Low Skilled Humans Need Not Apply: The Growth, Quality And Polarization Of New Jobs
Part 1: Exponential Job Disruption. This 2nd article looks at the quality of new jobs, the erosion of the middle class leading to a polarisation of low skilled and high skilled jobs, the emerging models of employment, the rise of a globally educated workforce, the reduction in worker bargaining power and how technology will disrupt workers, particularly in low skilled jobs.
Creation vs Disruption
Some technology experts are optimistic about the future of work believing we will create enough new jobs for a growing population even if major industries are disrupted. I agree partially, we will create new jobs and industries in the future, no one could have predicted the internet 50 years ago and all the jobs that it created such as web developers, network engineers and so on. In 2011, McKinsey & Company found that “the Internet created 2.6 jobs for each lost to technology-related efficiencies.”
Where I disagree is if enough new jobs that the mass amount of low skilled people can perform will be created fast enough, compared to the pace of technology that is gaining capabilities to disrupt those low skilled jobs at a rate never before seen.
Human skills and knowledge capabilities are, as of this time, limited. Robots have already surpassed us on strength and are taking on more “human” capabilities and in dexterity, senses, knowledge, vision, natural language, sensing, memory and trainability soon, as discussed in the previous article. This carbon vs silicon(maybe even graphene, quantum or entirely new computer technology may be developed one day) race can not go on forever.
Some experts such as Elon Musk, Stephen Hawking and Bill Gates believe machines will surpass us in intelligence one day, while AI expert Andrew Ng who is the Chief Scientist at Baidu is not worried about killer robots taking over the world, but is greatly concerned about the speed of machines driven by AI to continually erode what many people have to offer as labor and the inadequate education system to teach people new skills.
Andrew Ng — I think the next few phases between what we can do and the super intelligences, of which there are fair amount of hype, I don’t really see a path to get there, so I tend to worry less about the evil killer robots. Having said that there is one worst case that does concern me that I think is a serious concern is the impact of technology on labor. As new technology is created on average it make society so much better and powers the individual to do so much more, but there is something different about this time. The United states took about 200 years to move from about 98% farming to today less than 2% farming, so about 200 years.
What that meant was that the descendants of farmers had to do something else, because the farming jobs were all going away, but that was ok because our education system was sort of up to the task of training the farmers children to instead work in services or other things. But this transformation I think will be much faster, so we might be a position where we succeed in building self driving cars, that's 3.5m truck drivers that may have to find different employment and our education system has historically found it very difficult to retrain people that are already alive today to do a different job as opposed to training their descendants.
It concerns me because even things like Coursera(Moocs) may not be up to the task of training so many people already alive today. The reason I get irritated about the discussion about evil killer robots taking over the world is because I think thats a distraction from the conversation about labor which I think is a serious issue that governments and business leaders should have a serious conversation about.
We can expect new type of work to become more complex because the easy/routine parts will be relentlessly replaced by technology, leaving mostly the components that require more advanced human skills. Obviously their are outliers and exceptions to this but in general, highly skilled jobs are more immune to computerization.
The people with the skills, talent and luck who can work with and complement these new technologies will be the winners. The fewer remaining low skilled jobs available will face higher demand and competition pushing down wages even more for workers who can only perform low skilled work.
A study titled Robots at Work found that technological development did not lead to a reduction in overall employment and, in fact, boosted wages. However, the two researchers paint a very different picture across different type of workers: their research finds robots had a detrimental effect on low- and middle-skilled workers, who saw both their employment levels and their wages fall. These effects were absent in the case of high-skilled workers.
Tom Malone, author of The Future of Work — “While individual workers may have suffered, new productive uses were found for the workforce as a whole. Yet that does not guarantee the transition will be smooth. The concern is the speed of creation of new jobs and what skills they need.”
There may be an infinite amount of work to do that machines can’t, but maybe it keeps requiring higher and higher levels of education. Unless education vastly improves in price, speed and effectiveness, not everyone will be able to keep up in the race to gain skills which the machines can’t replicate cheaply.
David Autor — In 1900, the typical young, native-born American had only a common school education, about the equivalent of sixth to eighth grades. By the late 19th century, many Americans recognized that this level of schooling was inadequate: farm employment was declining, industry was rising, and their children would need additional skills to earn a living.
