IEX 181: The Work of the Future
2 recent reports point to some of the stark realities of the future of work, and provide food for thought for businesses and governments
MIT has recently published a report : "The Work of the Future - Building Better Jobs in the Age of Intelligent Machines". This is a comprehensive study commissioned in 2018 and worked on by over 20 faculty members, across 12 departments, along with a similar number of graduate students. The study took over 2 years to complete and also takes in the impact of the pandemic. The most fascinating parts of the study for me were the stories embedded in the data (largely from the US) of the past decades, and what it says directly or inadvertently about the future.
The Great Divergence: At the heart of this is the common debate over the 'great divergence' - productivity grows steadily over the past 4 years, but median incomes stagnate. Inequality becomes the defining feature of the US economy. We've all seen data about the concentration of wealth in the US and across the world. At some point this boils down to what a country wants to be famous for. America wants to be known for its world beating organisations, from McDonalds to Amazon. European countries value socio-economic parity. One data point illuminates this wonderfully: in the US they're waging the 'fight for $15' - a minimum basic hourly pay for workers in fast food and warehousing jobs. In Denmark, the entry level salary for a McDonalds grill job is $22 per hour, and it comes with 6 weeks of paid leave, medical insurance, and a pension. The problem isn't new technology, it's the market institutions that ensure a fairer distribution of the gains of technology.
Technology Impact on Jobs: There are 3 ways in which new technology positively impacts jobs, according to the report. First, it enhances productivity which releases people to do deliver more output by using better tools. Second, the overall improvement in productivity boosts income across the board, which leads to higher spends, and more goods and services being created and consumed. And third, by directly creating new jobs - in areas such as renewable energy or AI. The way I see it, each of these come with their challenges. Productivity increase often translates into reduction of employees in large firms - thousands of automation programs are justified on the basis of the headcount reduction. Income increases as we know from this report itself are increasingly skewed in favour of the already wealthy, who have a lower marginal spend per additional dollar earned. And finally, the new jobs generated by emerging tech are often geographically removed from the old jobs, and require a different skill set. A factory worker in a Detroit production line does not have access to the software job in Germany or China that is now delivering the same component through a robotic process. See the example of geographical distribution of jobs below.
Rewarding Inputs vs Outputs: And here's another fundamental issue that becomes obvious when you look at the data and observations of the MIT report. When technology brings in productivity benefits to low end jobs, it has no impact on the earnings of the employees because they are typically paid for input, not output. When you pay a shelf stacker by the hour, it doesn't matter if you make shelf stacking faster or slower, they will still earn the same for the hours they work, which are often already arduous. If their pay was in some part dependent on the number of shelves stacked, then any productivity benefit would directly improve their earning. This isn't the case, obviously and unless the average person invests in stocks or funds, they can't really get the benefit of the technology led productivity increases in their own jobs.
Labour vs Capital Productivity: The data also spotlights the hypotheses that while governments and economists still care about labour productivity, for most firms, the percentage of their output and value that comes from labour is low and falling. So what many large firms are really focused on is capital productivity. And that's what is growing. This is a bigger debate. So I'll just leave it at this.
Immigrant Culture: The one graph that should absolutely frighten US policymakers is the picture on intergenerational mobility. The US is in the bottom half of this set, at par with Pakistan and Switzerland, and a long way behind many European countries as well as Canada, Australia, and Japan. Although there's a negative correlation between the Gini Coefficient and the intergenerational mobility, this strikes at the heart of the American dream that draws thousands of migrants into the country. Why does this matter? Well, consider that Jeff Bezos and Steve Jobs are children of immigrants. Peter Thiel, Jerry Yang, Sergei Brin, and Elon Musk are immigrants themselves. As you can imagine the list of immigrant successes is a long one. If America stops being attractive to immigrants, it will lose out on generations of innovators.
