Effects of technology on the labor force: Firms’ adoption of personal computers and changes in their workforce size in Central Asia

The effect of technological innovations on labor market outcomes has been widely studied. According to a recent World Bank report, 1.8 billion jobs in developing countries are at risk of being automated. However, little is known about how technological innovations will affect Central Asia. I hypothesize that, in Central Asian economies, a firm’s level of computerization is negatively correlated with its workforce size. Given that a high proportion of Central Asian workers fill manual, low-skilled positions, a substantial number of these positions should, in theory, be susceptible to technology-induced labor substitution. To test my hypothesis, I use the World Bank’s Business Environment and Enterprise Performance Survey (BEEPS) to assess the relationship between technological advancement, as measured by changes in a firm’s personal computer (PC) adoption, and changes in its workforce size for the countries of Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan. My analysis finds no relationship between a firm’s computer use and its workforce size. This finding withstands a battery of robustness checks. The World Bank asserts that the rapid growth and diffusion of digital technologies, along with the growing importance of the digital economy, necessitate a discussion among policymakers and policy researchers about the consequences of these new technologies. This paper contributes to a better understanding of the regional effect of technology on labor, which could help guide assessments of policy options in order to maximize the benefits, and minimize the adverse impacts, of new technologies.