The impact of ICTs on employment in Latin America: A call for comprehensive regulation

Abstract

The purpose of this research is to determine the manner in which employment will evolve as a result of information and communication technologies. Prior research has shown that both communication and automation are displacing certain type of employment, mainly those with middle level skills. Given the evidence from countries with greater penetration of ICTs we expect Latin America to follow a similar path and potentially be negatively affected by the elimination of some professions. Researchers that have analyzed the impact of ICTs on employment have found that there has been a gradual move from agriculture, to manufacturing and to services with service economies being the latest iteration in development. The economic prospects for these service economies, however, will depend on the composition of the service professions. Ideally societies should aim to employ people in professions that require higher level skills as they would likely result in higher incomes and improved development prospects. ICTs are currently generating employment in the Latin American region and this is likely to remain the case for some years as these technologies make business and government operations more efficient but it is unclear whether this will continue to be the case in the long term given weaknesses in the region’s economic and political environment. The region could be relegated to providing simple services that pay low wages, potentially increasing poverty in the region. Using statistics from the International Telecommunications Union, the World Bank and the International Labor organization the author has developed a panel of Latin American countries over a 20 year period to allow for comparisons across countries in the region, and to determine if countries that have invested in education and R&D also benefited from service employment with higher level skills. Initial results indicate that wireless communications, the technology of choice for these country’s governments, do not create substantial employment while broadband is not yet deployed widely enough to show any effects. Factors that are found to negatively impact employment are capital formation and burdensome bureaucracies while factors found to positively affect employment are education, foreign direct investment, and, surprisingly, inequality a variable that will require further exploration. The paper concludes with policy recommendations.