The United States responded to this challenge over the first four decades of the 20th century by becoming the first nation in the world to deliver universal high school education to its citizens (Goldin and Katz 2008). Tellingly, the high school movement was led by the farm states. Societal adjustments to earlier waves of technological advancement were neither rapid, automatic, nor cheap. But they did pay off handsomely.
According to data from the U.S. Department of Labor, Of the top 10 “Occupations with the Most Openings,” nine fall into government-designated wage categories of “very low” and “low,” It turns out the vast preponderance of job openings these days consists of low-skill, hourly wage work with high turnover. With the exception of registered nurse, the 10 highest-growth occupations for the next decade make less than $33,000 per year.
Low skilled employment with its low paying salaries will not rebuild a middle class with current economic trends. The the type of jobs being created currently are mostly jobs that are low paying and susceptible to displacement by technology in the near future. Low-skill workers will be pushed out of the economic system and face structural unemployment if they can’t improve their skills for new complex jobs.
“Two parents in one of those low or very low occupations, and both working full time, won’t make it,” said Elise Gould, the chief labor economist at the left-leaning Economic Policy Institute. In metro Milwaukee, a household with two adults and one child would need a combined yearly income of $61,000 before taxes to scrape by — the equivalent of three typical full-time, low-end jobs. The calculator includes costs of meals, transportation, health care, taxes and child care, however it does not account for any savings for retirement or college.
James J. Hughes — They(Frey and Osborne, 2013) hopefully conclude that “as technology races ahead, low-skill workers will reallocate to tasks that are non-susceptible to computerisation — i.e., tasks requiring creative and social intelligence”. Since it is unlikely that half the work force could retrain for these creative and social intelligence occupations, or that the economy could absorb that many graphic designers, lobbyists and social workers, Frey and Osborne’s prediction still strongly supports a scenario of technological unemployment.
Gerald Huff — While many jobs have a creative component, it’s also important to note that all of the creative occupations in the U.S. economy (e.g. artists, writers & editors, musicians, photographers, actors, dancers, designers, choreographers, journalists, marketers/public relations, etc.) only account for about 1% of employment. There has never been an economy filled with only highly creative or highly skilled people.
The chart above shows the occupations that are projected to have the largest number of job openings during the 2012–2022 time period. Below is their probability of computerization within 20 years according to the Oxford report on The Future Of Employment.
- Retail SalesPersons = 92%
- Combine Food Prep… = 92%
- Cashiers = 97%
- Waiters and Waitresses = 94%
- Registered Nurses = 9%
- Customer Service Rep = 55%
- Labourers, Freight… = 85%
- Office Clerks, General = 96%
- Janitors and Cleaners… = 66%
- Personal Care Aides = 74%
What the average humans has to offer is diminishing compared to a machine. Silicon is overtaking many many of what low skilled people have to offer in useful labor. In the past, new industries hired far more people than those they put out of business. But this is not true of many of today’s new industries, the emergence of greatly improved computing power, artificial intelligence, and robotics raises the possibility of replacing labor on a scale not previously observed.
Mark Walker-“Historically, humans have contributed muscle and brains to production but we are now being outcompeted by machinery, in both areas, in many jobs. Machines are encroaching in the last area that we have a competitive edge. So, unlike the displacement of labor during the First Great Transformation, there is no untapped category for surplus human labor to migrate to. Even supposing new sectors of the economy open up, their demand for human labor is likely to be very weak since these new sectors too will be faced with the question of whether to employ robots or humans.
The cost advantage will lie with robots for the most part, and so there will be weak demand for human mental labor in the future just as the demand for human muscle dropped precipitously in the past.”New job opportunities for workers may be affected by other factors. The rate of new business formation has fallen by almost half since 1978. There is not enough convincing evidence that our ability to create new jobs will be able to keep up with the rate of exponential disruption.
Andrew McAfee — What we’re noticing is that as we’re coming out of successive recessions — as we go deeper into the computer age and we come out of each successive recession, the recoveries are increasingly jobless. In other words, the growth comes back, output comes back, but the employment does not bounce back in as nearly a robust way. Firms, companies go, oh, wait a minute. I can grow without hiring as many people back as I thought I needed to do before the recession.
In the past machines were doing basically mechanical things. This time around, they’re doing things that are very, very human. Not just driving cars, but also writing music. The future is not going to look like the past. It’s not going to look like history. It’s going to look like science fiction.
