Latin America must retrain its workforce for industry 4.0

Participants expressed this view in debates on the impact of the fourth industrial revolution at the World Economic Forum on Latin America.

By Elton Alisson  |  Agência FAPESP – Growing automation in manufacturing worldwide has discouraged multinationals from outsourcing production to emerging economies like China, Brazil and other countries in Latin America where these corporations once preferred to set up factories to take advantage of the cheap labor available there.

To prepare for the shape of things to come, in which manufacturing will be far less labor-intensive and people will mainly perform tasks relating to control rather than execution of processes, Latin American countries need to invest heavily in education and training to ensure the workforce has the new skills required by industry 4.0, while also encouraging the new generations to choose careers relating to science, technology and innovation.

This and similar views were expressed by participants in debates on the impact of the fourth industrial revolution during the World Economic Forum on Latin America, held in March 2018 in São Paulo, Brazil.

“Current and future generations of Latin American workers need to be equipped with social skills such as emotional intelligence, problem solving and the ability to reason logically, among others. You don’t get these skills from textbooks,” said Angel Melguizo, Chief Economist for Latin America at the Organization for Economic Cooperation & Development (OECD). “Firms aren’t finding these skills in the region’s workers at present.”

According to a survey by Manpower Group Latin America in partnership with the OECD, more than 50% of the region’s firms are unable to find candidates with the required social skills, such as communication, analysis and critical thinking, compared with 36% of firms in OECD countries.

The skills gap is widest in Peru, Brazil and Mexico, where it most affects the sectors considered essential to update and diversify Latin America’s economy, such as the automotive and advanced machinery industries, as well as service industries.

Not only does Latin America have the world’s worst formal-economy skills gap, two out of five young people in the region neither study nor work, and 55% of its workers are occupied in the informal economy, according to the survey. 

“The lack of a suitably qualified workforce in Latin America and the large number of people without formal jobs and living in economically vulnerable situations have made it difficult to overcome the middle-income trap in the region,” Melguizo said.

By “middle-income trap”, Melguizo added, he meant the phenomenon seen in emerging economies that stagnate at middle-income levels and fail to sustain sufficiently fast economic growth to ascend into the ranks of high-income countries. 

“This contrasts with what happened in most European and Asian countries, which have achieved sustained increases in per capita income and escaped the middle-income trap by investing in the quality of education, in the development of their workers’ skills, and in an innovation-friendly environment. We’ve seen this in Portugal, Ireland and South Korea, for example,” he said.

Innovative curricula

To achieve the same leap as these European and Asian countries, according to the experts attending the event, Latin America should reform educational curricula and create upskilling programs that combine technical training with the development of foundational competencies such as logical thinking and cooperation.

“For example, computer programming languages should be part of the school syllabus so as to prepare children, young adults and teachers for an increasingly digital world,” said Jennifer Artley, President of Global Services for the Americas at BT Group, a UK-based telecommunications firm with operations in more than 170 countries.

Latin American countries are avid consumers of new technology. Brazil, for example, has the third-largest number of Facebook users in the world and is one of the leaders in using Waze, a traffic navigation app developed in Israel and bought by Google in 2013. The region’s countries need to convert this interest into more innovations, according to participants in the event.

To increase the level of innovation in the region, they said, access by young Latin Americans to university courses relating mainly to science, robotics, engineering, mathematics, arts and design must increase.

“Science and technology are key drivers of innovation in Latin America. We can continue producing our commodities, but we must use part of the raw-material export dividend to invest in science and technology. In Colombia, for example, we spend 10% of our oil royalties on science and technology,” said Mauricio Cárdenas, Colombia’s finance minister.

The extent to which many Latin American countries depend on commodities is not incompatible with the challenge of diversifying the region’s economies and entering the post-manufacturing age. On the contrary, it can give the region an extra boost in the effort to develop new services linked to the sector, according to Melguizo.

“We can add value and develop commodity-related services,” he said. “Chile has done this in mining, and so has Uruguay in food.”