~ “Rapid and accelerating digitization is likely to bring economic rather than environmental disruption, stemming from the fact that as computers get more powerful, companies have less need for some kinds of workers. Technological progress is going to leave behind some people, perhaps even a lot of people, as it races ahead.” ~ Brynjolfsson & McAfee, 2014.
~ “Growth in the developing world has made the major emerging markets systemically important. Their choices and paths have significant effects on one another, and on the advanced countries. This is new. It is a function of the growth, the increasing size, and, significantly, the increasing incomes of the major developing countries.” ~ Michael Spence, 2011.
As we come out of the Great Recession, unemployment appears to remain stubbornly high. Many millions of Americans and Europeans are still out of work or in lower paying jobs. Meanwhile, many businesses are reducing their labor through automation and off-shoring. A growing number of recent studies suggest this is part of a major irreversible shift in how our economies run that will only intensify in future. Fundamentally different forces are emerging that constitute a major break with the past in the world of work as we have known it until now.
The artificial intelligence (AI) and robotics industries have been growing by leaps and bounds. New computer-driven, intelligent machines and systems are taking the place of human workers. Meanwhile, the Worldwide Web and faster more integrated telecoms and ICT than ever before, together with faster more efficient transport and supply chains across the globalized economy, are contributing to what has been called the “death of distance”. In this new world, workers in advanced economies – especially in lesser skilled, less knowledge intensive jobs are now competing for – and often losing – their jobs with far lower paid workers in emerging markets. Or they are being replaced by machines.
This is what in an important new book, Erik Brynjofsson and Andfrew McAfee have dubbed the “second machine age”. It is also what Tom Friedman has called a flattened world – that levels out work opportunities and pay across a globalized market. It is what Nobel Prize winning economist Michael Spence has called the “next convergence” in which emerging markets grow more rapidly than mature advanced economies, narrowing the income and prosperity gap between them.
However you choose to call it, it is clear we are living through a period of very profound and disruptive economic change – at least as great in human terms and probably far greater than the Industrial Revolution in Europe and North America in the 19th century. And this time it is more inclusive in that it involves the entire human race across the Planet. How will this affect the job and future prosperity prospects of our children and grandchildren? What is the best advice to give them for charting a successful, secure and prosperous future?
Key Questions : ~ How has technology and innovation changed the way we work? ~ How have computers, digitization and artificial intelligence (AI) changed what we produce and how we produce it? Are we humans in a losing battle with computers and robots in the work place? Or, are there vital capabilities human beings possess that computers, robots and digital systems cannot acquire or replicate? How should learning work and our society regroup to face these major challenges?
The Digital Age in the Workplace : Digital technologies are making vastly more knowledge available through the Web to more individuals than ever before. This is shifting work from a focus on physical power to mental power. Economic growth and increased prosperity are based more and more upon shifting work previously done by humans to machines, including robots; and upon using the power of networks to obtain and use information and knowledge vastly more rapidly and on a vastly bigger scale.
However, digitization and automation are focused largely on highly specific specialized tasks for which computers and robots have to be carefully programmed – and reprogramming can be lengthy and costly. Efforts at more general multi-purpose multi-functional work – especially creative thinking involved in developing new solutions and products to meet the human market place’s immediate needs – have so far eluded digitization. Computers can be programmed to answer questions – by more rapidly processing information at light speeds impossible for humans. Robots can be programmed to undertake a range of routine specialized tasks. But neither have the combination of intuition, experience recall, and human social context needed to pose the key questions and to seek answers in new and un-programmed ways.
Computers and computer programs and software can do such things as : replace humans in preparing tax returns based upon large sets of known rules; undertake more accurately than humans repetitive, specialized, routine assembly line operations. They can even drive cars – without need for a human driver – once road and traffic conditions are known. They cannot ask the key questions to design a new treatment of cancer, assess changing market trends in terms of human taste in very localized markets. Nor can they perform a range of personal services that require knowledge of individuals’ tastes and preferences and ability to adapt on the spot to sudden unexpected changes in these.
Digitized networks are enabling men and machines to tap into vast networks of social knowledge to create new services and provide usable knowledge to large numbers of individuals faster than ever before and often almost instantaneously. One highly sophisticated GPS system taps into the chips in users’ cell phones to obtain more accurate, up to the minute traffic information. Cell phones enable previously isolated poor farmers in emerging markets to access the latest price information for their crops and negotiate better prices with buyers.
