estimates show that in the coming decade over half of the tasks may be automated.
Coming for our jobs
However, it seems that robots are coming for our jobs. Not everybody’s profession is at risk, of course. The more creative and non-repetitive, the higher chance it cannot be automated quickly.
Which jobs are at risk?
Which jobs are safe?
Source: Oxford University
While the new economy will be thriving for a long time, traditional jobs in manufacturing and to a large extent also in services are at risk.
If permanent unemployment for the low-skilled workers becomes the new norm, this will create a challenge for the state. Countries that based their economy on manufacturing will be hit the most – generally a problem in Asia.
However, near-shore factories are often localised in Central Europe. Their liquidation may be one of the first moves done by international corporations because of labour shortages or rising wages.
Therefore, we cannot discount this as a problem that only applies to others.
Source: McKinsey Global Institute
How to deal with this future is an issue that requires careful consideration and debate. The scenario-based report on The Future of Work published by Visegrad Insight tackles this problem.
Things are changing
The report shows that any scenario presents significant challenges for the region. Insufficient technological progress is a problem by itself due to an ageing population. A relatively cheap and well-educated workforce was a significant comparative advantage for the region.
Now, things are changing, and the lack of a workforce is becoming a major problem. The report shows that automation is actually something we need. If its benefits do not materialise, we are bound to suffer the consequences.
However, the success of AI and automation is no guarantee of prosperity for a region that is slow to adapt. That is why the report indicates necessary policy changes with respect to the higher education system and the labour market.
Changes are urgently needed as there is a lot of catching up to do. According to the International Federation of Robotics, the leader in robot density is Slovakia: it has 165 industrial robots installed per 10,000 employees (as compared to 338 in Germany). The rest fares worse: Czechia (135), Hungary (57) and Poland is lagging behind with a meagre 36 robots per 10,000 employees.
This clearly shows there is a large ground to cover if Central Europe is to be the benefactor of technological changes. Otherwise manual labour, however cheap, will ultimately lose against automation.
The key is to convince corporations that nearshoring is a better option than reshoring. However, this requires the appropriate infrastructure. And it is not about good roads or railways, but skilled specialists, openness and a stable political environment.
Unfortunately, the V4 countries do not ride well on these measures each with their own set of problems. The poor level of higher education is a common denominator and probably the most troubling one. And there are few indicators that this situation is changing.
Higher education is mostly underfunded, focused on quantity rather than quality and tangled with internal politics. Even worse, country-level politics are also starting to influence academic independence and integrity. This may be in a direct and aggressive way – as in a case of the Central European University forced out by Victor Orbán – or in a more subtle way through the manipulation of financing to promote institutions that are more aligned with the party in power.
The outlook for the labour in V4 countries is therefore rather bleak and it is paramount to ignite public debate how to deal with the coming wave of automation and AI.
These changes may be a great opportunity for the region and help to finally catch up with the level of development of the West.
But if we miss this opportunity by betting on authoritarian strongmen and populist recipes, it will not be just a waste. It will be an actual and very serious threat to our prosperity.
This article is part of the #DemocraCE project.