The following is a re-organized outline of quotes and ideas from The Economist’s special report on the issues and trends affecting jobs and labor: “The Future Of Jobs”. This is a really good overview of the topic at hand (and a good overview of the spectrum of ideas covered by this blog). I really recommend you take the time to read over this one.

“Far and away the best prize that life offers is the chance to work hard at work worth doing” - Theodore Roosevelt.

- - -

PART 1: Symptoms/Current Data:

1.

“This year more than 2.1 billion people the world over will be in work. That is a greater number than ever before, yet there is a sense of crisis about jobs.”

2.

“Globally, the rise of many people out of poverty has reduced income inequality, though many people in informal and illegal work have not benefited. But within most countries inequality, as measured by the Gini coefficient, has increased in recent decades. Many rich countries are also seeing a decline in social mobility, suggesting a growing inequality of opportunity as well as of income.” 

3.

“Joblessness is becoming more chronic. In America, famous for its flexible labour market, the average jobless spell now lasts 40 weeks, up from 17 in 2007… Long-term unemployment is hard to cure, as people’s skills atrophy and they become detached from the workforce. Its shadow lingers, reducing future growth rates, damaging public finances and straining social order for years to come.”

4.

“A disproportionate share of those out of work are young, and youth unemployment leaves more scars, in terms of lower future wages and greater future unemployment… In 2007, the youth unemployment rate in the OECD was 14.2%, compared with 4.9% for older workers. In the first quarter of this yaer the rates were 19.7% and 7.3%, respectively. In Spain, youth unemployment soared from 17.6% to a vertiginous 44%.”

5.

“There has been growing demand for temporary staff provided by employment-services firms such as Manpower, and outsourcing and off-shoring has continued to grow… These trends don’t necessarily affect the number of jobs, but they do the quality of jobs, the security of jobs, how much people are paid, and the benefits they get.” 

6.

“A global Gallup survey found that at the average big firm only 33% of employees describe themselves as fully engages in their work, 49% say they are not engaged, and 18% say they are “actively disengaged”. At what Gallup calls “world-class” companies, the proprotions are 67%; 26%, and 7%, respectively.”

- - -

PART 2: Diagnosis

1.

“Today’s job pain is more than the aftermath of the financial crisis. Globalization and technological innovation are bringing about long-term changes in the world economy that are altering the structure of the labor market… (This combination) has reduced the demand for the less skilled, and many workers, particularly men, have failed to respond to these deep changes in the labor market… As a result, unemployment is likely to remain high in the rich economies even as it falls in the poorer ones…. In America, the ‘natural rate’ of unemployment (below which higher demand would push up inflation) in the medium term is now around 7.5%, significantly higher than only a few years ago.”

2.

“Michael Spence argues that (between globalization and technology) “globalization is the more potent factor. Some 98% of the 27m net new jobs created in America between 1990 and 2008 were in the non-tradeable sector of the economy, which remains relatively untouched by globalization, and especially in government and health-care - the first of which, at least, seems unlikely to generate many new jobs in the foreseeable future. At the same time, the mix of jobs available to Americans in the tradeable sector (including manufacturing) that serves global markets is shifting rapidly, with a growing share of the positions suitable only for skilled and educated people.”

3.

“The movement of work abroad in search of lower labor costs is no longer confined to manufacturing but now also includes white-collar jobs, from computer programming to copywriting and back-office legal tasks. That is likely to have a big impact on pay rates everywhere.”

“David Autor, economist at MIT, calls this ‘the hollowing out’ of middle-grade jobs, resulting in the ‘bipolarisation’ of the labor market between good jobs and commoditized ones in America and many other rich countries.”

Example:

“oDesk (is an) online marketplace that “takes outsourcing, widely adopted by by big business over the past decade, to the level of the individual worker… This ‘labor as a service’ suits both employers, who can have workers on tap whenever they need them, and employees, who can earn money without the hassle of working for a big company, or even of leaving home.” It is still small, but oDesk shows how globalization and innovation in information technology, the two big trends that have been under way for some time, are moving the world nearer to a single market for labor. Much of the work on oDesk comes from firms in rich economies and goes to people in developing countries, above all India and the Philippines. Getting a job done on oDesk can bring the cost down to as little as 10% of the usual rate.”

4.

There are three main types of work:

• “Transformational, typically involving physical activity, such as construction.”

• “Transactional, such as routine jobs in call centers or banks, often still done by people but capable of being automated.”

• “Interactional, relying on knowledge, expertise, and collaboration with others, such as investment banking or management consultancy.”

“Transformational work has been in long-term decline in most rich countries, shifting to emerging markets, particularly China, though wages in Chinese factories are now soaring.”

“Now a wave of labor arbitrage and the substitution of technology for humans is starting to sweep through transactional work, wiping out many routine white-collar jobs in rich countries.”

“But interactional work is unlikely to go the same way because it is inherently difficult to standardize. In this kind of work, technology tends to enhance human capabilities, often creating a “winner-takes-all” market in which the best performers are paid disproportionately well.”

