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New technology still underused by businesses

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[yt_dropcap type=”square” font=”” size=”14″ color=”#000″ background=”#fff” ] B [/yt_dropcap]usinesses need to step up the adoption of cutting-edge technologies, materials and processes if countries are to reap their full potential in terms of productivity gains, according to a new OECD report.

Development and implementation are taking place mostly in large firms, and even then new technologies are underemployed and could be contributing much more than is currently the case. The report highlights the potential effects of a wide range of technological developments in production – from the environmental impact of 3D printing, to autonomous digital systems and the latest advances in industrial biotechnology. Governments must seize the potential of technological advances to boost economic growth, living standards and environmental sustainability, but at the same time manage the risks and disruption this next “production revolution” will cause.

Policy makers have a key role to play in helping to create the right conditions for the adoption of new technologies and knowledge, particularly among smaller businesses. Action on multiple fronts is required. It includes encouraging life-long skills development and greater interaction between industry and education, improving conditions for business creation and development, and supplying the infrastructure needed by firms using advanced, digital technologies. Assisting research and technological scale-up and establishing agencies to aid the spread of technological innovation are also key.               

Even in the most advanced economies, diffusion can be slow or partial. A 2015 survey of 4 500 German businesses, cited in the report, found only 4% had implemented digitalised and networked production processes or had plans to do so.

The productive potential of new technology is illustrated by estimates from Japan suggesting that the use of big data and analytics among some manufacturers could lower maintenance costs by almost JPY 5 trillion. More than JPY 50 billion could also be gained in electricity savings. And major energy savings have been recorded in early application of artificial intelligence (AI) to data centres.

Estimates for Germany indicate that the use of advanced information and communication technologies (ICTs) in industry could boost productivity by 5% to 8%. Industrial component manufacturers and automotive companies are expected to achieve the biggest productivity improvements. Other estimates cited in the report suggest that a major acceleration in the adoption of new technology could boost value-added in Germany’s mechanical, electrical, automotive, chemical, agriculture and ICT sectors by an additional EUR 78 billion by 2025.

Many businesses lag in adopting the ICTs necessary to digitalise industrial production. The adoption by firms of cloud computing, supply-chain management, enterprise-resource planning, and radio-frequency identification (to automatically track processes and objects) is still far below that of broadband networks or websites.

The report points to research showing that productivity-enhancing technology causes job losses in some cases and job gains in others but that the overall employment and economic effects to date have been positive. This is not to underestimate the disruption caused by technological change and the hardship suffered by workers who have lost their jobs because of it. Implementing effective systems for life-long learning and ensuring labour markets can adapt to the shock of technological change are central to effective adjustment policies.

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Nations Improving Technology Also Improve Sustainability

MD Staff

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Nations investing in technology infrastructure make faster, more efficient progress towards the United Nations Sustainable Development Goals (SDG), according to a report released by Huawei today in London, England. The study assesses correlations between ICT (Information and Communications Technology) and progress in meeting SDGs in 49 countries.

According to the 2018 Huawei ICT Sustainable Development Benchmark, Huawei found that ICT development is 91% correlated with progress on the SDGs. This suggests that ICT is a leading indicator for sustainable development. This represents an improvement on last year’s results even though the number of countries analysed increased from 15 to 49.

Six key SDGs were reviewed, including: Health and Well Being (SDG 3), Quality Education (SDG 4), Gender Equality (SDG 5), Clean Energy (SDG 7), Industry, Innovation and Infrastructure (SDG 9), and Sustainable Cities (SDG 11).

The report found SDG 3 (Good Health and Well-being), SDG 4 (Quality Education), and SDG 9 (Industry, Innovation and Infrastructure) have the highest levels of correlation with ICT, suggesting digital technology can provide breakthrough in these areas and accelerate country performance. This is especially true for developing economies, where small investments in ICT are coupled with rapid SDG gains.

The study shows ICT (Information and Communications Technology) Access, Use, and Skills are clearly linked with a country’s sustainable development. Each nation was grouped into three clusters – Leaders, Up-and-Comers, and Pioneers. Countries that perform well in ICT also do well in progress on the SDGs, while countries that underperform on ICT also lag on SDG achievement.

“Huawei believes that stimulating the potential of digital technology will help solve society’s most urgent development challenges,” said Kevin (Jingwen) Tao, Chairman of Huawei’s Corporate Sustainable Development Committee, Huawei Technologies Co Ltd. “If a country fails to seize the opportunities brought about by digital technology, the country’s economic and social development may slow down.”

“This study is shows that digital infrastructure is key to achieving the Sustainable Development Goals by 2030 – only 12 years away,” said Tao. “We have extended the scope of the report from last year and focused on whether digital connectivity is able to contribute to the sustainable development of society. For example, ICT technology may contribute to lifelong education, create greater economic value, create jobs, and reduce inequality.”

