The last few years have seen a wide range of reports from governments, think tanks, consultancies and academics exploring how the future of work might look. Many of these have revolved around the impact technology, and especially AI, might have on how (and indeed whether) we work.
The latest effort, from Bain’s Macro Trends Group, takes a slightly broader view and examines not just the technological landscape but also demographic and economic forces.
The report highlights how the workforce in much of the world is an ageing one, and the baby boom premium we’ve enjoyed since the 1970s is petering out. This slow down in labor force growth will have a detrimental effect upon economic growth, with subsequent impact upon areas such as rising healthcare costs and other factors associated with an ageing population.
Drawn to technology
It’s perhaps not surprising therefore that in a world of increasing talent shortages, companies are turning to technology to fill the gap. The authors believe this will have a significant impact on productivity, with growth of around 30% compared to 2015 levels.
It’s here that I feel they go a bit awry, as they take the well trodden path of predicting significant job losses of approximately 25% of current jobs, with this figure largely based upon the (imo) discredited work of Oxford researchers Carl Benedikt Frey and Michael Osborne, which conflated the automation of parts of a job with the likely automation of all of it.
As with similar reports, they make no mention of the new jobs that will almost certainly be created as we develop new processes on top of these new technologies. Indeed, the likes of Erik Brynjolfsson has recently likened AI to electricity in the sense that it’s a base technology whose real impact will only come when new processes and business models are built on top of it. It’s a theory that goes some way to explaining the flagging productivity growth throughout the western world.
I touched on some analyses of what these potential new jobs might be in a previous post, and whilst it’s clearly uncertain what some of those jobs might be, what is almost certain is that new work will emerge. Sadly that isn’t reflected in the Bain work, although I agree with them that more needs to be done by both employers and society as a whole to adapt to the changing skills requirements they face.
Indeed, this was the topic of a recent post based upon new research from the UK Government looking at the adaptability of the workforce. It highlights significant challenges for society to tackle, with corporate investment in education falling and the portion of society most at risk from automation largely excluded from current training opportunities.
What it means for businesses
Despite not really touching on how businesses can help the adaptability of the labor market, they do nonetheless conclude with eight implications of the various changes identified in the report that they believe managers should take notice of:
- Be wary of following market momentum—volatility will increase. Leadership teams can prepare for a more turbulent business climate by making resilience a higher strategic priority than it has been in recent years.
- Middle-class markets are likely to erode. Consumer goods and services businesses will need to carefully stake out their ground across the socioeconomic spectrum because the landscape is likely to change midway through the coming decade as investments in automation begin to decline.
- Expect an interest rate speed bump. The demand for capital to support automation in the next decade, combined with shifting demographics, could temporarily tip some economies into supply-constrained growth and cause a rise in interest rates. Business leaders and investors thinking of taking a wait-and-see approach may find there will be very little time to react.
- Automation could fuel a 10- to 15-year boom followed by a bust. Bain expects investment in new automation technologies starting in the next decade to follow the same pattern as all major capital investment waves. The early part of this investment wave will create major opportunities for businesses and investors.
- Highly skilled, high-income labor will grow increasingly scarce. As competition grows for scarce talent, leading companies will invest more to attract, grow and retain scarcer high-end talent and ensure that their workforce is as productive as possible.
- Baby boomer spending growth will peak in the 2020s before tapering. Over the next decade, businesses and investors need to be mindful of the potential flattening of demand growth toward the end of the decade, in combination with other risk factors that could start to emerge from other parts of the macroeconomic landscape.
- More government in more places is likely. For businesses and active investors, stronger regulation or antitrust enforcement may make it more difficult to gain scale and force limited diversification. In particular, large-scale tech businesses will face continued scrutiny due to their size and competitive power despite the significant value they have created for consumers.
- Intergenerational conflicts will potentially rise, drawing in businesses. For businesses and investors, government transfers to better support one group or another may signal rising or falling spending patterns and business opportunities. By contrast, a shift in the balance of transfers to working-age households may diminish opportunities for senior-focused goods and services. Businesses, management teams and even shareholders may be drawn into the conversation about government transfers as they grapple with existing pension obligations, the scarcity of highly skilled workers, social pressure to address job losses and declining incomes among mid- to low-skilled workers.
A recent analysis by the MIT Tech Review highlighted the sheer variety of predictions on the ‘future of work’, and whilst they don’t appear to be converging on a common future, they are all predicting significant change afoot. Time will tell how big that change is and how effectively society adapts to it. For now though, the report from Bain is further grist for the mill.