The economists Michael Greenstone and Adam Looney found that from 1969 to 2009, the median earnings of men ages 25 to 64 dropped by 28 percent after inflation. For those without a high school diploma, the drop was 66 percent. Against the accelerating rise of low skilled job disruption that is about to take place, it is hard to see how we will be creative enough to find demand for so many low skilled workers. Some (possibly large) segment of the population may simply not be skilled enough for the remaining employment opportunities.
Gerald Huff — “If you look at the most common jobs, the top 50 occupations there’s only one, software engineer, which is new in the last 100 years.
People say oh we will invent whole new industries that people will work in, the new industries that we are inventing are not mass employers, they simply do not generate mass numbers of jobs of the kind we had in those other industries, we added 4x as much jobs in food service and retail than any other high tech industry in the last 20 years. Those are the jobs that we have been creating and those are the jobs that are very subject to automation.”
12 of the most 15 popular occupations in 2012 were typically done by people with just a high school degree or less. Low skilled jobs are most at risk of being computerised and any that remain will face less employment benefits, less full time employment opportunities and more competition between low skilled workers for their diminishing roles which could go to the lowest bidder, pushing down the already typically low wages.
Vivek Wadhwa — “Andreessen steadfastly believes that the same exponential curve that is enabling creation of an era of abundance will create new jobs faster and more broadly than before, and calls my assertions that we are heading into a jobless future a luddite fallacy.
I wish he were right, but he isn’t. And it isn’t a religious debate; it’s a matter of public policy and preparedness. With the technology advances that are presently on the horizon, not only low-skilled jobs are at risk; so are the jobs of knowledge workers. Too much is happening too fast.
It will shake up entire industries and eliminate professions. Some new jobs will surely be created, but they will be few. And we won’t be able to retrain the people who lose their jobs, because, as I said to Andreessen, you can train an Andreessen to drive a cab, but you can’t retrain a laid-off cab driver to become an Andreessen. The jobs that will be created will require very specialized skills and higher levels of education — which most people don’t have.”
An optimistic argument with the knowledge of coming disruption vs our creativity to create new jobs, is difficult as evident in the above chart. For the mass amount of low skilled people to develop more complex skills that are not replicable by cheap machines may pose difficult, even more difficult in a 20 year time frame.
How do you begin to take the median aged retail worker at 38 who probably hasn't looked at a Math textbook in over 20 years and turn them into a robotics engineer or computer vision scientist. Gaining an entirely new skill set isn’t easy and is currently very expensive and time consuming.
How does the average aged 55 year old truck driver pay for their housing, family, elderly relatives care costs, rising living expenses and bills etc. At 55 getting into debt and going to college would look unappealing, how do they survive until retirement with no work available for them?
Riccardo Campa — “Jeremy Rifkin points out that people that lose a low-skilled job often lose the only job they are able to do. Many of people involved for instance in assembly or packaging can barely read and write. They are on the lowest rung of ability and learning. However, the new job that arises from the machine that ‘steals’ their job is one involving taking care of that machine, which often requires high school computer programming, if not a college degree in computer science.
These are in turn qualifications requiring abilities at the higher end of the ladder. In brief, “it is naive to believe that large numbers of unskilled and skilled blue and white collar workers will be retrained to be physicists, computer scientists, high-level technicians, molecular biologists, business consultants, lawyers, accountants, and the like.”
Many people naively think everyone can simply transition from lower to higher skilled jobs, e.g. “the self driving car will disrupt many driving jobs but create jobs in computer vision and machine learning so everything balances out”.
No, not every person has the ability to learn these difficult skills with the current education system — almost half of US bachelor’s degree students who entered STEM fields between 2003 and 2009 had left these fields by spring 2009. The subject with the highest dropout rate and highest level of unemployment in the UK, is Computer science.
Plus there may not be enough jobs “programming the robots”.The Center for Economic Policy and Research, tracing graduates from 2010 through 2014, discovered that 28 percent of engineers and 38 percent of computer scientists were either unemployed or holding jobs that did not need their training.
There is no such thing as a STEM shortage. A 2014 study by the National Science Board found that of 19.5 million holders of degrees in STEM, only 5.4 million were working in those fields. I discuss more on the STEM shortage myth on my article on STEM Disruption.