Polarisation: One of the other really fascinating stories in the data is around the polarisation of jobs. The high intellect jobs which require academic attainment (Doctors, Lawyers, Business Leaders), have grown, as have the bottom end jobs which typically require humans to work on frontlines - truck drivers, bin collection, retail and fast food outlet jobs. It's the jobs in the middle where automation has caused the real decline - medical transcriptions, administrative and secretarial jobs, for example. Automation of work has therefore contributed to inequality by polarising the job market.
Education at the core: The longer term solution will require "complementary innovation and reforms in education & training systems, labour policies, corporate governance, and worker representation". Germany and Denmark are used as good examples of the benefits of getting a lot of this social contract right. Personally, I think education needs to be the bulwark of this future. If you think about the educational attainment required to enjoy a median lifestyle - it has grown steadily from the time of the industrial revolution. One of the starker observations that the report makes is that college enrolment amongst US adults flatlined in the 1980s and 90s, and even fell for US men. The inequality of earnings growth is attributable to the gap between those with and without college degrees across the industrialised world. The US is an extreme case of this. I believe that in the future, with the progress of technology including AI, Robotics, computing, and advanced materials, just to name a few, post graduate degrees may become the basic minimum educational attainment for enjoying median lifestyles. There has been a regular drumbeat of policy around vocational education, and a debate about whether everybody needs to go to college. This is a dangerous argument. If you train people for one job (vocational) and that job vanishes, their career is reset to zero, as they have to start from scratch in a different area. If you train people with a broad base of knowledge, skills, and learning ability, then horizontal moves and access to new and emerging jobs becomes possible, if a particular job (for example translation services) becomes redundant through technology.
Another report, this one from Bain, titled The Working Future, More Human, Not Less, looks more closely at the nature of work in organisations. One of the thought-provoking parts of the report look at 6 archetypes of workers.
Operators - find meaning outside of work, and treat the job as a means to an end.
Givers - find meaning in work that benefits others.
Artisans - like work that fascinates and inspires them.
Explorers - value freedom and experiences, and prefer autonomy
Strivers - want to make something of themselves, and greatly value professional achievements
Pioneers - would like to change the world, and are highly risk tolerant, and future oriented.
I think we would all recognise more than one of these archetypes within ourselves. I would probably classify myself as 50% artisan, 35% explorer, and 15% pioneer. The report looks at these groups and how they are distributed across countries, by academic achievement, and type of occupation.
The Bain Report also says that automation is helping to re-humanise work. Given that much of automation today applies to the most repetitive and robotic parts of jobs, this makes a lot of sense. If you survive the automation cull, which is definitely happening, then your job is likely to be much more meaningful. The challenge for societies is to make it across to the other side with the least amount of casualties.
The focus of the Bain report is on how organisations should think of the future of work, and here, the report makes some prescient observations. Organisations need to move from being talent takers, to talent makers, to encourage lateral careers, to promote and cater to diversity of personalities, and interests, build 'personal capacity' - promote the physical and mental wellness for employees, and redesign workflows for humans - these are some of the key messages. I'm reassured that my employer TCS already has much of this embedded into our DNA!
Reading This Week:
Market Signals: The Peloton saga - we spoke about blips and trends recently, here's the inside story of how Peloton confused market signals and mistook the pandemic spike for a secular trend.
Health Tech: A future challenge. What happens when a device embedded in your body is 'no longer supported'? This is the story of what happened when a bionic eye implant was abandoned and left the user literally in the dark.
Chip Design: Brain inspired chip design aka neuromorphic computing. (IEEE Spectrum)
White Collar Crime: The Singapore nickel investor scam (Business Week)
Social tech: How will divorce handle shared crypto assets? (NYT)
Sports and Gambling: Legal gambling in US sports - this feels like a game changer! (Bloomberg)
Tech for Good: Holographic animals in circuses - this is an obviously good idea if well produced and presented. (Bloomberg)
Cognitive budget - this is an excellent framework for those who tend to fret and overthink. How to set up cognitive budgets, amplify reflection and reduce rumination (aka fretting). (MIT Sloan Review)
Acknowledgement: Jim Spohrer read my book draft and recommended the MIT research to me.
Enjoy the weekend, and see you next week!