A few weeks ago, a coalition of labour unions demanded more than a doubling of Thailand's minimum wage from 300 baht a day now to 700 by 2018. The proposed number aims to meet living costs, high enough to support two family members, assuming an inflation rate of 3% a year.
Whether this policy is good for the Thai economy is up for debate. The minimum wage issue has always been social as much as, if not more than, economic. And its unintended consequence to marginalised groups has already begun.
We can look to recent economic research by Grace Lordan and David Neumark for a glimpse of what may come to our economy. The research finds that, increasing the minimum wage could drive low-skilled workers out of jobs faster, replaced by machines. The impact is particularly strong for the most vulnerable, in this context, the elderly and minorities in the US. This is an example of how some public policies can unintentionally tilt the balance in favour of machines, as humans and machines compete for the same jobs.
Sutapa Amornvivat, PhD is CEO of SCB ABACUS, an AI-powered data analytics subsidiary of Siam Commercial Bank, where she previously headed the Economic Intelligence Centre and the Risk Analytics Division. She received a BA from Harvard and a PhD from MIT. Email SCBabacus@scb.co.th.
With emerging Artificial Intelligence (AI) technology, machines can now self-learn from data and complete tasks like humans. They have started to carry out activities that people used to put time and effort into, now going on autopilot mode. The anxiety about machines that has been around since the industrial revolution re-emerged and intensified due to the rapid development of AI.
Even without a push from this policy, Oxford University researchers already predict that almost half of US jobs are at risk of becoming automated within the next two decades. Moreover, a report by the World Economic Forum, "The Future of Jobs", also sees a trend of AI taking over the world at the start of the Fourth Industrial Revolution. The implication is an overhaul of labour markets globally, as firms begin to weigh costs between using machines and human workers to do the same jobs.
In fact, we are already seeing the price of machines go down while the cost of hiring workers is generally rising in the United States. Bank of America Merrill Lynch reported that the cost of using a welding robot is three times cheaper than hiring a worker on an hourly basis. At the same time, the cost of building one has dropped almost 30% over the past 10 years. The cost reduction will not slow anytime soon, as these machines continue to become more efficient.
On top of getting cheaper, machines are now getting better at a wide variety of tasks. The scope of "automatable" jobs is fast expanding. In the past, automatable jobs usually involved routine physical tasks such as manufacturing assembly lines. But breakthroughs in AI and machine learning now allow for automation of more cognitive tasks such as financial analysis, insurance underwriting, and sales. In the future, automation could expand to truck and taxi drivers, doctors and even creative jobs. Indeed, Amazon is building a fashion designer AI by having machines learn from images posted on Instagram and Pinterest.
Although some of these machine-competing jobs may seem far-fetched for Thailand, our path to automation may take place sooner than expected. According to Thailand's Board of Investment, Thailand's automation industry imports rose 8% a year from 2010 to 2014. At present, most of these machines remain in automotive, electronics, and food processing factories, where tasks are more physically routine.
The pace of the shift toward automation could pick up as we too are facing rising costs of human workers. The minimum wage hike to 300 baht per day in 2013 caused a 60% rise in labour costs in real terms when it was first introduced.
In addition, our population is rapidly ageing and the workforce shrinking. Immigrant workers, the go-to alternative for Thai firms, are also facing tighter registration controls. These phenomena will soon push the cost of human workers up to the point where automation becomes a viable option to explore.
In fact, interviews of auto makers in Thailand by the International Labour Organisation refer to the wage hike in 2013 as a "wake-up call to integrate automation". Electronics makers in Malaysia share a similar story as the country introduced a minimum wage in the same year.
With this in mind, raising the minimum wage is unlikely to solve the problem of economic disparities. On the other hand, the policy runs a high risk of leaving some workers further behind. Minimum wage increases without improving productivity can outright hurt the very people they try to help.
A more sustainable remedy is to focus on training or, more appropriately, re-training people to leverage machines in delivering a task.
Today, free training courses are available online. A sales clerk can learn to become an online marketer; a factory worker can learn to write computer codes. Whatever prerequisite skills required are accessible on the internet as well. Guidance in navigating these online contents and perhaps making them available in Thai language could be a combined effort between firms and the government to ease the transition.
At the frontier of technology, we also see a movement among researchers and innovation leaders advocating for development of AI that complements rather than replacing people. Barbara Grosz, a professor of Computer Science at Harvard University suggests that "human and machine capabilities can add up to more than the sum of their parts". This is echoed by Microsoft CEO Satya Nadella who says that his company aims to build AI to assist humans, not replace them. A research group at Google, "People + AI Research (PAIR)", is dedicated to making technology transparent and design AI that incorporates human interactions.
It is likely machines will replace humans in many jobs, disrupting various industries. But it is far from becoming the dystopian future that some painted earlier. All things considered, AI can free people from undesirable tasks -- ones that are dirty, dangerous and repetitive. It will give us the chance to find things we truly care about.
Therefore, rather than being fearful of being replaced by machines, we should concentrate our energies on finding a way to leverage them, bearing in mind the side effects of well-intended policies. A safety net in the form of education programmes would do a better job at ensuring a stable economy and an inclusive society over the long run, where machines can work alongside us to achieve more together.