This week’s Next:Economy conference is bringing together leaders from the public and private sectors to talk about how digital technologies are reshaping business and society. Of course, people on the conference circuit talk about big issues all the time—but this gathering feels different. There’s a palpable feeling in the air that these are not ordinary times. The changes currently brewing will be sweeping rather than incremental as technology alters the structure of companies and the future of work. The five issues below provide some context and touchstones for business leaders and policy makers to consider as they shape their responses.
The productivity imperative
The past 50 years have been a remarkable period for global GDP growth, which was driven in equal measures by expanding the labor pool and increasing the productivity of those worker. But one of those drivers is running out of steam. As the workforce ages in many of the world’s largest economies, including the United States, a phenomenal demographic tailwind is coming to an end. To avoid a 40 percent decline in global growth rates, we need to turbo-charge productivity—and digital technologies will be one of the most important tools in our arsenal, but will also affect how the work that contributes to productivity gains is done and rewarded.
Dysfunctional labor markets
The US unemployment rate has finally dropped, but that doesn’t mean that the job market has returned to full health. Some 38 percent of US working-age adults are unemployed, inactive, or working only part-time, while companies struggle to fill open positions. At the same time, many key aspects of how labor markets work have not been working well; participation rates have not fully recovered, the fluidity of labour markets has been declining, there continues to be skill mismatches between the talent available and the skills that businesses say they need. This situation has been crying out for positive disruption, and digital platforms are starting to provide it. Online talent platforms are injecting new efficiency and transparency into the job market. So far the biggest beneficiaries have been highly skilled professionals, but this approach can be expanded to a wider set of occupations. Even more important is the opportunity to use the data being gathered by these platforms to reinvent our system of skills development.
Women in the world of work
Women account for half the world’s population––and when such a large segment faces barriers to achieving their full potential, the entire global economy suffers. A recent report from the McKinsey Global Institute measured the cost of gender inequality in the world of work, and the numbers are staggering. The world could add up to $12 trillion to annual GDP in 2025 if all countries match the best-performing country in their region on measures of gender parity. Addressing the exclusion of women in the developing world is critical, but women remain underrepresented at every level of the corporate world in most advanced economies as well. We have begun a long-overdue conversation about the barriers facing women in the workplace, but now we have to translate that momentum into organizational change and public policy.
Wage stagnation
For decades, it has been an article of faith for the middle class that each generation would be more prosperous than their parents. But over the past decade, some 60 to 70 percent of people in advanced economies did see their incomes grow. They are lowering their expectations—and some are not even getting by. This is a long-term trend, but it is being exacerbated by the digital transformation of the economy. The most digitized industries have posted the fastest wage growth, but they make up only about 19 percent of total US employment. Workers who lack digital skills are increasingly being bypassed by the new economy. Cracking this issue will take a broad set of solutions, including policy changes, company commitments, and new educational tools.
Automation
The prospect of artificial intelligence and advanced robotics taking on tasks once reserved for humans is no longer on the distant horizon. The future is here. Instead of trying to estimate the jobs that could be automated in a wholesale way, it is useful to look at this issue through the lens of activities. Recent McKinsey research finds that up to 45 percent of the tasks performed by US workers can be automated by currently existing technologies. About 60 percent of occupations could have 30 percent or more of their activities automated. This doesn’t mean it’s time to hit the panic button. Many jobs and business processes will be redefined and how technology complements work will evolve rapidly. Our institutions and policies need to be ready to help individuals acquire new skills and navigate a period of dislocation and transition.
As Next:Economy founder Tim O’Reilly told Bloomberg this week, “What’s coming at us is even bigger than the original Internet.” As new digital technologies approach a critical mass of adoption across multiple industries, everything is about to change. This wave of disruption could exacerbate long-term structural issues in the economy and the labor market—or create new openings for solving them.
This article originally ran in LinkedIn.