Ron Hira — “If there was really a STEM labor market crisis, you’d be seeing very different behaviors from companies.
You wouldn’t see companies cutting their retirement contributions, or hiring new workers and giving them worse benefits packages. Instead you would see signing bonuses, you’d see wage increases. You would see these companies really training their incumbent workers. None of those things are observable, in fact, they’re operating in the opposite way.”
The transitions for the workforce from agriculture, to manufacturing, from manufacturing to service sectors took many decades, and it was often the generations children who trained for the new jobs.
The Atlantic: A World Without Work — “Technology creates some jobs too, but the creative half of creative destruction is easily overstated. Nine out of 10 workers today are in occupations that existed 100 years ago, and just 5 percent of the jobs generated between 1993 and 2013 came from “high tech” sectors like computing, software, and telecommunications. Our newest industries tend to be the most labor-efficient: they just don’t require many people. It is for precisely this reason that the economic historian Robert Skidelsky, comparing the exponential growth in computing power with the less-than-exponential growth in job complexity, has said, “Sooner or later, we will run out of jobs.”
Even if you did manage to revolutionise education to upgrade low workers skills to high, to avoid most of the pressing disruption from automation and erosion of middle skilled jobs, and if you did manage to create a STEM or other highly skilled sector to absorb all the new capable workers, so will other countries where workers can be paid less.
Global Educated Workforce
Outsourcing has the potential to increase as remote collaboration technologies improve and as the work force becomes educated in countries with lower labour costs. The FT reports more and more people work for virtual platforms instead of companies where work is auctioned to pools of remote contractors.
In 2013, 67 per cent of employees worldwide were working in more actively collaborative ways, while 57 per cent reported an increase in their number of coworkers who work from different geographical locations. Jobs and organisations are becoming increasingly flexible in response to the shift towards a 24 hour society. I discuss new technologies and their potential to disrupt work in my article on STEM Disruption.
Young American workers today are more educated than ever before yet an analysis found that more than half of U.S. millennials lack proficiency when it comes to applying reading and math skills at the workplace. On numeracy, U.S. millennials are in a statistical dead heat with Spain and Italy for last place, showing an average score of 255 while the average for participating countries is 275 on a 500-point scale. US high schoolers are dramatically trailing behind comparable countries — especially in Math.
Low Skill Future — World population is expected to rise towards 9bn by the early 2040s. The OECD countries will amount to under a billion of these. Between them, the OECD nations generated 60% of world output in 2000, about half of it today and they will probably create less than 40% of it in 2030. Three or four hundred new cities of ten or more million inhabitants that will have been established by that time, all of them in the emerging economies.
Demographically young — excepting China — these will support a middle class measured in billions. At least two billion of these will be some kind of graduate. There will, then, be at least twice as many graduates in the emerging economies as there will be people living in the ageing rich world. In the longer run, therefore, this must stimulate competition and the drive still faster race to productivity with which we began. The tools with which the industrial nations respond to this will be those of the Fourth Industrial Revolution, tools likely to be deeply challenging to the status of the low and middle-skilled people in those countries.
There is a global race for STEM skills and other countries are heavily investing and increasing the supply of STEM students, 41% of all degrees awarded by Chinese institutions in 2011 were in a STEM subject, almost twice the proportion of STEM degrees awarded in the UK and three times the rate in the US. China now stands behind only the United States in the number of science and technology journals published annually, and is expected to overtake the US in scientific output within few years, according to a recent study by the Royal Society.
By 2020, China expects to have nearly 195 million community college and university graduates — compared with no more than 120 million in the United States. Accenture predicts that Brazil will increase its engineering graduates by 68% by 2015 and will produce more PhD engineers than the US by 2016.
What is to become of the low skilled in the wealthy world? — “The incomes of the low skilled in the wealthy world have been under pressure for a generation. More recently, middle income families have seen static or falling wages and wealth. This is the consequence of a wide range of powerful and often global forces, trends which can only intensify. In addition, increasingly autonomous and intelligent systems will have a major impact on employment, perhaps creating new jobs, certainly destroying existing ones.
Beyond the existing wealthy world, the emerging economies are set to become the chief source of economic power. Billions of their graduates are due to enter the work force. Existing high skill industries will continue to pass to these economies and as a result of intense competition, be quickly commoditised. As a result, the skill level at which a worker adds enough value to justify a “rich world” income will continue to rise. Some rich world citizens — or their children — will be able to rise with this, but many will not.”
