Sunday, July 19, 2015

Where will the future jobs come from?

This question is almost unanswerable, but it is easy to understand why people ask it. A definitive answer is not possible because future jobs will depend on decisions of large numbers of individual businesses, many of which do not yet exist, responding to demands of even larger numbers of consumers around the world. Some guesses are likely to be better than others, but no-one really knows what new products or new technologies will emerge, or how consumer tastes might change.

It is understandable that people ask where future jobs will come from when existing jobs are being threatened by international competition and automation. In the 1970s, when I worked at the IAC (predecessor to the Productivity Commission) many people were asking where the jobs would come from to replace manufacturing jobs then being lost to import competition. People who know about my work career sometimes still ask the same question today for the same reasons (e.g. in the context of the uncertain future of steel production in Wollongong) but these days there is greater concern about the offshoring of services and the impact of technological change.

I was thinking about the way economists answer the question of where the jobs will come from as I read a recently published report by the Committee for Economic Development of Australia (CEDA) with the uninspiring title: “Australia’s future workforce? Fortunately, this is a good example of not being able to judge a book by its title. The report contains many fine contributions by people with expertise in technological change and/or the Australian labour market. Some of the contributors provide information highly relevant to considering the nature and extent of job losses that are likely to occur as a result of technological change and the kinds of jobs that might be in demand in future.

Some points that seem to me to be important are summarised below:
  • The jobs that are disappearing involve routine tasks, not just low-skilled tasks. This is resulting in job polarisation, with computerisation or automation of many middle-level jobs in processing and servicing. See the graph in my post: Is average over? (This point is drawn from the chapter by Jeff Borland and Michael Coelli).
  • The jobs that remain are unlikely to be susceptible to automation and will tend to involve perception and manipulation, creative intelligence and/or social intelligence. (Hugh Bradlow).
  • Future skills and jobs will most often be concerned with the creative application of technology to solving problems. Everyone will need to be able, at some level, to architect (e.g. to integrate computing and communication resources) design (e.g. to understand problems of customers and propose solutions) and analyse (e.g. to make sense of performance data). (Hugh Durrant-Whyte).
  • Large job losses are likely to occur over the next 10 to 15 years. The methodology used by Frey & Osborne for the U.S. suggests that about 40% of jobs have a high probability of being susceptible to technological change in Australia. (Hugh Durrant-Whyte et. al).
  • In recent years enough new jobs have been created in Australia at a rate sufficient to replace those that have disappeared. (Phil Ruthven).
  • There have been substantial changes in the pattern of employment in Australia including growth in part-time and casual work. Most workers are happy with the hours they work. Job tenure is not always short in casual work – a quarter of casuals have worked in the same job for 10 years or more. (Phil Lewis).
  • Employment relationships are becoming more adult: workers desire autonomy and employers are unable to guarantee jobs for life. (Lynda Gratton).
  • Digital infrastructure provides potential for greater choice about where work is done, possibly reducing the need for people movement (e.g. commuting) and associated physical infrastructure. (Hugh Bradlow).
  • Self-employed people account for about 18 percent of the Australian workforce. There is a gradual trend toward independent contracting, as in many other countries. The supremacy of the large organisation is fading; technology is creating greater economic freedom for the individual. (Ken Phillips).
  • There is a significant problem of long term unemployment in Australia, particularly for unskilled people. Over half of the long term unemployed have no post-school education (about 9 percent have degrees). There has also been a substantial increase in people on disability support – numbers on disability support now exceed unemployed social security recipients. (Phil Lewis).
  • Education earnings gaps (skill premiums) have been fairly stable in Australia, unlike the U.S. and some countries in Europe. (Michael Coelli).
  • Schools and universities face a double challenge: how to embrace new technology; and how to deliver the skills required. This involves more than just increasing the number of STEM graduates. Education institutions will need to be able to encourage students to become creative and agile in applying technology to solving problems. (Hugh Durrant-Whyte).
  • Technology is challenging traditional methods of delivering education. Individuals may need to treat their careers as a business - taking more responsibility for their own education and investing in skills to adapt to changing demands throughout their working life. (Sue Beitz).
  • MOOCs (massive open online courses) are the iTunes of education. The way MOOCs will change education is likely to be similar to the way iTunes has changed the way people buy music. MOOCs are not likely to replace quality campus-based education. (Jane den Hollander).
  • Australian industry has largely been an exploiter of technology rather than an explorer. (This claim is seems to me to be highly questionable in relation to areas of Australia’s comparative advantage.) In terms of Joseph Schumpeter’s distinction, explorers search out new solutions to problems, while exploiters seek to make use of existing solutions (e.g. by imitating). In the new global economy new ideas will be the commodity in scarce supply, so explorers and likely to forge ahead and exploiters are likely to fall further behind. (Steven Callander).
  • Australia’s comparative advantage in specific industry sectors can be a driver for technological leadership in key areas of technology and computing. The most obvious industry sectors where this applies are mining and agriculture, but it may also apply to financial services, infrastructure and medical devices. (Hugh Durrant-Whyte).
  • Australia is well-placed to benefit from digital disruption because of strength of services industries including education and potential for sale of services to Asian markets. (Sarv Girn; Phil Ruthven).  

