Technology adoption, skill development and employment by SMEs in Sub-Saharan African Countries

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Adegboye, A.C.
Osobase, A.O.
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In general, technology adoption has been shown to matter for productivity growth, income expansion, and the overall welfare of societies. However, technology adoption by firms in recent times has evolved into a series of automation processes, artificial intelligence (AI), and robotics, with divergent implications for employment, especially for developing countries. While there are arguments that technology tends to reduce workspaces thereby making workers redundant, there are other views that consider modern technology as capable of creating better job opportunities, especially from smaller businesses. One clear issue is that investment in technology by SMEs can be associated with employment reallocation and substitution outcomes often involving difficult adjustments for firms and individuals. This is because technological change may be skill biased, requiring workers to develop new skills in order to fit into modern workspaces. Thus, widespread technology adoption by businesses may lead to high levels of displacement and unemployment. In this study, the effect of technology adoption by small and medium enterprises in sub-Saharan African (SSA) countries on employment are examined. The role of skills development in either aggravating or mitigating the technology-employment nexus is also investigated. For the analysis, the type of new technology adopted by businesses is considered in terms of product-oriented technology and process-oriented technology. The effects of both forms of technology adoption on employment are assumed to differ, especially with regard to skill-mitigating relationships. Data for selected African countries was obtained from the World Bank Enterprise Surveys. The study finds that SMEs with focus on technology acquisition tend to place less importance on employment. For those that have increased employment, skilled workers are the main target. It was also found that technology has improved entrepreneurial employment but has also led to less employment within smaller firms among SSA countries. In general, adoption of technology was found to be creating a demand-side barrier to the employment of low-skilled youth among SSA countries. The study therefore recommends a retooling scheme (in terms of technology-related skills) among young people that are transiting from education into the labour force in order for the job-seekers to be more relevant for employment. Programmes that support employers to expand quality apprenticeship and internship should also be encouraged in order for the youth to develop soft skills and skills that complement automation in the workplace should also be pursued by government.
Scholarly articles
Innovative technology , Youth skills , Job creation , Labour market , SME , Research Subject Categories::SOCIAL SCIENCES::Business and economics::Economics
Adegboye, A.C. & Osobase, A.O. (2021). Technology adoption, skill development and employment by SMEs in Sub-Saharan African Countries. Paper presented at the ARUA COE Conference held at the University of Cape Town, August 24-26