The View | New strategies needed as Third Industrial Revolution unfolds
In the technology-driven Third Industrial Revolution, education and health care loom as major employers, along with non-profit enterprises
Many today believe the world has entered the Third Industrial Revolution, where technological improvements in robotics and automation will boost productivity and efficiency.
These advancements have three biases: They tend to be capital-intensive (favouring those with financial resources), skill-intensive (favouring those with a high level of technical proficiency), and labour-saving (reducing the number of unskilled and semi-skilled jobs).
The pundits speculate the economic impact on the job market will be significant, and present serious social and political challenges in terms of growing inequality and the provision of safety nets to mitigate the consequences of disruptive technological progress. The concerns are three-fold.
First, it is uncertain whether demand for labour will continue to grow as technology marches forward. If not, there will be serious dislocations and worsening inequality. This is a particular concern for semi-skilled workers. If the Third Industrial Revolution continues to spread globally, then Asia's Second Industrial Age might end swiftly. Hong Kong's encounter with the old manufacturing era lasted only one generation before it became a service economy.
Second, the rapid development of smart software is transforming the old service economy. In the "on-demand" economy, computer power joins hands with freelance workers. Uber is an example of this. In the West, in the Second Industrial Age that ended last century, workers were protected from unemployment, penury in retirement, and health and safety risks either by the welfare state or their employers.
In the "on-demand" economy, such risks are pushed on to individuals, even more so if on-demand services are organised across national borders. New approaches have to be found to mitigate the associated economic and social risks. Governments are usually poorly informed and incentivised to do this.
Third, the new technology has a winner-take-all effect that is driving the rise in income and wealth inequality. This may not necessarily pose an economic challenge for society, but it is likely to provoke social and political concerns. The future presents at least two challenges: economically it is about good jobs and socially it is about safety nets. Which industries will be the employment growth areas? And can they provide social safety nets?