Applying on a large scale the power of such digitized networks, artificial intelligence, robotics and computer systems, increasingly large scale and other businesses in the USA and other developed economies are able to produce and deliver sophisticated goods and services to consumers at prices far lower than ever before. We have all experienced how personal computers and much digitized equipment are more powerful but also far less costly than in years past. Similarly, improvements in transport and telecommunications are making a range of consumer products – from foodstuffs to clothing to electronics – cheaper and more affordable than ever.
Digitization’s Impact on Labor Markets and Jobs : As the rise in use of digitization has evolved increasingly fast over the past thirty years, it has been mirrored by major shifts in labor markets – both in advanced high-income societies like the USA, as well as in poorer emerging market economies like China and India. In the USA since 1970, the median income of knowledge workers – those with college and graduate degrees have risen substantially. Meanwhile, those of workers with less than college or less than high school education have declined, after taking account of inflation. Many shop floor workers in large manufacturing plants have either lost jobs to automation – many more robots are used in car assembly today for example. Or to out-sourcing abroad – most controversially to China – which is estimated to have directly reduced US manufacturing employment by one quarter in the past twenty years. However, China has also, like America, been losing manufacturing jobs – also about a quarter by now – to automation (use of robots) and out-sourcing to still lower wage emerging markets, such as Vietnam or Bangladesh. Only jobs with a highly localized niche market – not amenable to out-sourcing have stayed strong for lower paid workers – but often at lower wages due to greater competition for them . This includes such things as : hospitality workers, home health aides, cooks, auto mechanics, plumbers etc.
Many millions of workers in America and other advanced economies used to work in now out-sourced or displaced jobs – notably on old line factory floors in large old industries (auto assembly, steel making…). Meanwhile, more high-skilled workers have found more prosperous employment. But on balance, overall remuneration of workers has declined, while returns to capital, entrepreneurs and investors have increased. This has contributed to a strong and growing inequality of income and opportunity in America and in Europe.
From “Go West Young Man” to “Get Creative Thinking Skills” : So, in face of the massive disruptive changes underway, what career advice should we be offering young people today?
As we know, many pundits are pushing hard the line for more students to go into and excel in sciences, engineering and maths. And there’s compelling data showing American youth have fallen behind other nations in these areas. But there is convincing and growing evidence that in a networked, digitized world, it is the ability to apply creative thinking honed through years of disciplined intellectual study in a wide range of academic disciplines that counts.
As James Surowiecki illustrated, it is knowing how to tap creatively into the “wisdom of crowds” applying knowledge in a creative multi-disciplinary or cross- disciplinary way, that is most effective in asking the right questions and finding creative solutions. As Jane Williams has shown, music can help those with learning disabilities to unlock their latent talents. There is evidence too that self-oriented learning environments (SOLEs) that encourage individual curiosity and self-directed learning – as in Montessori schools – are most effective in nurturing creative thinkers.
Clearly, America needs to return to giving top priority to building world-class education systems based upon new approaches and far better remuneration and status to outstanding quality teachers at all levels.
Strategy and Policy for Greater Employment and Less Inequality : In face of the disruptive change underway in work and the labor market in America – but also in other advanced nations and emerging markets – the problems of declining prosperity and increasing poverty and unemployment of low-skill workers will take time and creative new strategy and policies to overcome. Moreover, since technological change can be repeatedly disruptive over time, there may likely be continuing and repeated periods of worker dislocation in the future in the coming digital age. The main focus for greater prosperity, reduced income inequality and poverty will continue to be through creation of more higher quality jobs in private businesses. But government policy has a crucially important complementary role to play. Yet, this has been increasingly neglected in recent years as Western governments – including in the USA – have stressed austerity in government spending to reduce public debt. This even where such debt was caused by taking over liabilities of distressed private banks and the depressing effects of the resulting deep recession.
Conclusions : Key elements of public policy for expanding high quality employment in the digital age will have to include : (1) macro-economic policies that encourage accelerated economic growth – especially through fiscal policy; (2) substantially greater investment to build world class infrastructure and education systems; (3) removal of impediments to market openness and competition, that will otherwise hold back change and creation of start-ups where most new jobs will be created; (4) renewed emphasis on global multi-lateral trade liberalization, including in agriculture as well as financial and other services markets; (5) innovative new approaches to fostering employment and reduced income inequality – reviewing payroll taxes, replacing these with carbon taxes, and considering wider income support programs for working poor.
I for one hope that our political and business leaders in America and around the world will have the courage and foresight to follow such a path.
Editors’ Note: Back by popular demand, this article by Paul is a re-issue from our March 1-15 publication. He will resume his regular column in our next issue of September 1-15.