Technological progress is significant for a country’s growth and economic development today. As technology advances, it often leads to higher productivity and economic expansion. However, the connection between technological progress and productivity is quite complex, especially when comparing affluent nations to lower—and middle-income countries in regions like Africa, Latin America, and the Caribbean.
In the realm of productivity metrics vis-à-vis technology, the emphasis transitions to the influence of technological advancements—like automation, digital instruments, and sophisticated technological assets such as computers—on productivity levels. Technological enhancements bolster productivity by empowering workers to produce more with the same amount of inputs or by making production methods more efficient. The impact of technology on productivity is gauged through variables such as the embracement of novel technologies, capital investments in advanced technological equipment, and the consequent alterations in the wage patterns and number of jobs created.
An economic challenge today is ensuring that the wealth created by pioneering technologies, including generative artificial intelligence (AI) and breakthroughs in biomedicine and manufacturing (which rely on powerful computing resources), is distributed fairly. To improve living standards, the benefits of these revolutionary technologies need to be shared equally. So far, however, only a tiny minority has been able to take advantage of these benefits.
Impact of Technology on Productivity and Earnings
In developed countries such as the US, UK, Japan, and China, the infusion of technology in various sectors has led to significant productivity gains. AI and automation deployment is projected to increase labour productivity by up to 40 percent by 2035. This anticipated increase is attributed to the enhancement of processes, reduction in operational costs, and the ability to produce more with fewer resources. For instance, introducing robotics in manufacturing has streamlined production and increased the precision and speed with which goods are manufactured, leading to higher output and earnings. Countries with higher labour productivity typically have advanced economies with a significant focus on technology, education, and capital investment. For instance, countries like Ireland, Norway, and Switzerland are known for high labour productivity levels.
Conversely, in African countries, the correlation between technology and productivity is more complex. Adopting mobile payment services like M-Pesa in Kenya has demonstrated how technology can lift households out of poverty and contribute to business revenue growth through productivity gains. Yet, despite technological improvements, the overall labour productivity in many African countries still needs to improve compared to the rest of the world. While technology plays a crucial role, it’s important to recognize that productivity is influenced by a myriad of factors such as capabilities, finance, policies and regulations, and access to markets. Merely providing advanced technology or machinery without addressing these underlying factors may not lead to significant productivity gains.
The Dichotomy of Technological Impact on Employment in Developed and Developing Nations
In a discourse by MIT economist David Autor, he suggests that emerging AI can amplify the productivity and capabilities of employees who receive a fixed salary or wage rather than those whose pay is tied to performance incentives or output-based metrics. Echoing this sentiment, research conducted by Autor’s MIT colleagues Erik Brynjolfsson, Danielle Li, and Lindsey Raymond demonstrates that AI markedly elevates the efficiency of call-centre personnel. This sentiment is mirrored in Africa, where tech enthusiasts and industry leaders attest to similar productivity enhancements. These insights suggest that generative AI is poised to amplify human work and bolster productivity rather than supplanting human labour.
However, technology’s influence on employment exhibits stark contrasts between developed and developing nations. In the former, technological advancements have precipitated job displacement but concurrently have spawned new employment categories, notably within the tech sphere. While adopting digital technologies has contributed to job creation and poverty alleviation in African nations, the underutilization of mobile internet services in Sub-Saharan Africa underscores the imperative for comprehensive policy reforms. Such reforms are crucial to amplifying the adoption and application of digital technologies across sectors. By better harnessing the potential of technological advancements, African countries can drive productive employment opportunities and catalyze economic transformation.
In nations with lower and middle incomes, technology harbours the potential to transform the employment landscape by diminishing transaction costs and bolstering firm expansion, which can spawn jobs or lure work to more competitive new markets. Nevertheless, the prospect of job polarisation and disparities, contingent upon the nature of job tasks, looms as a concern, given that technology enables employers to automate or outsource an increasing number of tasks.
In Nigeria, the tech sector contends with a significant exodus of skilled professionals, many pursuing superior prospects overseas due to prevailing insecurity and infrastructural deficiencies. This migratory trend impinges upon Nigeria’s burgeoning tech ecosystem. From 2014 to 2021, a total of 474 Nigerian tech talents relocated to the UK under the Tech Talent Visa program, contributing to a talent void within the local tech industry. This brain drain poses a formidable obstacle to the growth and innovation of indigenous tech enterprises. Concurrently, the gig economy is on the ascent, proffering flexible employment modalities to Nigerians via platforms such as ride-hailing applications and freelance marketplaces. However, this paradigm shift towards autonomous work presents challenges, including elevated unemployment rates and the absence of social safeguards for gig workers.