Outsourcing has grown in the last decade, and recent statistics show that more than two million jobs were outsourced in 2013, with many of those opportunities going to workers in China and India. 43% of the IT sector was outsourced, 26% of distribution is now taken care of offshore, 12% of call center jobs are found overseas, and 38% of research and development (R&D) is taken care of by workers outside of the country.
The BLS projects that in the decade ending in 2022, the number of engineering jobs will have increased only by 8.6 percent, which falls short of the 10.6 percent rise expected for the workforce as a whole. In fact more than 370,000 science and engineering jobs in the United States were lost in 2011, according to the Bureau of Labor Statistics. Electrical and electronic engineering has been heavily outsourced abroad, US employment in 2013 declined to about 300,000, down from about 385,000 in 2002.
Martin Ford -“China has struggled to create enough white-collar jobs for its soaring population of college graduates. In mid-2013, the Chinese government revealed that only about half of the country’s current crop of college graduates had been able to find jobs, while more than 20 percent of the previous year’s graduates remained unemployed. According to one analysis, fully 43 percent of Chinese workers already consider themselves to be overeducated for their current positions.”
There will be about 16 million new college educated people being added every year from now to 2030. About ten million per year will be added from China and India. A relatively highly educated workforce has been a traditional source of advantage, however, the rapid rise in a globalized educated workforce means this historic strength is being eroded, the increasing numbers of highly educated people in the world will inevitably increase the international competition for the goods and services they produce.
The credo of the politician today is: “Why are you not hiring more people here?” The credo of the C.E.O. today is: “You only hire someone — anywhere — if you absolutely have to,” if a smarter machine, robot or computer program is not available. Yes, this is a simplification, but the trend is accurate. The trend is that for more and more jobs, average is over. Thanks to the merger of, and advances in, globalization and the information technology revolution, every boss now has cheaper, easier access to more above-average software, automation, robotics, cheap labor and cheap genius than ever before. So just doing a job in an average way will not return an average lifestyle any longer. — Thomas L. Friedman
Erosion of the Middle Class
Economist Tyler Cowen observes that rich economies seem to be bifurcating into a small group of workers with skills that are highly complementary with machine intelligence, for whom he has high hopes, and the rest for whom not so much. There are also many studies showing a erosion of the middle class and polarization of high skilled and low skilled jobs taking place.
A study at MIT by David Autor and David Dorn found that polarization stems from the interaction between consumer preferences, which favor variety over specialization, and the falling cost of automating routine, codifiable job tasks.
From 1999–2007 in the US, the low-skilled end of the distribution saw even larger increases in employment share, while the middle-skilled segment again experienced share loss; the high-skilled segment saw no change. Thus, while both low-skilled and high-skilled occupations increased their employment shares over the past two decades, the middle-skilled occupations faced consistent share losses.
The Center for College Affordability and Productivity found that increasing numbers of recent college graduates are ending up in relatively low-skilled jobs that, historically, have gone to those with lower levels of educational attainment. The study found 48 percent of employed U.S. college graduates are in jobs that the Bureau of Labor Statistics (BLS) suggests requires less than a four-year college education.
Past and projected future growth in college enrollments and the number of graduates exceeds the actual or projected growth in high-skilled jobs, explaining the development of the underemployment problem and its probable worsening in future years.
Erik Brynjolfsson — “Recently, we’ve been seeing more of the replacement, more of the automation, and less of the complementing and creating of new jobs.”
Unlike the transition that occurred in the post-War boom, automation is hollowing out the workforce rather than fattening it. Middle-class jobs are being replaced by robots and computers. As workers are forced out of good-paying factory and clerical positions, many take what they can find, maybe working as a janitor or preparing food at McDonalds.
The recovery has been dominated far by poor quality, low-paying jobs. Nationwide, low-wage jobs have grown at a 6 percent clip, roughly double the rate for overall job growth (3.1 percent) and the growth rate in high-wage jobs (3 percent). Of 953,000 Jobs Created in 2013, 77% were part-time.
Between 2009 and 2013, low-wage jobs outnumbered high-wage jobs by some 800,000 with 1.7 million versus 1.1 million jobs, though low-wage jobs made up less than one in five (19 percent) of all employment in 2009, they accounted for nearly 40 percent (39 percent) of all new jobs created out to 2013.
