COVID-19 Pandemic and Automation

Not only did the COVID-19 pandemic challenged the otherwise great performance of the Philippine, economy, it also forces firms and micro entrepreneurs to adopt radical changes on how they conduct economic activities. Technological advancements particularly in machine learning, artificial intelligence, and information and communication technologies will facilitate rapid adoption of new ways of doing business especially for firms that can afford them. However, given the huge economic losses resulting from lockdowns and work stoppage due to the pandemic, firms may find it sound to invest in these new technologies if it means fewer economic losses while the pandemic is ongoing.

The government imposed lockdown in mid of March 2020 to stop the spread of the virus. What was supposed to be a 2-day lockdown was extended to two months. Before May 2020 ended, the government started relaxing strict lockdown measures to allow some businesses to resume because the enhanced community quarantine imposed on most parts of the country caused huge economic costs. Cruz et al (2020) estimates that about 20 billion pesos are lost every day of lockdown. In 2nd quarter 2020, GDP declined by 16.5 percent, the largest economic contraction since the Second World War. Coinciding with the economic crisis is decline in employment by almost eight million in April 2020, and involuntary hunger reaching a new peak in six years.

The government allowed economic activities to resume gradually with caution because workplaces can become COVID transmission hotspots immediately. Recovery was not uniform. While some sectors can immediately resume with minimal changes in conduct of business, other sectors needed major changes. Experts from the University of the Philippines came up with classification of sectors based on how important they are in economic recovery and the risk that they transmit COVID. Among those that are of high risk are workers in retail and recreation, transport and logistics, and public works and construction. All these sectors are important in economic recovery, however, because they involve close physical interaction, they also display high propensity to spread COVID.

Suspension of economic activities due to COVID has caused businesses to resort to technology to adapt. Retail, which is one of the sectors severely hit by the pandemic, has shifted online as more consumers embrace online shopping. The emergence of online retail platforms and the growing popularity of online payment systems facilitated the shift of retail activities online. The growth of online shopping also encouraged growth in logistics as the increase in online purchases created jobs in the form of door-to-door delivery services.

Recreation and entertainment will also be different. Theater houses and music halls can easily become COVID super spreaders so it is unlikely for the film, music and creative industry to return to traditional means of service delivery. Some of producers in the sector have started looking into online showing of films and music performances. The technology that enables such form of distribution is already existing and will improve continuously as more creators and producers utilize them.

Radical technological change is also expected to occur in the construction industry. Construction activities are known to employ huge number of workers. Because of this, the sector is also considered at high risk of spreading COVID. Major firms in the construction sector are already eyeing more prefabrication of building parts through the design for manufacture and assembly (DFMA) system. Under DFMA, activities in the construction sector will be split into two processes that take place separately: manufacturing of building parts and structure, and assembly on site. With this system, labor costs of construction firms will sharply fall because a significant portion of construction processes will be taken care of by manufacturing and only the only tasks left for firms are those that involve assembly. The DFMA method is highly appropriate and will address the current challenges of the construction sector under the pandemic. Manufacturing of building parts and structure will greatly benefit from developments especially in 3D printing. Outsourcing tasks to manufacturing will reduce risks of COVID transmission in construction because physical contact will be reduced.

Technological changes because of the pandemic are inevitable for adaptation and survival of firms and economic activities. However, they come at a cost especially to workers. The abrupt shift online will significantly reduce the number of workers employed especially in sectors such as retail. The adoption of new construction techniques will also leave many workers unemployed if they cannot be absorbed by new jobs. Although there will be job losses, there will also be new jobs created, although they will likely require new set of skills.

Skills upgrading is more important than ever for workers to be able to take on new jobs. The COVID-19 pandemic will accelerate technology adoption and automation, and unless workers are equipped with necessary skills, rapid technological change will result in inequities especially because the jobs most exposed to automation and obsolescence are those that are routine and require low skill sets usually carried out by workers in lower income groups. The state has to step in to address the adverse implications of technological change by providing means for workers to acquire skills through trainings, basic income for those that will be displaced by technology, and encourage firms to adopt technologies that complement rather than substitute for workers.