“We hope that this report will enable people to fully realize the importance of ICT and hope it provides support for relevant policy analysis, so as to create a more intelligent world with greater prosperity, tolerance, and sustainable development.” said Tao.

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A Brave New World without Work

Nikolay Markotkin

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What’s the first thing that comes to mind when you think about the soon-to-come widespread introduction of robots and artificial intelligence (AI)? Endless queues of people waiting to get unemployment benefits? Skynet drones ploughing the sky over burnt-out slums? Or the opposite: idleness and equality provided by the labour of mechanical slaves? In all likelihood the reality will be less flashy, though that doesn’t mean we should ignore the social consequences of the technological changes taking place before our very eyes.

Revolution on the March

The Fourth Industrial Revolution with its robotics, bio and nanotechnologies, 3D printing, Internet of things, genetics, and artificial intelligence is rapidly spreading across the world [1]. The coming technological changes will have direct consequences for a number of existing professions and promise in the very least to transform the labour market in developed countries.

The high speed of change (suffice it to say that 10 of the most popular professions of 2010 did not exist in 2004) makes it difficult to predict the impact on society. In this regard, the assessments of experts and international organizations range from optimistic to alarmist. However, even if we were to eliminate the most extreme case scenarios, we could still say with certainty that a fundamental restructuring of the global economy, comparable to the one that took place in the 18th–19th centuries during the First Industrial Revolution, awaits us in the foreseeable future.

According to the World Economic Forum (WEF) Future of Jobs report, 65% of today’s primary school students will have hitherto unheard-of professions. McKinsey came to the same conclusion, highlighting in their report that at the current level of technological development, 30% of the functions of 60% of professions can be automated. M. Osborne and C. Frey of Oxford University give an even more pessimistic forecast. According to their research, 47% of jobs in the US risk being automated within 20 years.

Who will robots replace?

What professions are at risk? First at risk is, of course, unskilled labour. The Osborne and Frey study found clerks, data entry workers, librarians, machine operators, plumbers, sales specialists, and equipment adjusters among others to be those most vulnerable.

According to WEF, from 2015 to 2020, job reductions will have the greatest effect on office professions (4.91%) and the manufacturing sector (1.63%). Employment in areas such as design, entertainment, construction, and sales should also decline by 1%. In turn, the most significant growth in jobs is predictably expected in the field of computer technology (3.21%), architectural and engineering specialties (2.71%), and management (just under 1%).

Predictably, professions related to transport risk automation in the medium term. The development of self-driving vehicles could radically change both the passenger and freight traffic markets. In the US alone, 8.7 million people are employed in the long-distance freight traffic industry. If you take into account all of the business operations connected to trucking (motels, roadside cafes, etc.), the number increases to 15 million or about 10% of the country’s labour force. Reductions in passenger transport and the public transport sector are likely to be even more significant. It is also probable that self-guiding technologies will be introduced into sea freight traffic in the near future. The development of artificial intelligence should also bring down hard times on lawyers, teachers, miners, middle management, and journalists among others.

It can be said that on the whole, employment will gradually move from services to other sectors of the economy, many of which have yet to be created. The possibility is a confirmation of the revolutionary nature of the changes that are taking place rather than something unique. Before the First Industrial Revolution, over 70% of the population was occupied with agriculture, whereas nowadays the number hovers around a few percent in developed countries. The percentage of those employed in manufacturing continued to grow until the mid-twentieth century, though it has now fallen to 24% in the EU and 19% in the US (27% in Russia) as a result of the Digital Revolution. Meanwhile, although there are fewer workers, production volume continues to rise steadily. It would now appear to be time to automate services.

The Golden Age of Engineers and Psychiatrists?

Professions associated with intellectual work or direct personal contact with clients are least likely to suffer in the short term. According to the study from Oxford University, professions least susceptible to automation include various jobs in medicine and psychology, as well as coaches, social workers, programmers, engineers, representatives of higher management and creative professionals.

In other words, those whose work requires a creative approach and is not limited to the performance of predictable combinations will be best prepared to deal with the new reality. If we were to speak of engineers in this regard, it would have to be clarified that design engineers are generally safe, while operating engineers, on the contrary, are at risk.

Three key factors are keeping automation away from the creative professions. To successfully perform their tasks, artificial intelligence must possess intuition and an ability to manipulate material objects (touch) and make use of creative and social intelligence. Technology at its current level of development does not actually allow for the resolution of these problems. However, as strong AI continues to develop, the range of jobs available to it will invariably increase as well. It will expand the limits of automation that have already been achieved with existing technologies and will make it possible for computers to make managerial decisions and even, perhaps, engage in creative activity. Therefore, it cannot be ruled out that in the medium or long term, machines might successfully replace writers and artists along with engineers and managers. Furthermore, precedents do exist for AI’s successfully composing literary texts.

