As with earlier waves of industrialization, Industrialization 4.0 presents some challenges along with opportunities. The biggest challenge comes from the impact on jobs from artificial intelligence and its related technologies. Many economists have already highlighted the potential implications of the current AI revolution on job markets and have tried to quantify the job losses across different economies. Potential job losses vary from around 10 percent to 30 percent of the workforce depending upon the structure of the economy. However, a significantly higher proportion of workers will experience changes in the task structure of their jobs.

These losses are unequally distributed within an economy. Most of the job losses are concentrated in the middle-skill level as these jobs consist of the tasks which are easy to automate. Most of the middle-skill jobs are concentrated in the manufacturing sector, and some specific services consisting of routine tasks, for instance, a worker on a production line in a textile plant or a cashier in a retail store. Since these routine tasks are repetitive in nature, it is easy to automate them.

In addition, the cost of capital has been falling for the last couple of decades which makes it more attractive to company owners to replace workers with robots. In 2016, Foxconn, the supplier for Apple and Samsung, replaced nearly half of its workforce (reduced employee strength from 110,000 to 50,000) at one factory despite increasing output. The global production of industrial robots has increased exponentially since 2000.

The implications of the current AI revolution are different for different economies, but it requires responses from all stakeholders - governments, businesses as well as employees. Many developed economies such as Japan and the Scandinavian countries are already experiencing negative population growth rates, as will China in a decade or so. It makes sense for these economies to replace workers with machines if they want to maintain a competitive edge in the global economy, as well as increase gross domestic product per capita in the future. As these governments will need to support aging populations in future, they will have to rely on taxes generated from an increasing GDP per capita to finance such programs.

For countries whose populations are set to increase in the foreseeable future, governments should still encourage these new technologies as they will make these economies more competitive and increase productivity, and as a result the wages of the workers who will not be replaced by machines.

But there will be many workers in next decade or so whose jobs will either be replaced or significantly changed by machines. Here, governments and businesses must play a significant role. As technology is changing rapidly, it requires workers to keep investing in themselves to upgrade their skills. So, big companies should encourage their workers to opt for training to increase their productivity to avoid being fired when the workers are replaced by machines.

We already have some case studies where businesses as well as governments are proactively dealing with the impact of automation on the labor force. In Germany, automation has led to 275,000 fewer jobs being created in the manufacturing sector between 1994 and 2014, but it has not resulted in the mass firings of workers. Most companies offered those workers affected by automation either some wage cuts or changed their roles from production to services.

Similarly, last year, the French government introduced a law which would credit the account of every adult in the labor force with 500 euros (3,836 yuan, $556.54) a year, on top of the spending by the companies on workers' training, which can be redeemed against some training programs to be chosen from thousands available in France. Such policies can help workers to remain competitive in the age of automation and AI.

In addition, governments also need to reform the education curriculum. Students who are currently in primary school will join the labor force in the next two decades. So schools should adopt the concept of "learning to learn" or prepare their students for "lifelong learning" so that they can adapt to the fast changing work environment.

The opportunities that AI provides are unmatched in history, and no rational government can resist them. Governments should encourage businesses as well as workers to adopt new technologies, but also incentivize workers to upskill.

In order to protect workers from being affected by automation, governments need to be proactive in tackling this issue rather than being reactive. In addition, a creative redistributive system, without affecting the incentives to adopt new technologies by companies, can also play a significant role in mitigating the effects of the current wave as the benefits of adopting new technology significantly outweigh the costs inflicted on the affected workers.

The author is an assistant professor at University of International Business and Economics, Beijing.

The author contributed this article to China Watch exclusively. The views expressed do not necessarily reflect those of China Watch.

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