Harvard University

Written by Zeng Han-Jun

Even with the easing of Covid-19 restrictions, economic recovery still seemed to be hampered by the global manpower crunch that is faced in many countries. On this point, it appears that this trend might continue to worsen in the short- to medium-term future and is expected to impact many industries, more so in those that rely heavily on manpower.

Logistics is one such industry. It is one of the key enablers of the world’s supply chain and entire countries depend on it for movement of goods within countries and across borders. This industry is a critical node to the entire global business system because it interacts with many resources such as equipment, machinery, components, materials, fertilizers, seeds, food and drinks and items, to homes, supermarkets, stores, etc. Many research houses also look at logistics as a proxy to economic performance therefore this gives one a perspective of how important it is.

In fact, today’s global distribution, manufacturing and procurement depends heavily on logistics. Even with the growth of additive manufacturing, we would still need to depend on the logistic sector to transport the raw materials for most additive manufacturing operations.

The subset components of logistics could be broadly categorized as land, sea and air transport. Simply phrased, goods and materials can be transported to its destination via land, sea and air transport, all of which are important functioning gears to the great machinery of a sustainable urban development.

For those reasons, that is why I decided to write about sea transport in this think piece. If people were to draw parallels between cities and urban development to living bodies, then I would boldly say that the sea transport component comprising the shipping capabilities, port management and its connectivity paths to the rest of the inland transport systems, is similar to the mouth of the living body.

Just as the mouth receives nourishments to sustain and grow the living body, the entire combined functions of the shipping capabilities and port management, too receives the necessary goods and materials to sustain and build a country. Even large, prefabricated building components are now constructed overseas, then shipped to the designated country for further assembly into residential, office, entertainment or factory buildings.

The shipping-related industry is manpower-intensive yet persistently faces the problem of manpower shortages. The pipeline of talents is expected to continue to veer away from this industry in the future. Developed countries are facing similar issues but for different reasons. For developing countries, I believe that one of the reasons why this is happening, is because more people are able to find equal if not more financial compensations in freelancing, office-based jobs, sales career in insurance and real estate or emerging opportunities in content creation, cryptocurrency, web3, etc. Most of these jobs can be performed remotely and also from anywhere in the world as long as there are internet services.

Things might worsen when digitalization tweaks up its knob. Once internet services become even more affordable and accessible, developing countries might start to face growing challenges in finding good and reliable workforce and also, find it increasingly difficult for any hope of creating a future-proof sustainable urban development.  The stages of development will be as such. First, the manpower will be affected. Second, means of trading will be affected. Third, economy will be affected. Fourth, social dynamics will be affected.

For perspective, let’s use Rwanda as an example. A Maritime engineer in Rwanda, earns an average salary of about USD$500 to USD$700 per month. This is a very good and respectable salary for a Maritime engineer especially after he/she/they/zir have received a number of years of professional trainings in subjects like mathematics, sciences and engineering. All of these culminate in a professionally trained mind that is skillful enough to solve difficult and complex challenges. Furthermore, it is usually in solving these complex challenges that helps to improve the ecosystem. Also, not forgetting the fact that such trainings serve as fundament to receiving and understanding even more complicated and difficult subjects, thereby enabling one to push the envelope for innovations in specialized areas.

So, with this perspective in place, let me explain how digitalization, and cheaper and affordable internet services, could disturb the efforts of sustainable urban development. Digitalization is going to enable more innovations which then allow people to monetize digitally in more ways than ever. Cheaper and affordable internet services will allow more people to access these means of livelihood. One popular example of how people can monetize digitally, is on the social media platform, TikTok.

The platform offers a variety of content, presented in such easy-to-consume format and its entire user experience leaves many wanting for more. Plus, TikTok performances by people in developing nations, present fresh and never-before-seen content that many global consumers crave for, which is why, many content creators from developing countries did very well during the pandemic.

Cross-cultural fascination is one of the stronger and prominent factors in drawing large crowds to these performances. If the audience likes these performances, they can reward the performer by leaving tips.  It was estimated that on an average, a creator with half a million followers or views can earn up to USD$450 a month. There are also other benefits that come along with persistency in content creation, such as sponsorships, advertisements, live shows, plus the ability to work from anywhere. All of these might add up to more than a Maritime engineer’s monthly salary of around USD$500 to USD$700.

In fact, there are several other emerging avenues that compete directly at that salary level for talents, which I have already mentioned earlier. The best part about these career alternatives is the low barriers to entry and yet they still remain financially rewarding. Well, of course one can argue that emerging opportunities present new sources of income to individuals and also to the nation but at the expense of what? Conventional strategies of relying on tax revenue to fund studies or subsidize salaries, are dependent on students’ interest in the subject and market forces at play. In the worst-case scenario, digitalization could further hollow out the remaining of what is left of the shipping industry.

Countries at risk from the rise of digitalization could be the ones that show the smallest salary gap between professional salaries in the Maritime industry and the potential salary offered by these emerging opportunities. Besides that, those countries with stagnating salaries will face the greatest risk because they might continue to face challenges in keeping pace. In addition to this, we also have inflation to account for. Turnover is going to continue if salaries cannot keep up with global inflation and this might make it even more appealing to turn to alternative livelihoods.

Also, more people are starting to question the sustainability quotient of the shipping sector as Environment, Social and Governance (ESG) concerns start to gain traction among the regulators, interest groups, financiers and consumers. Several prominent players are starting to explore alternative energy sources like wind-assisted propulsion, electric batteries, solar, hydrogen, ammonia, etc but overall, the perception of shipping still pales in the area of sustainability. I believe that this would have substantial impact on young people’s future career choices.

Automation combined with Artificial Intelligence is definitely one way to overcome constraints, but it involves significant investments, rigorous long-term planning and continuing execution. An intensive study of the organization is required so that some roles could be streamlined, some roles to be eliminated, some roles to be changed entirely, funds and salaries re-allocated and in many cases, knowledge management practices to be enshrined.  The outcome would be an organization that has shrunk in headcounts, to perhaps a few hundred people armed with automation that is powered by Artificial Intelligence, replacing the work performed by more than few thousand workers previously.

There are many other ways to explore but that is not the point of this think piece. Perhaps I might reserve it to a future piece (or maybe not). The main point that I am trying to drive across and to get anyone to ponder over is that, firstly, digitalization is going to create new economic opportunities but at what opportunity cost? Second, what are the possible impacts in the short-, medium- and long-term future, and finally, what strategic moves to safe-guard optimally against these impacts?

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