Digital Transformation, the Future of Work, the Future of the Firm — Where does the OECD stand?
Opening remarks at the ETUC/ETUI conference: The World(s) of Work in Transition, 27–29 June 2018 Brussels
An industrial revolution is just starting and it is neither the first nor the last one confronting the labour movement and our economies. As we shift towards low-carbon, digitalised economies, 14% of existing jobs would be completely automated in the next 15–20 years. Another 40% would see their task content partially changed (OECD).
As we know however, the distinctive feature of this technological revolution is that employment relations are seriously being challenged. Data-driven business models give employers even greater possibilities to monitor operations at arm’s length and for outsourcing.
Five years ago, the launch of the Dreamliner airplane by Boeing was an industrial failure, and it had an explanation at that time: Boeing had “outsourced too much” we were told. We can bet that with today’s data-driven businesses, such failure would not have happened. Outsourcing and fragmentation of business can reach new levels unseen before. New business models allow for a mismatch between the economic relationship and the contractual relationship that bind the worker to the employer. This obviously is of concern because the contractual relationship is what protects the worker from unbalanced power relations with the employers and what allows workers to access social benefits and protection.
And globalisation is serving as an accelerator to this mismatch by creating ever more complex and globalised production systems. To give an example: 90% of crowd work assignments come from advanced economies but 80% of the work is done in emerging economies (source OECD).
Any discussion on the Future of Work also calls for a broader conversation on the Future of the Firm. Digital-driven disruption affects the way we regulate, employment indeed, but also competition, tax and data privacy. It affects all the key stakeholders, those who hold a claim against the firm: workers, users, consumers, the tax collector among others. Under the combined effect of globalisation and digitalisation, the “boundaries” of the firm become less clearly defined — to whom is it accountable within its operations and in global supply chains? where are the profits located? how is corporate wealth distributed? These questions are increasingly becoming open-ended ones.
These transformations come at a time when we are still struggling against the broken social contract and decades-long structural reforms that have either deprived workers of minimum basic protection, or promoted a ‘flexicurity’ model that has delivered far more flexibility than security. They come at a time when levels of inequality are comparable to the 1930s in many countries, and when wage growth is persistently flat, no longer keeping pace with productivity growth.
They come when — ten years after the crisis — the recovery is at best fragile, entirely dependent on fiscal policy easing. Wage dynamics should be accelerating. But they are not. Employment creation is in low productivity jobs, dragging down further the wage productivity gap. Three out four jobs created in Europe are in jobs below national average labour productivity; four out of five in the US (source OECD).
And the private sector is not playing its role as an engine of growth. With current interest rates, business investment should be booming. But it is not. There are for sure several reasons, including the uncertain economic outlook. But there is evidence of corporate short-termism. Instead of making productive investments, corporations are hoarding record returns, paying them out in shareholder dividends and share-buybacks, or channelling them into mergers and acquisitions. In 2017, in US S&P 500 companies spent some USD1.2tr in shareholder dividends and share buybacks — more than the total amount spent in investments and R&D.
And these transformations come at time when the foundations of multilateralism are being badly shaken — just as we need greater multilateral cooperation to overcome these common challenges.
This is the context in which we are conducting this conversation. So what do we need to do? Yes, we need to understand and anticipate on the quantitative impact of digital transformation and the disruptive nature of new business models. But we also need to deal with the legacy of past structural reforms that shifted risks from employers to workers, from the collective to the individual. And we must ensure that any conversation about the Future of Work extends to the Future of the Firm, and indeed the Purpose of the Firm.
Where does the OECD stand on all this? The OECD, and the G20 and G7 forums, sit high in the food chain of policy- making. What is discussed behind closed doors at the OECD often ends up on the menu here, in Brussels, or in the corridors of national parliaments.
The primary response of the OECD to the Future of Work question can be summed up that way: “skills! skills! skills! with an added layer of social safety nets”. Both are much needed we agree, but offer an incomplete response to the erosion of workers’ bargaining power. On labour market reform, the OECD has evolved from the old recipes of the past. Just weeks ago it adopted two blueprints for structural reform — a revised Jobs Strategy, and an Inclusive Growth Framework — as well as an interim report on its Going Digital initiative.
The OECD recommends considering “minimum wages as a tool to raise wages at the bottom” and promoting collective bargaining which in turn “can help to promote a broad sharing of productivity gains”.
The OECD is also discovering the virtues of social dialogue for a just transition to digitalisation and it is supporting the Global Deal initiative in partnership with the ILO. And it is taking steps toward a renewed discussion on the Future of the Firm, with its new Due Diligence Guidance that offers an authoritative framework for business responsibility within and beyond its legal perimeter. As the chair of the OECD WP on Responsible Business Conduct would say, “you can outsource your operations, but you can’t outsource your responsibilities”. And it has the right approach when it comes to corporate tax accountability, although perhaps the current BEPS plan has yet to deliver. It is not there yet with respect to curbing corporate short termism and promoting worker participation, although the discussion on the Future of the Firm continues to take shape at the OECD.
Now, let’s not be too enthusiastic or naive. There are many voices and perspectives at the OECD and in forums such as the G20 and the G7. And for sure, for every recommendation on job quality and security, there is a comparable one on individual flexibility and one on cutting regulatory burden for businesses.
Colleagues, we must maintain pressure and ensure the doors of the OECD rooms and of other global forums remain open. Our voice needs to be heard.
