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Impact of COVID-19 on Poverty In Austria

Impact of COVID-19 on Poverty In AustriaThe year 2020 left its mark in history. Governments forced businesses to close down and restricted travel, people were required to wear masks, and everyone had to self-isolate. With more than 700 million confirmed cases of COVID-19 worldwide, the virus has significantly affected the world and has contributed to the growing poverty rates in many countries, including Austria. According to Statistics Austria, more than 17.5% of the country’s citizens faced the risk of experiencing poverty in 2022. The following are some reasons why the impact of COVID-19 on poverty in Austria is so significant.

Increase in Automation

Due to COVID-19 and the inability of many people to work in person, many employers turned to automation or the use of robots and machines to do the work of employees.

According to an OECD report, the emergence of COVID-19 “accelerated automation, putting additional pressures on places with relatively high shares of jobs at risk”

The jobs at risk of automation are “predominantly in the private sector and in larger, single-site workplaces.” Additionally, 15.5% of workers on a temporary contract have a high risk of automation compared to just 13.5% without a contract.

The increased automation has significantly affected many people’s lives and has caused thousands of Austrians to become unemployed and eventually impoverished. According to a 2022 World Bank report, the unemployment rate was 4.7%.

Increased Prices

During the second half of 2020, Austria’s economy struggled with inflation, as commodities such as food alongside industrial services recorded price hikes.

These hikes occurred due to “significant supply chain bottlenecks”  resulting from increased demand when the government lifted COVID-19 restrictions. Additionally, the Russia-Ukraine war put extra pressure on Austria’s economy by increasing energy prices.

According to the World Bank, COVID-19 caused inflation to increase by more than 7%, going from 1.2% to 8.5% in 2022, the highest it had ever been. So, at the same time that Austrians were getting laid off or had to close their businesses, the cost of everyday necessities was increasing, pushing more people toward poverty. Alongside other factors, this issue of inflation represented the impact of COVID-19 on poverty in Austria.

Hope

According to KPMG, which supplies tax assistance to many organizations, the Austrian government made €100 million worth of loans available to hotels that lost 15% in sales.

Additionally, on March 13th, the Austrian government implemented a €38 billion fund for “COVID-19 crisis management.” This fund went solely toward stimulating the Austrian economy. Some efforts of the fund include helping businesses affected by COVID-19 by giving them subsidies for fixed costs and providing them with €4 billion worth of aid. In addition, restaurants benefitted from “value-added tax relief.”

As a result of government aid and subsidies, the economy improved remarkably. Fewer businesses had to shut down, and as a result,  the unemployment rate decreased from 5.4% in 2020 to 4.7% in 2022. Additionally, The GDP growth skyrocketed from -6.5% in 2020 to 4.6% in 2021.

Finally, as a result of the government providing aid to hotels in Austria, the tourism industry continued to stay afloat in 2020. According to World Data.info, “Austria recorded a total of 15 million tourists in 2020, ranking 18th in the world.” Furthermore, the industry generated at least $15 billion, which might have been impossible without the government’s help in keeping hotels open.

Looking Ahead

Despite the significant impact of COVID-19 on poverty in Austria, there are reasons for hope. Government initiatives and financial aid programs have provided support to businesses and individuals, leading to a decrease in unemployment rates and an improved economy. The tourism industry also received assistance, allowing it to continue operating and generating revenue. These positive developments highlight the efforts of the country to recover from the challenges posed by the pandemic and alleviate the effects of poverty.

– Hope Yonehara
Photo: Max Pixel

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Fighting Poverty with Cobots in Developing Countries

cobots in developing countriesAutomation has often been discussed as the enemy of progress, taking jobs and resources away from low-skilled workers. However, recent reports suggest that cobots offer a compromise for small- and medium-sized enterprises (SMEs), particularly in the developing world. Though the effects of widespread use remain to be seen, the use of cobots in developing countries has already had positive effects, according to leading Danish robotics company Universal Robotics (UR).

What Are Cobots?

The first cobot (collaborative robot) was invented in 1996 by J. Edward Colgate and Michael Peshkin, both professors at Northwestern University. At the time, the invention was called a “programmable constraint machine.” Since then, human beings in companies across the world have been working alongside cobots, using the machines’ superior strength and accuracy to enhance processes from surgery to crop harvesting. Cobots differ from robots mainly in that they are not dangerous; they are much smaller and lighter and can work in close proximity to people. They are also not pre-programmed, and they can be trained to complete a process repetitively and even refine their abilities, improving as they go.

Cobots represent a growing industry worldwide, having generated $580.8 million in 2018. This growing industry, UR says, is expected to be worth over $9 billion by 2024. The industry is also relevant in developing nations such as Malaysia, where experts expect the use of cobots to increase.

Challenges to Manufacturing in Developing Nations

Emergent economies often struggle to match already-developed areas of the world in terms of productivity. Human labor alone cannot exceed the work done by human-cobot teams because of the advantages in strength and accuracy that cobots offer. Many poorer nations are not prepared to front the ever-increasing cost of feedstock, while also using devalued currencies to invest in technological solutions. On the other hand, they cannot afford to keep doing things the same way, says UR. Cobots offer crucial innovation that doesn’t empty the coffers.