Amid these challenges, opportunities emerge to mitigate the talent outflow and unemployment dilemmas. Managed migration schemes could aid in retaining skilled labour within Nigeria while promoting international cooperation. Moreover, regulatory interventions are paramount to guarantee equitable treatment and protection for gig workers, harmonizing the autonomy of independent work with the necessity for job security and benefits. By confronting these issues head-on, Nigeria can more effectively mobilize its technological talent and capitalize on the gig economy’s potential to drive sustainable economic advancement.
Technology and Productivity: unpacking the enabling factors
Investing in Education: A lack of access to quality education and vocational training can result in a workforce needing more skills for higher-productivity jobs. This could, in turn, reduce demand for services due to low capacity to deliver. With the advent of generative AI and machine learning, developing nations must consider these spaces crucial to meet job demands, investments, and development.
Digital Public Infrastructure (DPI): Digital Public Infrastructure (DPI) is a pivotal catalyst for economic transformation, particularly in low—and middle-income nations, where it can expedite economic growth by an estimated 20% to 33%. DPI fosters a landscape ripe for opportunity, bolstering sectors such as healthcare, agriculture, and financial inclusion and simultaneously empowering women economically.
The synergistic operation of the triad of core systems—identity, payments, and data exchange—unlocks the full potential of DPI. When these systems interconnect seamlessly, they enable individuals, enterprises, and governments to harness the comprehensive advantages of DPI, culminating in dynamic and competitive economies over time.
Countries embarking on this digital journey are not relegated to reinventing the wheel. They can leverage established digital public goods—cost-effective, adaptable, open-source technologies that act as foundational elements—to construct their infrastructures, ensuring alignment with the unique demands of their economies and populace. For instance, Togo capitalised on its electoral registry and digital payment avenues to broaden social assistance outreach from 12,000 to 1.8 million beneficiaries, extending emergency funds to 35% of its adult population.
DPI is instrumental in promoting sustainable and inclusive economic advancement. It equips smallholder farmers and rural entrepreneurs with access to global meteorological forecasts, digital early warning mechanisms, and electronic payment systems. This empowers them to plan their agricultural cycles meticulously, safeguard against environmental adversities and pests, and penetrate new markets. The resultant enhancement in crop yields elevates their financial standing and mitigates food scarcity within their communities.
Policies: Governments are currently prioritizing issues such as food security and inflation amidst the uncertain global economic conditions. However, it’s crucial for them to adopt intentional policies that look beyond the current state of their countries’ development, especially considering that many African economies rely heavily on agriculture, which tends to have lower productivity levels than manufacturing and services sectors.
As we are on the brink of a technological revolution driven by advances in AI, robotics, biotechnology, and other cutting-edge fields, African governments must develop policies to address the rapid emergence of these transformative technologies. These policies should go beyond mere bureaucratic requirements and ensure citizens are prepared to navigate and leverage the potential of such revolutionary innovations.
Integrating these technologies across various sectors promises to reshape employment, healthcare, education, and more. A comprehensive approach implemented in countries such as Brazil is needed to fully benefit from these opportunities, including reforms in education, infrastructure, and regulatory frameworks that foster innovation while upholding ethical standards.
Conclusion and the way forward
To foster widespread benefits from new technologies, governments must invest in education, digital infrastructure, and enabling policies and frameworks. Such frameworks can enhance the delivery of public services and help streamline interactions among governments, businesses, and citizens by providing standardized processes, reducing bureaucracy, improving access to information, and fostering collaboration.
Yet, realizing these benefits demands a shift in perspective. Digital infrastructure, often seen as a conduit for government services, can evolve into a robust platform for fostering interactions across sectors. An example could be a publicly owned payment system facilitating transactions among businesses and individuals globally. However, if banks, for instance, have their own private payment systems that offer advantages such as greater speed, efficiency, lower costs for users, enhanced robustness, and reduced failure rates, they could also contribute to the productivity of their clients – both businesses and individuals.
However, technological progress does not automatically translate into heightened productivity for economies. Its impact depends on how effectively a country integrates technology into its economic framework and effectively provides other enabling factors, some of which were discussed in the preceding sections. Developed nations have leveraged technology for substantial productivity gains. At the same time, in regions like Africa and other middle-income areas, outcomes are more nuanced and contingent on factors like policies, infrastructure, and bridging the digital divide.
Concerted efforts are needed to bridge gaps in digital access, invest in education and skills, and cultivate environments conducive to innovation to ensure technology boosts productivity. Only through such measures can the full potential of technological advancements be harnessed, fostering inclusive and sustainable economic growth worldwide.