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The future of work oct 2018



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Future of Work

The future of work is increasingly uncertain. What is clear is that we are in the midst of a major transformation driven by multiple drivers of change. How individuals, companies, cities and governments respond to the upcoming shifts will be pivotal for future economic and social wellbeing, but this is far from straightforward. Some major decisions lie ahead.

Ahead of a speech to MPs in London next month and several subsequent expert discussions, this is a point of view on how, where and why the future of work is in flux.

It explores three key drivers of change as leaders around the world view it – shifting demographics, technology innovation and the organisational response. In addition, we have highlighted several areas where new policy decisions need to be made.

The future of work oct 2018

  1. 1. 1 TheFutureofWorkInsightsandImplications THE FUTURE OF WORK Insights and Implications
  2. 2. Text © Future Agenda 2018 Images © Graphs © Future Agenda First published September 2018 by: Future Agenda Limited 84 Brook Street London W1K 5EH
  3. 3. 3 TheFutureofWorkInsightsandImplications The Future of Work Insights and Implications Dr Tim Jones Caroline Dewing
  4. 4. 4 TheFutureofWorkInsightsandImplications The future of work is increasingly uncertain. What is clear is that we are in the midst of a major transformation driven by multiple drivers of change. How individuals, companies, cities and governments respond to the upcoming shifts will be pivotal for future economic and social wellbeing, but this is far from straightforward. Some major decisions lie ahead.
  5. 5. 5 TheFutureofWorkInsightsandImplications Context How and where we will work in the future is a major focus for multiple organisations. Whether you talk to the WEF,1 ILO,2 DWP,3 EAER,4 the RSA5 or multiple consultancies,6,7,8,9 there are many different views exploring how and why the nature of work is in flux. The reality of changing demographics and the escalating impact of new technologies across many sectors are fundamentally challenging the status quo and, as such, there is widespread concern about what the outcomes will be. Indeed, it is difficult to avoid the furore around future threats and potential political interventions about job protection and creation. There is much uncertainty. Future Agenda believes that the best way of making sense of the risks and opportunities ahead is to take a global view and consult with leaders around the world and share and debate their varied ideas. This is why we run the world’s largest open foresight programme which engages with experts from across all continents in order to explore emerging change via openly shared global dialogue. Our objective is to bring together multiple different perspectives and make more sense of the future – one that balances alternative views and provides an impartial, credible and reliable synthesis of how changes around the world may play out - and what are some of the key implications. Within this we have looked in detail at the future of work as well as at other important and related topics such as the future of ageing, education, immigration, trade, data, transport and health - all of which are experiencing significant shifts that will impact how and why we work. Ahead of a series of further discussions starting in London, in this article we explore three key drivers of change as leaders around the world view it – shifting demographics, technology innovation and the organisational response. In addition, we have highlighted several related areas where new policy decisions need to be made.