Thus, it is quite conceivable that the majority of the labour force will find itself back in school in the foreseeable future. The problem, however, is that no one really knows what to study. It has been estimated, that as many as 85% of the professions that will be in demand in 2030 do not yet exist. Even in developed countries, the education systems have yet to adapt to the new reality.

What will become of our country and of us?

Today, most researchers have little doubt that developed countries will successfully adapt to the changes coming one way or another (which does not rule out the possibility of social tension and growth in income inequality). New technologies could help create additional jobs to replace those that have been lost, as it was not long ago following the rapid development of the Internet. It is assumed that the new professions will be more creative and better paid.

A new balance will gradually be established in the labour market. The nature of manufacturing will also change. The development of automation and 3D printing will make it possible to create efficient local production facilities focused on the specific needs of consumers. This will facilitate the return of a part of production from developing countries to developed (so-called reshoring).

In turn, the consequences of automation could be much more negative for countries of the third world. The percentage of non-skilled jobs in developing countries decreased by 8% between 1995 and 2012. Reshoring could significantly accelerate this process in the short term. Since the proportion of people engaged in low-skilled work in low and middle-income countries is much higher, the growth of unemployment would threaten to become a major global problem. The situation would be further aggravated by the underdevelopment of labour protection institutions in these countries.

It must be noted that risks of this sort are endemic to Russia as well. Despite the significantly higher level of education of its citizens in comparison to that in developing countries, the Russian economy could hardly be called high-tech. A significant part of the working population is engaged in routine low-skilled labour, and productivity remains low as well. At the present time, Russia lags significantly behind other developed countries in regards to this indicator (and behind the US by more than 100%), and according to some estimates falls below the world average. What’s more, factory jobs are not the only ones at stake – an army of many millions of bureaucrats and clerks is also under threat of redundancy as a result of digitalization.

Another disaster waiting to happen to the Russian economy is related to outdated industry and the decline of domestic engineering. At present, institutions of higher education produce mainly operational engineers trained to maintain tools and machines. What’s more, even the limited innovative potential of Russian engineers is not needed by Russian industry.

Furthermore, it cannot be ruled out that in the near future Russia will launch a massive programme to introduce robotic automation and artificial intelligence. All the more since it fits in perfectly with the desire to modernize and digitalize the national economy repeatedly spoken of by the Russian leadership. Because of the lack of a strong trade union movement and the prevalence of hybrid and grey forms of employment, labour automation could lead to much more severe social consequences in Russia than in Western countries. Finally, it is entirely possible that the catch-me-if-you-can nature of such modernization will result in Russia introducing more primitive technologies than in more developed countries. Editor-in-Chief of Russia in Global Affairs magazine and RIAC Member Fyodor Lukyanov cleverly described a similar scenario in his article.

Saving the Rank and File

Ways to reduce the social consequences of labour automation have long been at the heart discussions surrounding the Fourth Industrial Revolution and the development of AI. The Robot Tax is one measure being considered. Microsoft Founder Bill Gates supports the idea and has proposed collecting income tax and social payments on robot labour to slow down the pace of automation. “Right now, the human worker who does, say, $50,000 worth of work in a factory, that income is taxed and you get income tax, social security tax, all those things. If a robot comes in to do the same thing, you’d think that we’d tax the robot at a similar level,” he declared in an interview for the Internet publication Quartz. It is his opinion that the funds received from payments of this sort should be used by governments to create social security systems for those who have lost their jobs as a result of automation.

The first country to resort to this measure is South Korea, which introduced an indirect tax on robots in August 2017. The European Union also discussed the introduction of a similar tax, though the clause proposed by Progressive Alliance of Socialists and Democrats Representative Mady Delvaux was rejected by the European Parliament was rejected by the European Parliament because it could slow the development of innovations. At the same time, the parliament approved the resolution itself, which calls for granting robots the status of legal entities.

A universal basic income could also soften the effect of rising unemployment and inequality. Elon Musk supports the initiative together with numerous other businessmen and experts. At the same time, a lack of work to afford one the opportunity to fulfil one’s potential poses a significant social risk. Significant unemployment, even in the absence of poverty, can contribute to the marginalization of the population and the growth of crime – the first jobs to go are those of low-skilled employees, who are unlikely to spend all of their permanent free time engaged in yoga and self-improvement activities.

Possible ways of mitigating the consequences of the upcoming restructuring of the world economy include a change in the nature of employment. Technological changes and expanding access to the Internet allow more and more people to work remotely. Thus, some of those who lose their jobs will be able to find themselves a place in the new economy without having to change their place of residence.

