Global Employment Trends During Tariff Wars and Technological Change
Sanjay Roy
EMPLOYMENT across the world is undergoing changes. The changes are multi-dimensional, driven by shifting nature of labour contract by skill grades, impacted by uncertainty and shocks in supply chains. However, the tendencies are neither uniform across countries nor do they show uniformity in direction of change. In some advanced countries, as reported by the ILO in a recent report, unemployment rate has fallen although market sentiments are sluggish. Restrictions on immigration by right-wing governments might be a partial cause for that as the number of job seekers decline, but there is also a decline in labour force participation rate due to discouragement driven exit. Most importantly, uncertainty in trade impacts large number of workers who are directly or indirectly linked to global supply chains and they are going to be affected by restriction in imports as well as relocation of investment. The high growth regions of the world, particularly Asia, experienced a growth which is largely driven by productivity growth rather than by proportionately adding new employment. A growth driven by productivity without adequate growth of employment relies on capital intensive production which favours labour with higher skills. As a result, in terms of occupational composition, the developing countries are gradually shifting from low to medium skill activities and shows signs of marginal rise in high-skill proportions. Most of this upgrading happens in traded sectors while low employment essentially increases precarity and vulnerability in other sectors. Developing countries recently show a marginal rise in the share of formal workers at the aggregate levels. It might also be because of the relaxed definition of formality adopted by many countries which basically requires enrolment in any one of the social security schemes offered by government to be considered as formal worker. But ILO also reports a global decline of workers’ share in output since 1980s which has further fallen in the recent years.
RISISNG UNEMPLOYMENT
According to World Economic Outlook the global economy is expected to grow by 2.8 per cent in 2025 which includes a downward revision of 0.4 percentage points compared to the previous estimate. The uncertainties in global trade generated after Trump tariffs are going to adversely impact employment across countries. ILO estimates that 8.4 crore workers across 71 countries are directly or indirectly linked to supply chains of final demand in US. This is 4.3 per cent of these countries’ total employment. The largest share of such workers is in Mexico, Canada and developing countries of Asia and Pacific. Asia and Pacific alone have 5.6 crore workers linked to exports to US and their supply chains. Because of such restructuring or protective measures, the fastest growing region in terms of GDP, namely, Asia and Pacific, is going to be affected in terms of both, GDP and employment. GDP growth in this region is estimated to be lower than the forecast, down from 4.4 per cent to 3.8 per cent and employment growth is revised downward from 1.9 per cent to 1.7 per cent. This is a matter of concern because additional employment is likely to be 70 lakh less than the previous estimate. Globally, the real challenge for capitalism is employment creation and this is important not on some moral grounds but because employment is the only channel that generates income to buy the goods and services produced in the economy.
True capitalism uses unemployment as a disciplining device for the existing employed and uses it as a reserve army of labour to contain the real wage of existing workers, but it requires buyers to realise the value of goods and services produced. In the past 10 years, that is 2014-2024, global GDP grew by 35.5 per cent but employment grew only by 13.2 per cent and workers’ productivity or the growth of output per labour 17.9 per cent. The high growth region of the world that is the Asia Pacific region grew by 55 per cent in terms of GDP but employment grew only by 10.5 per cent. This is the region which experienced the fastest growth in labour productivity in the past decade by 39.8 per cent. This simply implies that productivity growth is outstripping the growth of output resulting in a slowing down of employment. Productivity growth is the driver of growth of output. But since capitalism is an uncoordinated process, initiative to innovate and increase productivity depends on the individual entrepreneur. The motivation in using or innovating a new technology allows firms to earn more profit than the average rate of profit in a particular industry and they are also keen to utilise it fast to realise the value of the new technology before a new one makes the existing technology obsolete. But in this process of technological growth, output per labour grows faster than the growth of output, leading to lower rates of employment. Also, with higher number of jobseekers the bargaining power of existing workers and that of new entrants fall which results in decline in workers’ share in GDP. Globally there had been a consistent declining trend since 1980s which slightly recovered during COVID but again declined since 2022. In periods of crisis or shock, since the fall in output cannot be entirely transferred to workers in the form of income loss, the shares of workers increases but when the economy reaches normalcy once again the share tends to fall.
TECHNOLOGY IMPACTS
The shift towards medium and high skilled work due to use of technology has not been uniform across the world. In the low-medium countries it is primarily towards medium skilled jobs. In fact, the share of low-medium countries in high-skilled jobs has declined in the past ten years while the share of medium skilled jobs increased from 30.9 per cent to 36.5 per cent per cent during the same period. One important trend highlighted by ILO is the faster rise in the share of high-skilled workers among women compared to men in the past decade.
The general shift towards higher skill in the aggregate workforce is driven by technological development. This also increases the demand for skilled workers and raises their premium over and above the average wage. But industrial skills need to be imparted and that require institutional structures that help upgrading the skill capabilities of the workforce. If skills need to be acquired through training that are marketed, then a large portion of the existing workforce would not be able to vertically move up the skill ladder. Premiums for those who can afford to acquire trainings would increase while a large number will be left out in the process giving rise to higher inequality in wages and salaries. It is also important that use of new technology particularly generative AI is going to adversely affect the job market initially. ILO estimates that occupation-wise, one in every four will be facing high exposure to GenAI and the impact seems to be highest in the medium skill segment. The estimation suggests that 38.1 per cent of occupations in the medium skill segment face the highest risk of being transformed by GenAI. Hence if the shift in composition of workforce particularly in the low-medium group which includes India moves towards medium skill activities it would eventually face greater exposure to new technological transformation. Preparing the workforce for the new technological challenges is an imperative which cannot be left to markets. But neoliberal policies that accelerate the drive towards privatising public funded educational institutions would hardly be able to address the current challenge. The current policies of privatisation, instead of preparing the larger section of the workforce for the evolving transformation in the world of work, are likely to widen the income divide between the rich and the poor.
