How AI will impact the Labor Market in the Global South
And how Artificial Intelligence Can Boost Productivity in Latin America
Many articles in Brazil are based on data from the U.S. or translated from articles published there, where there is an abundant source of information and a strong data culture. After some time publishing articles on global trends in the world of work, I realized that, beyond curation, the greatest value might actually be adapting the content to the local reality - which is often a challenge. In other words, some global trends and data may not fully align with the reality of emerging countries. So, in this edition, we will explore the impacts of AI on the job market, specifically for emerging countries.
1. AI´s Impact on Jobs: Global vs Emerging Countries
AI is changing the global workforce, but its impact isn’t the same everywhere. While a lot of the focus is on high-income countries where AI is reshaping industries, less attention is paid to developing nations, where 80% of the world’s workforce lives.
AI’s impact will be slower and less intense in the Global South, especially in low-income countries. AI affects jobs differently depending on income level and the access to electricity and internet also plays a big role, with low-income countries facing more limitations.
Almost 40 percent of global employment is exposed to AI. Historically, automation and information technology have tended to affect routine tasks, but one of the things that sets AI apart is its ability to impact high-skilled jobs. As a result, advanced economies face greater risks from AI - but also more opportunities to leverage its benefits - compared with emerging market and developing economies.
In advanced economies, around 60% of jobs could be impacted by AI. Of those exposed jobs, roughly half might benefit from AI integration, boosting productivity. However, for the other half, AI could take over key tasks currently done by humans, potentially reducing labor demand, leading to lower wages and fewer hiring opportunities. In some extreme cases, these jobs could even disappear.
The IMF staff assessed the readiness of 125 countries, and their findings show that wealthier economies, including both advanced and some emerging markets, are generally better prepared for AI adoption than low-income countries. However, there’s significant variation between countries. Singapore, the United States, and Denmark topped the index with strong results across all four categories evaluated.
How Artificial Intelligence Can Boost Productivity in Latin America
Let´s dive into the context of Latin American landscape.
1. The informal economy
Emerging countries share several common traits, one of which is the large number of informal jobs. Half of all working people in Latin America and the Caribbean work in the informal economy. It mainly affects certain population groups, such as women, youth, people belonging to certain ethnic groups and migrants. It also affects more the less educated, those working in low value-added agricultural activities, the working poor, smaller enterprises, the self-employed, people in new forms of employment, both in rural and urban areas.
And this is one of the reasons why these countries are less exposed to the AI´s impact in the job market.
2. First things first: how do we measure AI exposure?
I believe the person who benefits the most from this newsletter isn’t the subscribers, but me - because every time I write, I put myself in a learning position to fully understand what I’m talking about.😂
According to my researches, to figure out how much a job is affected by AI, we break it down into its tasks. Then, using past research, we give each task a rating based on how much AI could take over. After that, we add up these ratings to see the overall AI impact on the job. Finally, we connect this AI impact to real workers using global labor data.
AI exposure does not necessarily mean that a task - or an entire job will be replaced. Exposure could mean three things:
Automation – AI fully takes over certain tasks, reducing the need for human labor.
Augmentation – AI enhances human productivity, allowing workers to perform tasks more efficiently.
Job restructuring – AI changes the mix of tasks within an occupation, potentially leading to new job descriptions building on different skills.
In practice, all three of these forces will likely play out differently across various sectors and economies.
2. How about the data infrastructure in emerging countries? The true cost of data infrastructure inequality
This is a very important topic to consider. Vuk Vegezzi addressed the inequality in data infrastructure in developing countries at the “AI for Developing Countries Forum.” He highlighted that many organizations unknowingly give away their data rights due to a lack of data maturity, even in developed nations. The biggest gap lies in human capital, particularly in three areas: academia, data literacy, and talent retention.
Academia – Without strong infrastructure, research struggles, and top talent is hard to attract.
Data Literacy – Raising awareness and understanding of data is expensive but essential for AI success.
Upskilling Talent – Skilled professionals often leave, and there need to be incentives for them to return.