Some believe that automation will increase and not reduce the total number of jobs by accelerating the pace of economic development over the long term. Amazon is one example of how automation has not resulted in staff reduction. While increasing the number of robots employed in its warehouses from 1,400 to 45,000, it has managed to retain the same number of jobs. It has also been noted that automation is becoming increasingly necessary due to a decrease in the working-age population (primarily in developed countries).

It should be noted that these measures are all limited in nature and hardly correspond to the scale of changes that stand to be swept in by the Fourth Industrial Revolution. To avoid mass unemployment and social instability, governments must develop comprehensive short-term strategies for adapting the population to the new reality. It is very likely that new programs will be needed to retrain citizens en masse for new professions.

Russia is no exception here; on the contrary, it is of vital importance that our country reform its education system in the near future, especially as regards technical education. It is equally important to develop targeted support programs for those parts of the population that are most vulnerable to automation and digitalization. Moreover, it would seem advisable to make use of existing experience to mitigate the social consequences of factory closures in Russian single-industry towns. If we continue to move as sluggishly as we are moving at present, we risk turning into a kind of reserve for yesterday’s technologies with a population becoming ever more rapidly marginalized.

First published in our partner RIAC

[1] Marsh, P. The New Industrial Revolution. Consumers, Globalization, and the End of Mass Production. M.: Gaidar Institute Press, 2015.

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Building the Future of Construction

MD Staff

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Dramatic changes on the horizon indicate an uncertain future for the engineering and construction (E&C) industry and its more than 100 million employees worldwide. Advancing digital technologies, which include building information modelling, prefabrication, wireless sensors, automated and robotic equipment and 3D printing, are affecting the entire industry. The substantial impact of full-scale digitization could help the industry escape its decades-long lack of productivity progress and generate an estimated $1.0 trillion-$1.7 trillion in annual cost savings.

In parallel, global megatrends should motivate E&C companies to rethink industry practices that have not advanced over the years. Rapid urbanization – with more than 200,000 people a day relocating from rural areas into cities – climate change, resource depletion and the widening talent gap are just a few of the most powerful of these trends. Shaping the Future of Construction: Future Scenarios and Implications, a new report from the World Economic Forum and The Boston Consulting Group (BCG), is the first to integrate consideration of the new technologies and trends into consistent scenarios of the future.

“The investigated scenarios and their implications clearly show that incremental change is not an option any more. By redefining the ultimate frontier, leapfrogging innovations in construction will finally help to address major societal challenges, from mass urbanization to climate change,” said Michael Buehler, Head of Infrastructure and Urban Development at the World Economic Forum. “The widespread adoption of game-changing innovations that consider a variety of possible futures is going to make a serious impact, socially, economically and environmentally.”

Over the past year, the World Economic Forum and BCG worked with more than 30 leading companies from the E&C industry, conducting workshops in Berlin and London. The result of those workshops was the development of three future scenarios for the E&C industry. Although all three scenarios, outlined in the report, are extreme, they are plausible. In the “building in a virtual world” scenario, which many experts consider highly likely, design and engineering software systems are powered by artificial intelligence, and autonomous construction equipment replaces most manual work throughout the E&C value chain.

Although the report indicates that it remains unclear which scenario or scenarios will unfold, there is little doubt that the future will include elements of all three. Michael Burke, Chairman and Chief Executive Officer at AECOM and co-chair of the World Economic Forum Future of Construction initiative, said: “Current business models, strategies and capabilities will not be sufficient in any of these future worlds. This underscores that players along the construction value chain need to prepare strategically to thrive in the face of anticipated disruption.” In addition to recommending specific actions in response to each of the scenarios, the report provides a set of actions that will be relevant in any possible future.

The report states that 74% of the E&C company chief executives who participated in the World Economic Forum Annual Meeting 2018 in Davos in January said they considered that attracting new talent and improving the skills of the existing workforce to be among the top three actions for keeping pace with upcoming disruptions. The other two priorities they named were improving integration and collaboration along the value chain (65%) and adopting advanced technologies at scale (61%). For each scenario, the report describes the most important changes that E&C companies must anticipate; explains how customer requirements, segment demand, regulations, processes and technologies would change; and provides details on how the competitive position of existing industry players would be affected, what new entrants could be expected and what new business opportunities will arise.

Luis Castilla, Chief Executive Officer of Acciona Infrastructure and until recently a co-chair of the World Economic Forum Future of Construction initiative, summarized the relevance of the new report: “The construction industry’s decision-makers should understand the disruption outlined in the future scenarios as a wake-up call and use the identified key actions as a foundation for companies in the construction industry to prepare and shape a prosperous future that will allow the industry to fulfil its role in promoting economic growth, social progress and environmental responsibility.”

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