  6. 6. 6 TheFutureofWorkInsightsandImplications As the world’s population continues to grow and consume more, many increasingly recognise the need for additional jobs to be created on a global scale. If average standard of living is going to stay the same as today, or ideally improve for more people, then there needs to be greater economic activity in many key locations. A common number shared in recent years by the UN is that over the next decade we should aim to create 600m new jobs – so 45 million a year.10 This will be a significant challenge, as many of these are needed in areas of major population growth across Africa and Asia. With the young making up around half the total of over 190m looking for but unable to find work today, plus more than 800m people currently unable to get over the poverty threshold, the requirement for more and better jobs is well documented.11 In the countries experiencing an ‘urban youth bulge’ rising unemployment for the young is already a major challenge.12 Even in several southern European countries, many graduates already need to wait a decade before finding meaningful work. At the same time, North Americans, most Europeans and the populations of several notable Asian countries such as Japan, Korea, Singapore and China are battling a different issue – that of a naturally declining workforce and steadily rising dependency ratios. Here increasingly ageing populations, low fertility rates and a snowballing focus on immigration are all playing an important role in reshaping society. By 2030, older people will outnumber children for the first time in US history,13 while across several European nations, those over 65 will account for around 25% of the population.14 The average EU old age dependency ratio will have risen from today’s 30% to 40% and by 2050 will have passed 50%.15 Put another way, twenty years ago, there were about five workers for each pensioner. Ten years later, the ratio was 4:1 and today it is close to 3:1. In 2050 it will be 2:1. Managing this is a huge challenge for policy development. Balancing an increasingly wide range of conflicting forces that impact on the availability, quality and length of jobs is putting mounting pressure on how we see and prepare for work across our lengthening lifespans. Some in our discussions suggested that we should expect to work less but work longer – arguing that, if 30 years ago in Europe we were all aiming for up to 5 days a week over the adult lifetime, today we are on average targeting around 4 days and, in the future, this will drop to 3. Others observed that this is all very well but “a major potential barrier is that employers remain ambivalent about older workers.” This despite the fact that there are countries, such as Canada and South Korea where “workforces are becoming older and more age diversified than ever in history.” Demographics – The Big Picture
  7. 7. 7 TheFutureofWorkInsightsandImplications Old-age dependency ratio 0% 10% 20% 30% 40% 50% 60% Low income countries Middle income countries High income countires World Old-age dependency ratio 2020 2030 2040 2050 Looking back a few decades, the majority of people in rich countries were expected to work for 30 to 40 years and then retire for 10. This was the basis around which most pensions were designed. The model is now being challenged as we may have to work for up to 50 years and support at least 25 years of retirement. As was highlighted in a discussion at Stanford “for many, retirement at age 65 is economically infeasible. The reality is that few workers can fund a 30-year retirement with a 40- year career. Neither can societies.” An inevitable consequence of this is that retirement ages may well have to rise. Indeed, several European countries are now joining others such as Australia in contemplating increasing the standard pension age to 70.16 Given this, many now recognize that the challenge of supporting an increasingly older workforce demands not only the rethinking of life- long learning but also the broader acceptance of the additional cost of part-time flexible jobs. If that was not enough, at the other end of the working life we can also see a generational attitudinal shift underway. At the same time as the demand and supply of jobs is fluctuating, the expectations of the new workers are changing - particularly amongst the educated elite. More informed, knowledgeable millennials are increasingly seeking more purposeful work. Some organisations now recognise the “importance of connecting candidates with a cause” but delivering on this will be difficult for most.17 This all clearly has major implications and raises some difficult questions: • How can new jobs be created on a significant scale? • Should we expect full or part-time work? • What will be the future retirement age? • Can pensions be better structured? • What is the nature of employment and unemployment? • If we can’t create sufficient jobs should we incentivise people to work less or not at all? and • How should we, as society, value, incentivise and support work? Unemployment rates (2018) Japan 2.4% China 3.9% US 3.9% Russia 6.0% EU Average 6.8% India 7.1% Brazil 13.1% South Africa 27.2% Kenya 42.0%
  8. 8. 8 TheFutureofWorkInsightsandImplications With faster technology change and the 4th Industrial Revolution building traction, many anticipate an impact on jobs - creating new ones but rendering others redundant. Capturing the opportunities associated with the broad range of emerging technologies could be a significant driver of GDP growth in many economies over the next decade. However, a large part of this growth may arise from the replacement of labour by automation: The activities that are most susceptible to this include the predictable physical tasks as well as the cognitive tasks built upon collection and processing of data. The pivotal question is whether the changes ahead will drive mass unemployment or will the shifts that led to the likes of blacksmiths being replaced by car mechanics repeat themselves? Several suggest that technology will have a fundamental impact on roles that are currently considered part of our social fabric – doctors, lawyers, teachers and accountants for example. Some of the earliest jobs at risk include underwriters, telemarketers and translators.18 The Economist, for one has even explored the