Confluence of seemingly unrelated factors heralds demise of jobs

We are in the midst of a curious confluence of seemingly unrelated factors, all driving towards one conclusion - demise of jobs.
PHOTO: The Straits Times

One thing seems clear in the global economy - we are looking down at a deep freeze in employment.

A decade ago, this pessimism was not prevalent. We are in the midst of a curious confluence of seemingly unrelated factors, all driving towards one conclusion - demise of jobs.

Five trends have accelerated this.

Global growth is still anaemic and there are still no strong green shoots in the big economies such as the US, Europe, Japan and Brazil.

The impact of India or China or Indonesia growing faster is not felt sufficiently in the overall pot, as they need to mop up their own surge of employable pools.

Jobs tend to lag economic pick-up. That means we are some time away from real job spurts.

The US is supposed to have added about 10 million jobs in the two Obama terms, but one suspects much of that in a numerical sense, is restoration of jobs lost or correction of stagnation during the Bush years.

High wage countries continue to drive out jobs. As wages rise in first world economies (Singapore included), private businesses realign their costs and will move operations.

When this happens, it doesn't impact only the blue-collar or mid-level jobs.

When companies move, C-suite jobs also move. Japan has faced it for a long time.

Now, the US East Coast and some Western European economies face it as well.

Brexit is bound to add a further element of surprise in this as the immigrant jobs of EU nationals are reduced.

For a long time now, industry shifts are causing disruptions in employment.

Traditional industries such as textiles gave way to information technology and services a few decades ago. There is a new churn in this now.

The new wealth creators, "technology" companies, do not employ the same number of people for a given turnover.

Apple, Facebook, Google and Microsoft employ far less people for their combined revenue of over US$500 billion.

Companies such as Amazon are defining new business models, which even Walmart (the world's largest employer at 2.2 million) is forced to adopt. E-commerce will shave jobs further.

The real economic activity is more vibrant in small and medium enterprises, in technology and service industries.

Fintech, medtech, app-services, SMAC (social media analytics companies) are mushrooming not just in Silicon Valley but all over the world.

These are new jobs in new industries, requiring new skills. Campus recruitment in top colleges has already shifted to these enterprises in a significant way.

The last factor is "skill obsolescence". This affects workers aged 45-plus more than others.

Unless they dramatically re-skill themselves, a good proportion of them would be displaced, in some cases by machines and in others, by people with machine knowledge.

Mid-level accountants, for instance, can be replaced by a combination of software.

We have not even discussed outsourcing, which continues unabated, despite nationalistic cries.

Manufacturing and services continue to move to lower wage countries with some changes in the basket of such countries.

The trends in artificial intelligence (AI) and robotics are equally alarming, even though they have not created major job churn yet.

If we don't need as many drivers, factory workers, checkout clerks, paralegal people, retail bank staff (credit analysts, loan officers) or telemarketers as before, it could be another telling blow of massive portent.

How is this pain going to be manifested or alleviated? Re-skilling is an important part of the solution pie.

Some countries have started this gingerly (SkillsFuture of Singapore is one such voluntary public-funded model), but this could hurtle towards compulsory enrolments soon.

There will be a further trend towards protectionism in subtle and overt ways. New private investors will be required to guarantee a certain level of employment.

Closures will become difficult or will come at a prohibitive exit cost. Incentives for startups will increase.

It is now possible to crowdfund even millions of dollars to start a venture, without the help of the formal banking system.

We will see crowdfunding 2.0 and other peer-to-peer financing ideas. Fintechs are rapidly causing these shifts.

New ancillary industries are becoming large employers - last-mile deliverers, for instance.

The apps industry is estimated to be reaching US$100 billion in a couple of years.

While the employment intensity is not high, it should still produce a large number of jobs.

Overall, there will be more dynamism (and unpredictability) about jobs, skill sets and compensations.

Under-employment or gap years will be new norms.

The other big takeaway is in education. High school and university education have to change quickly and profoundly to cater to these trends.

Learning will become lifelong instead of being front-ended in the teens and the 20s.

The importance of self-teaching will grow as that is the most effective impetus for re-skilling without a pause.


This article was first published on Jan 05, 2017.
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