Harold Meyerson — A 2012 study by economists John Schmitt and Janelle Jones of the Center for Economic Policy Research concluded that 22 percent of all jobs in 2007 (the year before the Great Recession began) qualified as bad — and for a job to be bad, it had to come with annual pay beneath $37,000, no health insurance, and no pensions (including 401ks) of any kind. In 1979, just 18 percent of jobs, adjusted for the lower cost of living then, were, by that standard, bad. The share of bad jobs, Schmitt and Jones wrote, had risen in those 28 years at every level of educational attainment. And the share had increased despite the fact that the workers of 2007 were far better educated than those of 1979.
The nature of employment is changing with fewer large employers offering stable jobs. There are 6.4m Americans in part-time jobs who want to work full-time, up from 4.5m on the eve of the recession. Almost 50 percent of part-time workers receive only one week of advance notice on their schedule. This makes it for people to plan ahead because of financial uncertainty.
Megan Mcardle — “What the computers are doing to retail scheduling. This is great for retailers. Retailers have computers that they look at the weather, they look at demand forecasts from last year, they schedule people and they say go and log in what hours you are available. Computer crunches it all together, and then they spit out a shift. It’s great for the retailers. It’s a little hard on the workers because you can’t even do what you used to be able to do and string two part-time retail jobs together. Because you need to make, say, a block of 80 hours available in order to get 30. Well, you can’t do that at two retailers.
So what you end up with is someone who can’t do the things that we used to depend on for family formation in terms of getting steady, long-term work, that you can predict is going to be there for year after year.”
A study by the UK Government predicts the the way we work will be vastly different in 2030 with a high increase in agency roles or Zero hour contracts.
Government study in the UK: Future of Work in 2030 — “As digitalisation grows, we can expect a significant impact on employment and skills in the decades ahead, at all levels and in all sectors. The shrinking middle will challenge the workforce. The high-skilled minority (characterised by their creativity, analytical and problem solving capabilities and communication skills) will have strong bargaining power in the labour market, whilst the low-skilled will bear the brunt of the drive for flexibility and cost reduction, resulting in growing inequality.”
As businesses shrink their workforces to a minimum using flexibly employed external service providers to cover shortfalls, a much smaller group of employees will be able to enjoy long-term contracts. By 2020, 40 percent of the US workforce will consist of freelancers according to a study by Intuit.
A 2013 report estimates that roughly a third of the US workforce, more than 40 million, consists of temps, part-timers, contractors, contingent workers, freelancers/independent workers and those who are under-employed or work without employer-sponsored health insurance, 401Ks or FLEX accounts” according to a report by the Harvard Business Review.
Is This Time Different? — As an article in The Economist (2014) noted, “the workers who are now working the longest hours also happen to be among the most educated and best paid. The so-called leisure class has never been more harried.” The welfare implications of this dual phenomenon in economic inequality of labor and leisure hours need to be further explored. At least part of this widening inequality in hours worked is driven by the highest-skilled workers increasing their work effort, but it is also driven by outright declines in work for lower-skill workers.
A common pattern in recent years is that routine tasks with little unpredictable variability are more likely to be mechanized, while jobs that require continuous adjustment to new information and new physical settings along with fine sensory motor-coordination are more difficult to automate. Many middle-skill jobs, both in manufacturing plants and in offices, have tended to be more susceptible to automation. However, those middle-skill workers can then end up competing for lower-skill jobs. In this way, we are already seeing some of this labor-saving technology affecting the supply side of the lower-skilled labor force.
According to a global PwC survey 46% of HR professionals polled expect at least a fifth of their workers to be contractors or temporary staff by 2022. A new report by the U.S. Government Accountability Office is a startling statistic: 40.4% of the U.S. workforce is now made up of contingent workers — that is, people who don’t have what we traditionally consider secure jobs. In contrast, in 2005, 30.6% of workers were contingent.
Carl Frey-“My reading of the evidence is that the digital economy hasn’t created many jobs directly, and the jobs it has created tend to be concentrated in cities like London, San Francisco, New York and Stockholm, which drives up prices, creates inequality and makes it difficult for people to live in or move to places where new jobs are emerging.”