benefits of automating politicians.19 Others see more opportunity, pointing out that the jobs that are displaced will be offset by gains due to digital automation and AI technologies. These include those created as a result of rising expenditure on IT hardware and software, jobs supporting a growth in global consumer spending and those associated with the increasing demand for healthcare. We should also highlight the potential benefit of entirely new jobs that may be hard to imagine today. All in all, the WEF reckons that in just the next four years there will be a net gain of 58m jobs with around 133m new jobs being created and 75m disappearing.20 In addition to the creation of new skilled jobs, particularly in digital sectors, it may well be that greater efficiencies will lead to higher production, lower prices and thus more demand for the tasks that the machines cannot perform. During the first Industrial Revolution the number of weavers rose as the work became more automated simply because the improved efficiencies generated by machines led to reduced prices and opened up new opportunities. The job of a weaver changed but the number of weavers increased. This could be replicated in a number of existing occupations including doctors and teachers. That said, this does not follow in all professions; those presently employed as taxi drivers or factory workers may not necessarily find the transition to something requiring completely different skills an easy mid-life journey. Technology - Promise and Threat
  9. 9. 9 TheFutureofWorkInsightsandImplications Careful policy planning is necessary and the WEF 2018 Future of Jobs Report is cautious about the impact that new technology may have, pointing out that “these transformations, if managed wisely, could lead to a new age of good work, good jobs and improved quality of life for all, but if managed poorly, pose the risk of widening skills gaps, greater inequality, and broader polarization.” One of the most important questions to ask is which sectors are most vulnerable to technology change and which will gain most. Although factory workers, supermarket checkout assistants and truck drivers may bear the brunt of the initial disruption, given how widely applicable automation seems to be, it’s certainly the case that many traditionally “safe” white-collar roles, including engineers and accountants, doctors and lawyers, may well also experience fundamental change. AI in particular has a fast-developing capability to support or replace cognitive tasks just as much as physical ones. Some even suggest that we will no longer need as many teachers, certainly not in their current guise. In a discussion in Mumbai the idea of teacher-less classrooms was seen to be just as credible as driverless cars. There is clearly lots of hype around the varied technologies that are gaining major investment. While advocates of such innovations as AI and self-driving cars are primarily focused on the positive benefits, others see a different future and the many alternative voices are all now muddying the picture. The jobs of around 75% of accountants, bankers and lawyers may well be vulnerable, so fundamental here is the need to be clear on whether we are talking about AI as artificial, assisted or augmented intelligence and, by implication, how it will replace or support us.
  10. 10. 10 TheFutureofWorkInsightsandImplications Healthcare AI and Robots The healthcare industry employs millions of people but also has many new development programmes which are focused on improving efficiency and outcomes. As such it provides a good example of how technology might be deployed alongside workers. Robots are already performing surgery; AI advisors are supporting GPs; while pattern recognition technology is out-performing radiologists in the analysis of patient data. Change is guaranteed as governments and private healthcare providers around the world wrestle with need to reduce costs and improve efficiencies. In Switzerland, for example, there are currently 50% more doctors per capita than in the UK. Will this ratio be maintained? It will be interesting to see how the roll-out of new technologies will develop across different systems. As machines improve to do what we can do but more efficiently, at less cost and with fewer chances of error, then they will become increasingly attractive options for hospitals. Information-rich, repetitive jobs in areas such as pharmacy may well be initially supported by the first phase of AI (machine learning) but then replaced by the second phase (deep learning). Deloitte, for one, suggests that “if automation in the industrial era was the replication of tasks previously isolated and defined for humans, then in the post-industrial era, automation might be the replication of isolated and well-defined behaviours that were previously unique to humans.”21 Should we therefore rethink the concept of work that not only makes humans essential, but allows them to take fuller advantage of their uniquely human abilities? So the role of a radiologist, for example, will not completely disappear – few envisage a time when a patient would prefer to have a complex, sensitive diagnosis delivered by a machine – but it does mean that it will change. In the same way there is also more automation coming to the increasingly digital operating theatre. This is even having an impact on the role of a surgeon. Experts we talked to in Frankfurt believe that, although for the foreseeable future at least, “surgeons will still be in the mix, but they will act more as supervisors than active participants - ready to step in if needed.” Effectively their role will become similar to today’s airline pilots with machines undertaking the majority of the technical tasks, but skilled humans being on hand to manage unexpected turbulence and emergencies. That said, greater efficiency and accuracy are unlikely to replace the human touch. The very real need for hands-on healthcare professionals such as nurses, surgical support teams and carers who can interact with patients, will remain – and may well rise. Just as replacing a highly dextrous job such as that of a hairdresser with a robot is extremely tricky, so too is the case for those roles where empathy and understanding is critical. Few believe that this can be addressed though machines alone.