To attract or retain even the best talent to innovate, you will always be kind of a follower, which is okay from a business perspective. But if you want to have the top talents, you will have a tough time competing with different institutions. Thus, you will also need more education, which will be, let's say, more pushed to develop better minds. Secondly, the cost of augmenting data literacy across developing countries is very high.
Vegezzi warned that while data is often called "the new oil," its true value lies in ownership. If countries don’t control their own data, they risk long-term economic dependence and missed opportunities in AI development.
3. The Future of IT in the Global South
How about the IT sector in emerging countries?
LLMs (Large Language Models) could hinder the growth of the IT sector in the Global South in terms of economic contribution, employment, and exports. While the digital service sector has shown promising growth, much of this growth is happening in IT jobs that are at high risk of being automated by LLMs. A good example is the telecommunications sector, which has seen growth in employment, GDP, and exports in the Global South, but many of these jobs could be vulnerable to automation.
At the same time, the digital gig economy in the Global South is rapidly expanding, but much of the work in this space is repetitive and can easily be automated by LLMs. This includes tasks like data labeling, content moderation, transcription, virtual assistance, customer service, software development, and more.
There are two main risks for countries in the Global South:
Stagnant IT Sector Growth – if LLMs developed in the Global North are used to create digital services for the Global South, they could disrupt existing industries in these regions.
Loss of Outsourced Jobs – if Global North countries automate and reshore IT tasks that were previously outsourced, this could hurt the net IT exports and overall growth of the Global South.
In short, LLMs might make some jobs in the IT sector more efficient to automate rather than outsource, creating challenges for developing countries in this area.
4. AI’s Impact on Jobs May Be Smaller in Developing Countries - And Big Opportunities Exist
I don't mean to bring a pessimistic tone to this post... don't be discouraged about living in an emerging country!🤯Let's focus on the positive aspects like the lower cost of living, and explore the exciting opportunities that come with it.
While it’s true that skilled workers from developing countries often find opportunities in wealthier nations, emerging economies still offer vast potential for innovation and problem-solving.
These countries are home to a unique set of challenges and limitations, but where there are problems, there are also opportunities - especially for creative minds. The constraints that many developing countries face can often spark innovative solutions.
AI-powered tools have the potential to drive significant improvements in these countries such as:
Improved Access to Education and Healthcare
AI-powered tools have the potential to improve access to education and healthcare, particularly in underserved areas. This can lead to better quality of life and increased opportunities for development in regions where resources are limited.
Optimizing Agricultural Practices
AI can optimize agricultural practices to boost food security and productivity, which is crucial for many developing countries that rely heavily on agriculture. By increasing efficiency and yields, AI can help improve food systems and reduce hunger.
Enhancing Financial Inclusion
AI can contribute to enhancing financial inclusion in developing countries. By offering new ways to access banking, lending, and investment services, AI can provide financial opportunities to those previously excluded from traditional systems.
Local Innovation Models
The developing world has the potential to create innovative models for AI adoption, especially by focusing on local context and needs. Understanding and nurturing local innovation can help integrate AI in ways that benefit the local economy and workforce.
Regulating Digital Labor Platforms
By focusing on how digital labor platforms can be regulated to protect workers rights, developing countries have the opportunity to set global standards for fair labor practices, ensuring economic growth while safeguarding workers.
Potential to Bridge the Digital Divide
Though the digital divide remains a challenge, addressing it could provide massive opportunities for growth. Improving digital infrastructure, such as access to the internet and affordable devices, will allow developing countries to better capitalize on AI's potential.
To prepare for AI’s future in developing countries, policymakers should focus on improving digital and energy infrastructure, encouraging AI that complements workers instead of replacing them, and using AI in areas like healthcare and education. AI’s impact will differ around the world, but with the right strategies, developing nations can use it to empower workers instead of leaving them behind.
Are you optimistic or pessimist about AI impact in developing countries?
SOURCES:
How Artificial Intelligence Can Boost Productivity in Latin America
How Generative AI Is Changing the Global South’s IT Services Sector
The Opportunities and Challenges of AI for Labor Markets in the Global South
Recommend Hiring in LAtAm to your friends.🤩
The most relevant insights and updates about the Latin American workforce, designed for foreign companies looking to hire in the region.
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Thanks for reading!
Juliana.