- - -

PART 3: Implications

1.

Education:

“Lynda Gratton argues that the pace of change will be so rapid that people may have to acquire a new expertise every few years if they want to be part of the lucrative market for scarce talent.  She calls this process ‘serial mastery’ and notes that the current educational system in most countries does a poor job of equipping people for continuous learning. There is likely to be a wave of innovation in further education, particularly online, that will cater to this need in a more flexible, personalized way than the traditional degree or postgraduate course.”

• “The mismatch between the skills demanded by employers and those available in the market is a reflection both of bad choices by students, who have not thought hard enough about what will help them find a good job and of education systems that are too often indifferent to the needs of the labor market and too slow to change even if they try… Universities provide training for public sector jobs that are no longer abundant yet fail to equip students with what they need to thrive in a market economy.”

2.

Individuals:

“Workers will have to take responsibility for their own future. People who work their way up the corporate ladder in the traditional “Organization Man” way will increasingly be the exception - and that is surely a good thing. ‘The pleasures of the traditional working role were the certainty of a parent-child relationship. You could leave it in the hands of the corporation to make the big decisions about your working life,’ Gratton explains. Now the world is moving towards an ‘adult-adult- relationship, which will require ‘each one of us to take a more thoughtful, determined, and energetic approach to exercising the choices available to us.’”

“(Gratton argues that) people will have to invest more in their “social capital” which will involve three elements.:

• “First, they need to build themselves a “posse,” a small group of up to 15 people they can turn to when the going gets rough. They should have some expertise in common, have built up trust in each other and be able to work effectively together.”
• “Second, they need a “big-ideas crowd” who can keep them mentally fresh. This echoes the discussion of “managed serendipity” in last year’s business bestseller, “The Power of Pull,” in which john Hagel and JSB argued taht the successful worker of the future will live in clusters of talented, open-minded people and spend a lot of time going to thought-provoking conferences.”
• “Third, they need a “regenerative community” to maintain their emotional capital, meaning family and friends in the real world “with whom you laugh, share a meal, tell stories, and relax.””

“In a world where more people may work from home, there is a danger that they will become isolated. One remedy is the emergence of “collaborative workspaces” or “hubs” in big cities around the world. These are often more than shared offices with hot desks for peopel who prefer to be with other people even if they are not working for the same employer.  The hub operator may also organize courses for professional development - on marketing or taxation, say - and social events.”

3.

Firms/Organizations/Companies:

• ““It is going to be the companies that make their employees happiest that will attract the best people…” Having more control over their working lives is particularly important for educated, creative people…”
• “As younger people enter they labor market they will demand a very different workplace. (Don Tapscott). Firms that try to maintain a “generational firewall” will do so at their peril, because for the first time in history ‘younger people know more than their elders about the biggest innovation of the day,’ namely social media.”
• “Even in the lower ranks employees are having to handle growing complexity, not least b/c customers are changing the way they shop, making more use of the Internet and mobile technology… (Technology) has had “implications across the entire organization, requiring a general increase in technical skills across the board.””
• “Firms are also making a bigger effort to engage large numbers of employees in decision-making, which thanks to new technology is becoming ever easier and cheaper.”
• “Companies seem to not have given enough thought to dealing with important demographic shifts. For example, even though women have been flooding into the labor market in growing numbers in the past few decades, the “glass ceiling” that stops them getting to the top mostly remains in place. One problem is that most companies are still structured around one type of career-advancement model, and if a woman doesn’t conform to that model she won’t progress.”
• “The other big challenge for employers is burn-out, especially for the supposed victors of the winner-take-all markets who are expected to be ‘always on’. Ex. Of firm working at this: The Energy Project.”

Hsieh: “When people are asked to rate the best companies, they increasingly go for those that let them bring their pets to work or spend more time working from home.”  Ex.: Google’s decision to allow its staff to spend 205 of their paid-for time to work on whatever they want was controversial at first, but has started to spread.”

4.

Organized Labor

“The traditional way for workers to protect themselves against exploitation has been to club together to form a trade union. In rich countries unions have been in decline in the private sector, but they remain powerful in the public sector and there are pockets of growth among people in vulnerable occupations.”

• Ex. America’s Freelancers Union - “doesn’t do collective bargaining with members’ widely dispersed employers, but instead uses members’ combines buying muscle to negotiate better terms for things like health carea nd penions. Also runs fitness centers.”

“This may be the start of a “new mutualism movement” that will be very different from traditional trade unionism. “If work is going to be more gig-like and short-term, the supportive safety-net institutions will need to be much more about enabling flexibility in the workforce.” (Sara Horowitz). “This new movement will bring together mutual organizations, co-operatives, friendly societies, and social-enterprise start-ups to build a “market-based safety net” and exercise political influence to get better protection for members. It will get its power from information and aggregation.”

- - -

PART 4: The Role Of Government and Economic Policy

1.