  11. 11. 11 TheFutureofWorkInsightsandImplications Autonomous Vehicles Another popular area of debate on where technology might have impact is that of autonomous or self-driving vehicles. Ultimately, many supporters envisage a world where fleets of trucks, taxis, ships and even planes all drive themselves and there are no accidents. Here pretty well everything moves smoothly, efficiently and securely. People and goods arrive when and where they need to be while making efficient use of available resources. The consequence of this is fewer drivers, sailors and pilots, but advocates see that this will be compensated for by the creation of thousands of higher-value new jobs in tech development and the manufacturing of all these vehicles. While some jobs disappear, others new ones are again created. It’s a good thought. However, while the changes ahead may drive innovation and deliver a GDP balance in terms of value, it may not equate to more jobs. Taking the UK for example, there are potentially up to 1m driving jobs ‘at risk’. We have over 300,000 taxi drivers; 300,000 truck drivers; over 150,000 delivery drivers; and around 120,000 who work for the likes of Uber and Deliveroo plus thousands more cycle couriers. Few of these jobs will be replaced in the next 5 to 10 years, but further out some see between 30% and 50% could go as autonomous cars, urban robots and delivery vehicles are all widely deployed. What will happen to these workers who may not find it easy retrain? Moreover, at a national level, it is unlikely that up to half a million jobs are going to be replaced by an equal number of scientists, engineers and coders. So, some are questioning whether as a society we should indeed support the move to widespread full (level 5) autonomy for vehicles - especially as many of the important safety benefits can be achieved with less automation and so without impacting so many jobs. In healthcare, transport and other strategic sectors new technology will progressively have the capability to replace humans, but will we want to let it? After all many believe that quality of work makes a huge contribution to quality of life. As some sectors and countries gain from new technology, others will correspondingly lose out and fall behind. A response to this will drive both the call for more reskilling and upskilling as well as an inevitable surge in migration.
  12. 12. 12 TheFutureofWorkInsightsandImplications As more companies look ahead to future resource and skill needs, some are starting to rethink how they operate as organisations. For many there are three core future shifts to accommodate: 1. A change in the tasks undertaken by humans in some specific fields 2. More freelancers or independent contractors, especially in the service sector 3. The need to upskill and reskill ‘employees’ two or three times during their work life Research in Finland sees a future where work may move from being stable to being more episodic and relationships become multiple.22 While manufacturing may remain an industry with long- term employer / employee relationships, in many other sectors, especially those in the knowledge economy, the whole purpose and structure of what a company is may change. As the potential employment pool expands to include both ‘on and off-balance sheet talent’ the workforce, workplace and the nature of work is all in flux.23 Looking back a decade, the world’s ten most valuable companies employed a total of over 3.5 million. Today, the top ten companies are worth twice as much, but only have 50% of the number of total full-time employees. Many now see the future organisation as increasingly flexible, permeable, flat and virtual.24 This means that companies shift from being employers and may become the bodies that create or coordinate projects that an increasingly flexible and freelance population come together to deliver. Think of many software developers or the movie industry which has worked in this way for decades: Other than a few people who work for the movie studios, pretty much everyone else is freelance – the director, actors, camera crews, runners, special effects, costumer design, pre- production etc – they come together as a team of 1000 or so for 6 to 9 months and then all move on to their next projects. Maybe, this is how many other sectors will operate in the future? The majority of us will certainly be independent ‘free agents’ available for work as projects require it. Last year 15% of working Britons, 25% of the Swiss and 36% of the US workforce were freelancers operating across the gig economy. In each country, many expect this will rise to over half of workers within the decade.25 Deloitte research supports this trend and further highlights a future where more people are mobile and so not bound by location.26 We may see more educated individuals who are ‘sometimes nomads’ moving to the countries and cities where their next project prospects are best27 Gen Z in particular are increasingly willing to move for better opportunities.28 Organisations’ Response Top 10 Companies Value and Employees 2008 vs 2018 Total Value ($tn) Total Employees (m) Top 10 Companies Globally [can do this as row of people and row of mon 2018 2008 2.60 3.51 5.98 2018 1.73