Contingent workers had median hourly earnings in 2012 of $11.95, compared to $17 for workers with standard full-time jobs, their median annual earnings were $14,963 vs. $35,000 for full-time workers. They have higher poverty rates, greater job instability, less access to to private health insurance and higher reliance on public assistance. Another trend the report underlines is the fading of good, blue-collar jobs–traditionally a source of stable, middle class jobs for men. It is increasingly becoming contingent work, assigned through agencies which leads to underemployment.
Intuit 2020 report — “Traditional employment will no longer be the norm. replaced by contingent workers such as freelancers and part-time workers. The long-term trend of hiring contingent workers will continue to accelerate with more than 80% percent of large corporations planning to substantially increase their use of a flexible workforce.”
A study by Deloitte found Canadian organizations are reaching out to the “open talent economy.” 47% of Canadian respondents plan to increase their use of contingent, outsourced, contract or part-time workers in the next three to five years. 80% view workforce capability as an important trend — and 53% see it as a long-term priority for their organization.
Even if automation does not reduce the quantity of jobs, it may greatly change the qualities or returns of jobs available. The world is increasingly moving towards ‘winner takes all’, superstar economic outcomes, those that create something unique or special command increased returns on their efforts while the rest get lower and lower returns.
Gerald Huff — Another important fact about the “app economy” is that it is not very democratic. Like many digital products sold primarily through user recommendation, it is subject to winner-take-all dynamics. A very small number of apps do extraordinarily well while the rest in the “long tail” earn almost nothing. Winner-take-all markets are a very precarious place to attempt to make money. It is hard to recommend the app economy to a truck driver used to a steady income that pays the mortgage and the bills.
People will not spend time or effort on the tenth-best product (or even second best) when they have access to the best. The internet enables everyone to access the very best there is — the best writing, the best software, the cheapest retailers, the top performers have access to a huge audience who aren’t inclined to use anyone else.
Median household incomes remain lower in real terms than in 1989, and only 11% higher than in 1970. The thing to focus on in the chart below is the lines showing Median Income, as the mean can be distorted by the super rich. Here we can see, adjusted for inflation that median individual income(bottom green line) has been stagnant for many years. The person in the middle has seen little income growth.
There is a serious issue of rising income and wealth inequality, in the US, the top 0.1 percent are now worth more than the entire bottom 90 percent of the U.S. population. The top 1 percent of households received 8.9 percent of all pre-tax income in 1976. In 2012, the top 1 percent share had more than doubled to 22.46 percent.
According to data compiled by the Economic Policy Institute, a think-tank, the pay of chief executives at the largest 350 public companies by sales rose six-fold to an average of $20m between 1990 and 2000. The overall bounty is not being distributed equally, it is quickly accumulating at the top, leaving everyone else with less.
An Economist Thomas Piketty, released a best selling book last year called Capital in the 21st Century. Piketty’s argument is that, in an economy where the rate of return on capital outstrips the rate of growth, inherited wealth will always grow faster than earned wealth, “If you get slow growth alongside better financial returns, then inherited wealth will, on average, dominate wealth amassed from a lifetime’s labour by a wide margin”, says Piketty. “Wealth will concentrate to levels incompatible with democracy, let alone social justice. Capitalism, in short, automatically creates levels of inequality that are unsustainable. The rising wealth of the 1% is neither a blip, nor rhetoric.”
In 2013, median US income was $28,031. Median hourly wage was $17.09 in May 2014. Since it was last raised in 2009, to the current $7.25 per hour, the federal minimum has lost about 8.1% of its purchasing power to inflation.
About 20.6 million people (or 30% of all hourly, non-self-employed workers 18 and older) are “near-minimum-wage” workers( those who make more than the minimum wage in their state but less than $10.10 an hour).
What American workers contribute to overall productivity and therefore, profits of corporations, there must be some mechanisms for ensuring that those profits are shared more equally.
CEOs earned three times more than they did 20 years ago and at least 10 times more than 30 years ago. The Walton family has more wealth than 42% of American families combined. These levels of inequality are not good for economic growth.
Robots and software may be complementing this inequality as the benefits of the productivity gains created by technology are distributed to just an elite few who own the capital(robots). Solutions to decrease income and wealth inequality must be used to allow the majority to see the gains in productivity.
Unions are one way, union membership has plummeted in the U.S., from nearly one-third of workers 50 years ago to one in 10 American workers today, workers have less power and democracy at work reducing their bargaining power for higher wages and allowing companies to easily outsource jobs.
