Driverless cars and 3D-printed body parts are frequently making news in developed countries. Although not as discernible, technological changes are also making inroads into developing countries, influencing how people live and work. For example, even blue-collar workers such as car mechanics now work with computers to detect problems and repair vehicles.

Technologies have influenced labor markets throughout history, but the present-day transformations stand apart given their speed, magnitude, and the complexity of change. Scientific breakthroughs in a broad spectrum of fields, such as genetics, artificial intelligence, nanotechnology, and 3D printing, are feeding into innovations that redefine how people live, work, and interact with each other.

These innovations are constantly creating and altering production processes and revolutionizing the operations of a large spectrum of industries. They are also restructuring labor markets.

Can education systems cater for these changing demands of the labor market? In January 2020, the World Economic Forum 2020 called for a re-skilling revolution. This column emphasizes the need for transforming education systems in developing countries if they are to benefit from technological transformations.

How are technological changes affecting the labor market?

Technological changes are affecting labor markets in multiple ways. They are changing the occupation skill profiles of countries. In 2016, The World Economic Forum predicted that 65% of children today will do jobs that do not currently exist.

Similar changes are happening in developing countries. A survey on the Future of Jobs in India finds that of the jobs in 2017, 9% will not be in existence, and 37% will have radically different skill requirements by 2022.

Seminal research by David Autor and colleagues first showed how computerization is increasing the demand for workers doing complex non-routine problem-solving and communication tasks while decreasing the demand for workers doing routine manual and cognitive tasks.

Computerization of routine tasks has allowed firms to source workers off-site and offshore, changing the organization of work. Such changes benefited firms during the Covid-19 pandemic, when working from home became the norm in many countries.

Why skills are getting increasingly important

Research shows that over time, automation affects the cessation of jobs for people with tertiary education significantly less (5%) than those of people educated just to lower secondary level (40%). Evidence from Sri Lanka also shows that the jobs done by workers with at least a degree are less likely to be automated (see Figure 1).

Figure 1. Probability of computerization of jobs, by the level of education

Source: Own calculations using Sri Lanka Labor Force Survey data 2018, mapped to probabilities of computerization for detailed occupations.

Skills supply

Despite the increasing demand for higher-skilled workers, the supply of quality tertiary educated people in lower-middle-income countries is low. Gross enrolment rates in tertiary education in low-income countries lag behind those in high-income countries (see Figure 2) due to low demand, inadequate facilities, low quality of pedagogy, and governance structures.

Moreover, within the tertiary education sector, there are specific needs for different types of graduates, although the exact demand will vary across countries. But the demand for some fields of study such as science and technology has increased faster than supply, creating shortages for such graduates in many advanced countries. Despite the attention given to improving education systems in the past, successes have been limited.

The migration of skilled workers to advanced countries lured by preferential visas exacerbates the skills gaps in developing countries. Such exodus is also due to low growth, poor labor market conditions – such as lack of suitable opportunities, lower pay, and inferior employment conditions – and poor quality of life in home countries compared with elsewhere.

Figure 2. Tertiary gross enrolment rates (%)

Source: Own compilation using UNESCO Institute for Statistics.

Note: Data for the latest year available. Accessed in June 2021.

The lack of skilled workers is creating labor shortages. Some industries are resorting to hiring under-qualified workers. Such skills gaps restrict firm expansions and productivity and impede growth. For example, according to the International Labour Organization, at least a first degree or higher-level qualification is needed to perform the tasks and duties of a ‘professional’.

But my research shows that only 40% of ‘professionals’ in Sri Lanka had a degree or higher-level qualification. This shows that the majority of workers doing the job of ‘professionals’ are not formally trained to do their job.

Policy implications

Technology is changing the jobs available in the labor market, the skills required to do the jobs, as well as the arrangement of work. Research shows that future jobs will increasingly demand higher-skilled workers. Yet the education systems in many developing countries are unable to cater for the skill demands of the changing labor markets. Already countries are experiencing skills mismatches, leading to productivity losses.

Radical changes, not just incremental ones, will be needed to increase skills generation to meet the growing and changing demands. Given increasing and changing demand, around the world tertiary education systems are changing legislation and governance structures to make tertiary education more flexible, adaptable, and affordable. Tertiary education is also being better integrated with enterprises and social sectors, so that education changes can better keep up with technological changes.

Such profound changes are only possible through a multipronged approach to restructuring education systems. Global and regional level efforts are needed to implement deep-seated reforms to modernize tertiary education systems across countries.

This article was written by Nisha Arunatilake, Director of Research at the Institute of Policy Studies of Sri Lanka (IPS) and a Research Fellow at the Partnership for Economic Policy (PEP). Her main areas of interests include labor markets, public finance, education, and health.