My answer to the question posed above is that the future jobs of Australians will be shaped by: 
  1. the pattern of economic growth that evolves in this country in response to the changing opportunities that the world economy will provide to people living on the edge of Asia; and 
  2. the human, technological and physical resources that Australians develop in the years ahead.

It might seem logical to proceed now to consider the policy proposals contained in the CEDA report. However, there are a few other questions I want to consider before I turn to policy.


alloporus said...

If machines do all the routine tasks then how about we create jobs for helping each other. There is more than enough to do. Just need a way to redistribute wealth.

Winton Bates said...

Hi Mark
Perhaps the time is coming when the only way to obtain income will be by being a capitalist (robot owner or property owner) or mendicant. I think we are still quite a long way away from that situation, but it is probably a good idea to start thinking about whether we will need a better way to redistribute wealth.

Nicolas Dorier said...

"then how about we create jobs for helping each other"

Because robot will be able to help the other better than you would do.

"whether we will need a better way to redistribute wealth"

If the goal of society is to redistribute wealth, my goal will be to protect wealth from the redistributor. Interestingly enough, protecting wealth involve creativity, imagination and social skills, which is not subject to automation. :D

Winton Bates said...

Hi Nicolas

It seems to me that the current approach to wealth redistribution is basically a mendicant model. It is not faring too well at present and might collapse in a heap if placed under increasing stress in future to support a rising proportion of the population. However, I don't know whether that is likely.

I don't know what a better wealth redistribution system would look like, or whether we will need one. In my view we should not anticipate that we are necessarily heading toward a future of greater wealth disparities. I have previously argued that greater wealth disparities would not matter a great deal as long as there is widespread economic opportunity. That is still my view.

We just need to start thinking about such things.

Procrustes said...


I'm more of an optimist

I think that there will be income earning opportunities for more than just robot and property owners. Even for these people there are only 24 hours in the day - there will be plenty of jobs for humans (either working alongside robotics or not) to provide personal services to service this demand.

I think that this would extend beyond everyone just being dog-walkers.

For example, driverless cars and drones might replace taxis, couriers and even uber drivers but there will be opportunities for people to supply customised goods and services (meals, stores and warehousing beyond the selection abilities of robots). I can't say what there would be but I think the incentives and opportunities would be there.

Winton Bates said...

I actually agree with you.
The extent to which robots replace humans depends how far into the future you look. In the immediate future the routine jobs go. That is my main area of interest.
Looking a long way ahead there will still be demand for human labour as you note and as I discussed in my robot post:
The idea that one day the only way to earn income will be to own robots or property is just conjecture. Perhaps it will happen but might not.

There may still be a wealth distribution question, but It is not inevitable. Even if there is concentration of wealth it is possible that everything will be so cheap that wealth distribution will become a non-issue in terms of the opportunities available.
There is also the idea lurking around that robot owners will have a collective interest in ensuring that the rest of the population has enough income to buy the stuff they produce.

Procrustes said...


Good points

However, what concerns me most is the risk that governments will put in place silly policies that won't help the least advantaged in dealing with the future.

These include: labour restrictions that will inhibit flexibility and probably prompt an even speedier switch to robotics than would otherwise occur (e.g. the recent Californian decision on Uber drivers being employees rather than contractors); and excessive increases in the minimum wage. Witness the increased use of ipad type devices in fast food restaurants accompanied by an increase in the number of tables per staff. While aspects of this are increases in labour productivity with benefits to consumers, I'm not sure that the advocates of large minimum wage increases realise that there will be reduced hirings of the least well off due to even quicker substitution of technology for labour.

Hillary Clinton's stasist (to use Virginia Postrel's term) comments about the sharing economy in her recent economic policy speech are a worrying sign of the prospect of interventions larded with unintentional consequences or protection of incumbent interests.

On wealth redistribution, I'm not so sure about the claims of robot owners ensuring consumers have enough income to purchase their products. This sounds a little like the unsubstantiated claim that Henry Ford paid his workers well so that they would all buy model Ts - even if it was true that he did pay so handomely it isn't a sustainable business model.

That all said, while I recognize that there are concerns about 1%ers and inequality, most of the solutions floating about would probably make matters worse.

Winton Bates said...

The latter-day Luddites seem to be gathering political support in some parts of the world. I get the impression that the problem is much worse in Europe than America. The interventions in Australia seem to be confined mainly to tax measures, some of which seem to make sense in terms of equal treatment (Uber) and some seem incomprehensible (e.g. tax treatment of Bitcoin).
I expect evidence will emerge that the countries/regions that maintain greatest economic freedom will tend to do best in terms of growth in GDP and employment in the years ahead (as in the past).
Regarding wealth distribution, perhaps the question we should be asking ourselves is what are the institutions that will enable people to cope best with an uncertain future. It would be hard to do better that rule of law, free markets and representative government. Those who are worried about wealth distribution should be concerned to ensure that governments are not encumbered to the point where they will not be capable of doing anything to redress the problems that they perceive as likely to emerge in future.