  13. 13. 13 TheFutureofWorkInsightsandImplications The challenge here is then increasingly three-fold: 1. How does the talent adapt and keep itself up to date and so attractive to the project? 2. How does the organisation with the key projects to deliver attract the top talent? 3. How do cities and countries better attract both the top talent and the pivotal companies? Back in the late ‘90s, Swedish academics Jonas Ridderstråle and Kjell Nordström authored a notable book titled ‘Funky Business’ in which they focused on a world where, with increasing access to better education and information for all, many of us may become more equally qualified but there would be a few elite “people worth employing” and a select range of exclusive “organisations worth working for.”29 Perhaps, going forward, we will actually be more focused on the “talent worth accessing” and “projects worth working on?” KPMG propose that “in developing a talent strategy that draws upon the value of a full-time employee and high-end independent professionals from the gig workforce, companies can not only adapt to this future of work model, but also use it as a competitive differentiator.”30 Others consider that this could be progressively tricky to pull off. As increasingly selective new graduates seek different types of organisations to work for, or with, having the right combination of projects, talent magnets and core purpose will be vital so that any one company can stand out from an increasingly homogeneous average. Whatever and however changes play out, there is a growing consensus that the whole notion of an organisation has to change: Many established activities are increasingly being outsourced – operations, finance and legal. At the same time, strategy, innovation and brand are increasingly core while HR is more about talent attraction rather than skill development. These are significant changes and indicate that the future of the company is as much in flux as the future of work itself.
  14. 14. 14 TheFutureofWorkInsightsandImplications Numerous governments and their advisors are clearly preparing for a change in the nature and contribution of work. While some of the key shifts ahead are having short-term impact, others may have a longer gestation. However, given the varied demographic, technology and organisational developments underway, there are a number of emerging issues for government and regulators to consider – some of which are already being debated. These include: 1. Society’s view of the purpose and contribution of work and whether the future jobs available should be proactively spread more evenly across the population and country; 2. Supporting the increasingly freelance, gig economy not just in terms workers’ rights but also in areas such as taxation, credit ratings, loan terms and insurance cover; 31 3. Financing meaningful upskilling and reskilling so that every individual has the opportunity to fully retrain, and not just be educated once; 4. Having more open and honest dialogue on the role of internal and international migration in supporting and balancing the talent mix; 5. Rethinking pensions to accommodate people not only living longer but also working longer, and most likely part-time; 6. As suggested by Bill Gates and others,32 introducing a tax on robots, data and AI and the companies that gain most from their use – this, incidentally, will require more clarity on the value of data;33 and 7. Building on combining current EU and California proposals,34 ,35 diverting revenues from recommended digital taxes to support a wider and better universal basic income. One thing is clear, the companies and governments that proactively engage in mapping and planning for the challenges and opportunities around the future of work are likely to benefit from its transformation. The question is which will lead, and which others will follow. Some Policy Questions
  15. 15. 15 TheFutureofWorkInsightsandImplications
  16. 16. 16 TheFutureofWorkInsightsandImplications References 1 2 3 4 5 6 7 8 9 10 11 12 13 14 switzerlands%20digital%20opportunity/the-future-of-work-switzerlands-digital-opportunity.ashx 15,_EU-28,_2016-2080_ (%25)_PITEU17.png 16 on-to-newstart 17 18 19 20 21 22 23 future-of-work 24 25 freelance/#a473a043f82b 26 27 28 29 30 31 entrepreneurs/#63735a835071 32 33 34 35 idUSKCN1J015D
  17. 17. 18 TheFutureofWorkInsightsandImplications Contact details To discuss this project further please get in touch Dr Tim Jones Programme Director Future Agenda +44 780 1755 054 @futureagenda