Digitalization, AI pose threat to skilled PH workers, says HSBC
The digitalization trend and the rise of artificial intelligence (AI) pose a serious threat of replacing skilled workers in the Philippines—particularly overseas Filipino workers (OFWs) that returned home over the past eight years—if not harnessed appropriately, according to HSBC.
Aris Dacanay, HSBC’s economist covering Southeast Asia, said in a report that about half a million skilled OFWs had come back since 2015 when deployment from the Philippines peaked.
And while this is welcome news in terms of the availability of talent in the domestic labor market for the ones of the region’s fastest-growing economies, Dacanay noted that many of the returnees have not found opportunities in traditional workplaces and instead turned to the digital or so-called gig economy.
“OFW returnees and current residents may have decided to join the labor force to help make ends meet,” Dacanay said. “However, with not enough jobs in the formal sector to absorb the boom, many have found refuge in the informal sector.”
At the same time, the disruption of the pandemic accelerated the growth in the number of self-employed workers in services and sales as other skilled workers entered the gig economy—ranging from food stall vendors to online resellers and even content creators.
“Unless OFW returnees are employed in export-related jobs back home, the current account will likely see a wider deficit, with OFWs remitting less foreign currency than before,” he said.
According to the Bangko Sentral ng Pilipinas (BSP), the country’s current account—which measures the nation’s transactions with the rest of the world, mainly on goods and services—was recorded at a deficit of $18.1 billion in 2022 as more dollars went out than came in.
The BSP’s latest forecast points to a trend of narrowing toward deficits of $15.1 billion in 2023 and $11.1 billion in 2024.
But Dacanay said that with AI and digitalization making services more tradable, the Philippines is in a strong position to use this trend as leverage and move its biggest industry—services—up the global value chain.
But he warned that, apart from being an opportunity, digitalization can also be a risk.
“Without the necessary adjustments, digitalization and AI can replace labor in the Philippines instead of helping it,” Dacanay said.
“Reskilling and investment will be necessary to ensure that digitalization is an opportunity and not a liability,” he added.