From “Dull, Dirty, Dangerous and Dear” to Dynamic Careers

Popular culture often presents robots as adversaries; movies and books narrate universal fears of robots taking over human life and livelihood. But many of the jobs lost to automation, such as jobs in mining and sewage, fall into categories that are sometimes referred to using the four D’s: dirty, dangerous, dull (demeaning) and dear (expensive).”

Cobots can help reduce workplace injuries involving heavy and repetitive lifting, for example. And since cobots specifically require a human partner in order to be effective, using cobots does not necessarily result in the loss of a job. In fact, it could mean just the opposite: training people to operate cobots frees them from mundane tasks, making them more qualified, a phenomenon known as “upskilling.” This results in a more knowledgeable workforce whose lives are enriched by more fulfilling careers. In this way, cobots in developing countries can be part of the solution, not the problem.

Darrell Adams, the director of UR in Southeast Asia and Oceania, said of cobots: “Tomorrow’s workplaces will be run by highly skilled workers assisted by intelligent devices. Cobots help to automate and streamline repetitive and potentially unsafe processes, thus ensuring a safe work environment while increasing productivity and efficiency.”

The Successes of Cobots in Developing Countries

Cobots in developing countries have already had a degree of success. For example, in India, one automobile parts manufacturer, Craft and Technik Industries (CATI), saw the urgent need for more precision in its operations. A workforce deficit meant that manual work often resulted in errors and waste. However, after the addition of a UR cobot used to perform quality control, the company stopped experiencing these errors. At the same time, production jumped by 15-20%.

UR believes that cobots could offer up to a 30% boost in manufacturing output of SMEs in developing countries such as Malaysia. According to UR, as of 2020, most Malaysian companies automate less than half of their operations. This could be because industrial robots are simply too expensive for SMEs to afford.

Smaller, more practical cobots in developing countries make better financial and logistical sense because they are easy to put to immediate use, without causing invasive stoppages in production for installation. “With the assistance of cobots, local manufacturers can achieve higher levels of efficiency and rapid productivity gains,” said Adams.

According to UR, companies that have opted to automate their processes using cobots can slash production errors while boosting productivity by as much as 300%. For SMEs in the developing world, though, the most compelling evidence is in return on investment (ROI). Companies who have recently signed on to cobot technology can achieve ROI in about a year.

Automation and Policymaking

It is clear that developing nations will have to confront how to “upskill” workers in a way that accounts for socioeconomic differences and the gaps in access those differences can cause. In some countries such as Thailand, policymakers have already convened to form organizations dedicated to developing automation industries while equipping workers with the skills needed to keep up with those advances. But some economists are skeptical that this would be the norm in most countries, and propose a government-provided basic income for those who have lost employment. Whatever the case, with robots already here to stay, it seems clear that cobots in developing countries offer the happy medium that these countries need to compete in an increasingly automated world.

– Andrea Kruger
Photo: Flickr

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Job Programs Versus Payouts for the Poor

All the foreign aid in the world could be useless if not implemented well. The Borgen Project seeks to help third-world countries join a global market and become self-sufficient. Among the many ways for developing governments to reach this goal, there is a common debate over whether it is better to have foreign aid creating jobs for the unemployed, or to simply give would-be entrepreneurs cash directly. In the debate of job programs versus payouts, each tactic has its own valuable strengths.

Technology reduces access to good entry-level jobs

Supporting a work program would equip workers with what they need for a good job in a competitive world. The World Economic Forum predicts that five million jobs will be lost around the world by 2020. For first-world nations, this loss can be offset by an increase in productivity and wealth. For third-world nations, artificial intelligence means low-wage workers will lose their competitive cost advantage in a global market.

The Financial Times predicts that 85 percent of all Ethiopian jobs are at risk due to automation. Corporations do not wish to pay human employees more in exchange for less efficient work. A job program, for nations striving to reach industrialization, can teach citizens skills that machines cannot learn. And that system will help developing countries keep pace with their richer neighbors.

Each country’s difficulties are best solved through their own workforce

The World Bank examined how small and medium enterprises (SMEs) contributed to the growth of almost 100 developing countries. Its research concluded that SMEs do more than provide the most employment for states. SMEs help developing nations even more than the biggest firms, in contrast to the U.S. economic system. SMEs bring in more than 80 percent of job creation even in countries with net job loss.

Some of a starting business’s greatest obstacles include lack of finances and burdensome taxes. Helping people help themselves would be an efficient use of money. As The New York Times notes about job programs versus payouts, human capital “could catalyze more business investment and activity in low-income neighborhoods, which would further promote economic growth.”

Emerging nations need money invested in its entrepreneurs, not its corporations.

The World Bank admitted that to claim “SMEs provide productivity growth” is dubious. If job programs only train developing nations to be cogs in a global machine, then ultimately only large corporations will benefit.