The union wage premium — the percentage-higher wage earned by those covered by a collective bargaining contract — is 13.6 percent overall (17.3 percent for men and 9.1 percent for women). Unionized workers are 28.2 percent more likely to be covered by employer-provided health insurance and 53.9 percent more likely to have employer-provided pensions.
Richard L. Trumka — The two decades after the NLRA became law witnessed a surge of worker organizing that created the modern U.S. labor movement and, with it, the American middle class. Union membership as a percentage of the workforce reached its peak in the mid-1950s and as a raw number in the late 1970s.
In the intervening decades, Americans enjoyed unparalleled shared prosperity. Since the 1970s, in contrast, as the number of union members has gradually declined, workers’ productivity has continued to increase, but wages have not gone up proportionally.
Richard L. Trumka — The two decades after the NLRA became law witnessed a surge of worker organizing that created the modern U.S. labor movement and, with it, the American middle class. Union membership as a percentage of the workforce reached its peak in the mid-1950s and as a raw number in the late 1970s. In the intervening decades, Americans enjoyed unparalleled shared prosperity. Since the 1970s, in contrast, as the number of union members has gradually declined, workers’ productivity has continued to increase, but wages have not gone up proportionally.
As a result, workers’ share of income gains has fallen sharply. In fact, in the 15 years between 1997 and 2012, the top one percent received more than 70 percent of income growth while the share going to the bottom 90 percent fell.
Underlying these trends is the fact that the free market drives innovation, but also a relentless effort to reduce costs, including labor costs, and that one primary area of “innovation” in the past half-century has been in avoiding the “cost” of complying with law. Employers have escaped U.S. labor law by moving jobs across borders and by restructuring their relationship with the workers in order to claim that they no longer employ them.
The emerging models of employment such as the Uber model where employees are turned into independent contractors are a cause for concern. Uber doesn’t have to pay minimum wage, health insurance, unemployment insurance, guarantee of stability, worker’s compensation, pensions, sick pay, holiday pay, wage rises with inflation, maternity leave, overtime restriction, bonuses, sociable hours and so on compared to the better working conditions, pay and benefits that full time employees in companies with good worker representation receive.
This ‘Uber’ model of employment whether it’s TaskRabbit, Amazon’s Mechanical Turk or entirely new start ups could infect many other occupations other than taxi drivers, as new technologies facilitate the evasion of rules that have been put in place to protect workers.
Capitalists will love for nothing more than a on demand, flexible, no strings attached workers at the lowest wage possible who they can get rid off at a moments notice and offer the least or even deny responsibility for providing any employee benefits, in their pursuit to cut costs and grow profits.
Harold Meyerson — Globalization will surely make even more jobs potentially offshorable, and the tech revolution’s ability to create gigs is only just beginning. Before we despair, however, we need to remember how we created the good jobs of the mid-20th century, and, in general, how jobs that provide security and decent incomes are created at all.
The key has always been worker power. In a capitalist system — and that’s the only system we have — workers have only had good jobs when they’ve had the power to demand them from employers and investors. In the placid 1950s, the nation experienced on average 300 major strikes every year: that’s where the great American middle class of the mid-20th century came from.
We can predict what jobs will face the most disruption and can see the trends on what types of new jobs are being created — They are both low skilled. They are the most vulnerable to computerisation. There will be a huge drop in demand for traditional skills. People will be caught off guard, the transformation could be too much too quick for too many people.
Many people are going to find their limited skills are no longer valuable, for many jobs they will find that low skilled Humans Need Not Apply. For these workers there is a vicious circle associated with their inability to re-engage with the labour market You cannot just take middle-aged workers out of factory, transport or retail environments, put them into classrooms and then expect them to immediately learn new skills for new jobs in that unfamiliar setting. We need better solutions to support while they re-skill and adapt. A career for life is over.
Do we see rapid economic growth anymore? Do we see the same rate of increase in peoples spending power? Do we see the same rate of increase in employment? None of this necessarily assumes that technology itself is the problem, or a major cause of the problem, but rather changing economic conditions combined with failed economic policies are also part of the problem. But nevertheless these current trends makes for a very bleak future for a child born today which I discuss in the next article — The Employment Future For A Child Born Today.