“The Great Delusion of a Great Moderation caught on not least because it let those in charge feel they had solved one of the toughest questions of political economy: what is the proper role of government? A combination of free and flexible markets, including for labor, and an independent central bank to keep money sound seemed to have delivered the multiple alchemies of permanently low unemployment, low inflation, and an end to the businesses cycle. Yet the financial crash and the subsequent jobs crisis have thrown the question wide open again.”

“Where unemployment is currently higher than usual, there is enormous pressure on politicians to spend money they have not got on quick fixes that almost certainly would not work. But almost everywhere, what is needed from government are the sort of fundamental reforms that can make a big difference in the long run, beyond the next electoral cycle.”

“(Government) schemes may help the cyclically unemployed find work and, in so far as those people would have become permanently unemployed, help reduce structural unemployment too. That is not to be sniffed at, but it does not solve the problem of creating enough decent jobs in the long term. The same is true of creating jobs through a debt-financed economic stimulus. That can help in the short run, as it did after the financial crisis. The debate still continues over whether further stimulus would be helpful, supposing politics or the financial markets allowed it. But the long-term answer is to create real, sustainable jobs.”

2.

“(Creating) the right conditions for businesses to create more jobs… means running sustainable macroeconomic policies, so that firms need not fear that their investments will be undermined by another economic crisis; sensible regulation; and a tax system that is both competitive, with low marginal rates, and does not distort business decisions in arbitrary ways. Given the importance of job creation, it would make sense to shift some of the burden of taxation permanently away from employment towards consumption or carbon emissions. And since entrepreneurship plays a big part in creating jobs, especially in the phase when young businesses expand rapidly, government should do all it can to encourage more of it - though in view of its poor track record in this area, that should be mainly a matter of supporting (rather than obstructing) private sector-led initiatives.”

• Industrial policy: “governments are notoriously bad at picking industrial winners, and even if they succeed, there are questions about whether their interventions provide value for money.”

3.

“It is tempting to think of the globalization of labor as a zero-sum game in which (someone) in Pakistan is benefiting at the direct expense of (someone) in America. But economists point out that such calculations suffer from the “lump of labor fallacy” - the belief that there is only a fixed amount of work to go around. A better explanation, they say, is the theory of comparative advantage, one of the least controversial ideas in economics, which suggests that free markets make the world better off because everyone can concentrate on doing what they are best at.”

“(Thus,) the goal of creating flexible labor markets should not be abandoned, but in the future the ways in which inflexible labor markets are loosened up should be given more thought. The countries with the biggest youth-unemployment problems tend to be those where either there is no flexibility  (as in much of the MIddle East) or where flexibility applies only to newcomers to the jobs market, whereas older incumbents have continued to enjoy the protection that made the labor market inflexible in the first place (as in Spain). The political attractions of leaving the incumbents’ privileges untouched are obvious, but so, by now, are the social consequences of making the young bear most of the costs of flexibility.”

• “It is clear that labor market policies can make a huge difference. In many cases this means deregulation. In Spain, 46% of young people under the age of 25 are out of work because there is a two-tier system, with mollycoddled ‘permanent’ workers and easy-to-fire ‘temporary’ workers, who are disproportionately young.”

4.

Lowering this new natural rate of unemployment will require structural reforms:

• A. Changing education to ensure that people enter the workforce equipped with the sort of skills firms are willing to fight over.
• B. Adjusting the tax system
• C. Modernizing the welfare safety net
• D. Creating a climate conducive to entrepreneurship and innovation.

A. Educations/training: “Education and training system (should be) overhauled, not least to produce far  more graduates who are properly equipped to compete for good jobs and make it more responsive to the needs of business. A supply of many more people with qualifications in science, technology, engineering, and mathematics will ‘have to be a big element of American competitiveness’” (Immelt).

B. Corporate tax overhaul: :(Our current system) currently imposes one of the world’s highest marginal rates on company profits.” (But few big firms pay that rate b/c of loopholes and lobbying; overall its a very inefficient system.)

C. “Health care and pension systems should be redesigned to allow workers as much flexiblity as possible, not least in deciding when to retire. In the rich world these welfare systems were bui lt on the assumption that men with lifetime nine-to-five jobs were the main breadwinners.”

D. Making entrepreneurs of us all: ““Getting the innovation engine going again is essential to reducing the structural rate of unemployment (dismissing the idea that innovation might actually destroy jobs by making production more efficient). “Virtually all innovations require people to conceive new products, to develop a way to produce them, market them, and evaluate them.” (Phelps). Empirical evidence suggests that innovation has expanded the number of jobs.”

• “Research funded by the Kauffman Foundation shows that between 1980 and 2005 all net new private-sector jobs in America were created by companies less than five years old. “Big firms destroy jobs to become more productive. Small firms need people to find opportunities to scale. That is why they create jobs.””

Closing Thought:

“Karl Marx thought that much modern industrial work was essentially dehumanising, reducing people to factors of production… (But) work today is about far more than economics. People the world over want work not just to put food on the table and money in the bank, but as a means of gaining personal satisfaction. The changes now under way stand to make the world as a whole significantly better off and allow many more people to win the prize of being able to work hard at something worth doing.”