The USAID website, similar to the World Bank, agrees that entrepreneurs in developing nations need help to get started. But USAID notes that investors don’t contribute to high-risk yet promising early enterprises. If cash only flows to what’s proven to work in an economy, then no startup will escape a global corporation’s shadow. Through several nonprofits and systems, USAID “efforts focus on directly strengthening individual, high potential entrepreneurs.”

The debate of job programs versus payouts may never be solved. Artifical Intelligence will not be the last technology to threaten jobs, and corporations will ultimately never be the only factor taking a nation to greatness. USAID, the World Bank and the Financial Times can all agree on one thing: investment in the poorest among us is the key to our brighter future.

– Nick Edinger

Photo: Flickr

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The Effects of Automation on Developing Countries

The Effects of Automation on Developing CountriesThe world is on the cusp of another industrial revolution. This time, it is information technology that is dramatically altering the fundamentals of the global economy, displacing millions of workers in the process.

While technological disruptions have already taken a significant toll on developed countries—causing what Erik Brynjolfsson and Andrew McAfee dub the “Great Decoupling” of wages from productivity—the effects of automation on developing countries are only beginning to be felt.

In the last three decades, information technologies produced high growth rates in many developing countries, as communication and transportation technologies facilitated economic globalization and tapped low-cost labor sources.

But in the future, continued technological advancement is expected to undercut even the lowest-cost labor in developing countries.

Last year, the World Bank estimated that roughly two-thirds of all the jobs in the developing world are due to succumb to automation.

While deindustrialization caused wage stagnation and inequality in developed economies, automation in developing countries will likely have an even worse effect. Lacking the wealth and educational infrastructures developed countries had, most developing countries will be hard-pressed to transition from export-led to service-based economies.

Instead, the coming technological revolution is likely to produce a reverse-outsourcing effect on developing countries. The countries with the best-educated and most competitive STEM workers will be the ones attracting the businesses that are going to design and develop the technologies that put everyone else out of work.

To compensate for technological disruptions, tech moguls like Mark Zuckerberg have suggested implementing policies like universal basic income.

While this platform may offer a short-term solution to the coming wave of unemployment, it will likely bankrupt governments and ultimately fail to uphold a long-term consumer-based economy.

In the developing world, specifically, universal basic income will explode budgetary deficits, which are in many cases already inflated from subsidizing industrial production and exportation.

Regardless of how cheap and efficient technology renders supply chains, without an employed and enriched populace, efficiently produced goods will find no new markets.

The only long-term means to mitigating the effects of automation on developing countries will be investing in human capital and educating high-skilled workers. Only when most workers are responsible for driving the driverless economy will the economy work for most workers.

– Nathaniel Sher

Photo: Flickr

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What Does Increased Automation Mean for Laborers?

automation
A recent book called The Second Machine Age has been heavily cited in discourse regarding the state of the economy and the future of work itself. What is the second machine age? The second machine age refers to the rise of automation of tasks once thought to be restricted to human ability. How will emerging technologies like artificial intelligence affect the poor?

Many famous people, such as Stephen Hawking and Elon Musk, are worried about the future implications of artificial intelligence being malevolent towards humanity; however, the real problem may begin before artificial intelligence even reaches such a point. A more urgent and realistic scenario approaches — it does so at an uncertain rate, but it is projected to run down a well-worn path.

AI are quickly developing the ability to do tasks as well as and better than humans, albeit usually narrowly specialized tasks. Driving cars, manufacturing goods, finding patterns in data, even winning jeopardy – AI technology is assuredly forging ahead. If AI are going to be able to do these tasks, where does that leave the truck driver, the factory worker, the lawyer, accountants and others? These are millions of jobs that could be eliminated in rapid succession, potentially creating a situation of chronic high structural unemployment amongst people in their prime working years.

Where does this leave those without employment? And an even more unnerving question – where would this leave those who are already impoverished? The answer is complicated. A few things might happen at once. To begin with, some jobs are simply not worth replacing with robotic labor – for the time being, at least. Waiters and other jobs that require genuine human interaction at low wages may survive.

Others believe that AI can help usher in a so-called “post-scarcity” society. A post-scarcity society would be the result of a world where AI and technology as a whole would work for humans and produce more goods than people would need. Perhaps John Maynard Keynes’ predictions of fewer hours of work per worker will come true. Germany currently has a system in which they incentivize companies to cut workers’ hours, not jobs. This could save some jobs, but it may not be suitable for every type of occupation. The poor would make even less money with the jobs they do hold.

Some believe that the current situation of worldwide income inequality could become aggravated even further by AI-caused automation of jobs. Fewer jobs could lead to further concentration of wealth and an unhealthy economic balance. The prospect of less work to be done, fewer jobs and fewer ways to make money seems to bode poorly for fighting the cycles of poverty.

However, automation does happen for a reason; namely, automation of tasks is more productive and efficient than using human labor. Higher productivity means more goods and services for lower prices. Perhaps the post-scarcity world isn’t such as fantasy. Maybe automation could be a great thing for the poor in the very long term – if managed properly. For now, it seems as though the short-term effects may need to be addressed more seriously. Automation of a diverse range of professions will be a problem for the poor and for society as a whole.

– Martin Yim

Sources: RT, The Atlantic, New York Times
Photo: Flickr