Inclusion, inequality, and the Fourth Industrial Revolution (4IR) in Africa

The introduction of Fourth Industrial Revolution (4IR) technologies in sub-Saharan Africa could bring not only significant economic growth and welfare gains, but also social and economic disruption, including rising inequality, if countervailing measures are not taken, as discussed in our recent report. With a high proportion of the workforce working informally – a trend expected to persist for several decades – Africa’s education and industrial policies must strike a balance between encouraging the private investment needed to create new formal jobs using advanced technology and ensuring that that all new labor is available Entry-level workers have the basic skills and infrastructure to make a decent living.

Much has been written about the current and potential disruptive impact of the suite of new technologies dubbed the Fourth Industrial Revolution (4IR) in advanced economies – a group of technologies that are fusing digital, biological and physical innovations in applications such as advanced robotics and artificial intelligence, the digital gene editing CRISPR and the networks of sensors and computers known as the Internet of Things. According to studies, 4IR technologies could create 133 million jobs globally in manufacturing alone by the end of 2022, but displace 75 million jobs, resulting in a net increase of 58 million jobs.

Researchers have shown that in the United States, the skill orientation of technological change in the manufacturing sphere disproportionately affected unskilled and mid-skilled occupations, created an asymmetry of opportunity, earnings, and income between low- and high-educated workers and exacerbated trends toward inequality. However, the researchers also argue that economic policies over the past decade could have mitigated rather than amplified these effects.

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Despite this experience, the skills orientation of 4IR technologies has led to recommendations from international financial institutions and private think tanks that African countries should urgently move towards creating more high-level STEM skills in their future workforce. Africa will undoubtedly need to further upgrade the skills of its future workforce, but the question is how to organize and finance this upgrade fairly.

Sub-Saharan African countries already spend about 4.5 percent of their GDP on education (including public and private spending), but in many countries education systems are often inadequate to meet the needs of current students, let alone those who are about to enter the study system. Of total education spending, 1 percent of GDP (22 percent of total spending) goes to higher education, with gross enrollment less than 10 percent. The African Union proposes that member countries spend an additional one percent of GDP on STEM skills development at the secondary and post-secondary levels. In today’s tax environment, the private sector and global partnerships are needed.

The rapidly expanding labor supply and the challenges of structural change suggest that most entry-level workers find employment as low or semi-skilled workers or work for themselves and their families (on farms or in informal micro-enterprises); They will not work as software developers or digital engineers. To be more productive, these young people need better access to (i) quality primary and secondary education, including the development of problem-solving and basic digital and STEM skills, and (ii) access to cheaper cell phones and tablets, mobile internet and digital services to develop their farms and businesses. Providing an inclusive platform for job creation for these workers through public investment in basic skills and internet access should remain the spending priority for governments.

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Low income inequality within a country is not just an inherently desirable economic characteristic; It contributes in many ways to support economic growth and development. More equal countries are politically more stable, less prone to violence or civil conflict. They also show greater resilience to external shocks. Leaving large sections of the population behind actually lowers future economic growth, stifling the potential for aggregate demand and the increased consumer appetite of a growing middle class to spur growth, while reducing support for public investment needed to sustain development.

Inequality is increasing in many countries in sub-Saharan Africa. Five of the ten most unequal countries in the world are in sub-Saharan Africa. Africa cannot afford to allow technology to amplify this trend. Action to stem or reduce inequality requires action across sectors and policies, and ensuring equal access to quality education and other human capital development services is a good start. Other actions and programs needed to counteract a potential increase in inequality in the 4IR context include:

  1. Incentivize the deployment of cheaper ICT services so that they are accessible to households and businesses outside capital cities (including by expanding energy grid coverage).
  2. Additional measures to reduce the gender gap in access to and use of mobile phones and internet services.
  3. Further expanding coverage of mobile banking and other fintech services, including developing interoperable payment systems within countries and across the continent.
  4. Avoid the temptation to subsidize the private sector’s introduction of non-essential labor-saving technologies.
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Meanwhile, aggressive policy to attract more Private Investing in higher education to meet the projected need for a highly skilled workforce will be crucial.

The experience of OECD countries, particularly the US, suggests that 4IR technology is not an inherently benign change agent. Unequal employment and income outcomes have been observed. African countries cannot – and should not – avoid 4IR technology as it has the potential to accelerate economic transformation in Africa. However, countries should also consider their options for increasing inclusion, particularly in countries where inequality is already high. Some factors – such as B. the saving of manpower, the qualification orientation of these technologies – are beyond the control of the African countries. But economic policy can still steer economic development towards greater equality.

Would you like to know more? Tune in to Louise and Landry’s webinar at the Brookings Africa Growth Initiative Monday, September 26, 2022 @ 11:00am-12:15pm ET (GMT-5). Register here

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