The Future of Work

03/04/2015 02:49 pm ET | Updated May 04, 2015
Cultura/Frank van Delft via Getty Images

Snapchat -- producers of the eponymous photo messaging application -- is reportedly raising a new round of funding that would value the company at up to $19 billion. Created in a Stanford dorm room in 2011, Snapchat has for the past few years had a mere 35 employees. While this extraordinary market valuation of over $500M per employee may be a reflection of a bubble in certain tech stocks, it signals the changing nature of innovation and how the generation of value is becoming disconnected from the creation of employment opportunities.

Simultaneously, rapid technological advancements are enabling the automation of many human tasks. My colleagues at the Oxford Martin School, Carl Frey and Michael Osborne, have estimated that 47 percent of U.S. jobs are at high risk of automation over forthcoming decades. In our latest report, published by the Oxford Martin School in partnership with Citi, Frey and Osborne demonstrate that, for the first time, low-income and low-skill jobs are most likely to be automated. It is no wonder that profound questions are being raised about how we will work and live in the 21st century.

While technological developments have always threatened jobs, this historically has been seen as a concern for small segments of the labor force, whose resistance to change has been labelled luddite, referencing the 19th century artisans who smashed the mechanical looms which threatened their employment. Yet, despite the protests of particular groups, the long-term benefits of technological progress have widely been seen to outweigh the short-term costs. In recent decades, for example, the Internet and smartphones have brought great benefits, and many eagerly anticipate the next generation of even more advanced products.

But the benefits of technological and economic progress have been unequally shared. There are fears that machine intelligence and automation now threaten a wider group of both lower and middle-income jobs than has historically been the case. This arises from the concerns that the substitution of machines for labor over the past 15 years has contributed to the rise of inequality in almost all countries, and the stagnation in real median wages in roughly half of the advanced economies. In the U.S. and Europe there has been a decline in employment in middle-income jobs and a rising concentration of wealth benefiting shareholders rather than workers. The communication, information and logistics revolution has increased the speed and density of transactions while their growing complexity and dependence on information infrastructure and process centers has increased the returns to the owners of the information hubs, be they Google or Bank of America. As Moore's law continues to drive the near exponential growth of processing speed, and the pace of change accelerates, those that are able to adapt and invest thrive, while those that are unable to do so are left further and further behind.

There is a growing risk that individuals around the world see a growing threat to their livelihoods and futures in an age of globalization and turbo-charged technological change. We have already seen a polarization of politics and growing nationalism, protectionism and xenophobia, not least in the U.S. and Europe. A number of countries, such as Germany, have even banned new technologies, notably GMOs and nuclear power.

To surf the growing complexity wave -- arising from what I call The Butterfly Defect of turbo-charged globalization -- requires new skills. Education -- from preschool to tertiary and adult -- is key. It is no accident that the societies which score best on these comparators have been most able to adapt to technological change, and experience among the lowest levels of inequality. In terms of content, social, creative and problem-solving skills must be emphasized; it is these skills that are least susceptible to computerization. These skills can be taught online, as well as in person, reducing the costs and potentially increasing the reach and quality of education. Entirely new occupations -- and indeed industries -- are being created as a result of new technologies. Big data architects, digital marketing specialists, and data scientists are occupations that hardly existed on LinkedIn five years ago, and which have developed as a direct result of new technologies. Solar energy systems engineers, informatics nurse specialists, and biomass plant technicians are other new and emerging occupational titles. While these constitute very different jobs, they share the common characteristic of requiring significant skill. Education is thus a prerequisite to embracing change.

Other policies that increase flexibility in workforces are vitally important too.

Housing markets which allow individuals and families to move from one city to another prevent the creation of pockets of unemployed people who are financially trapped in one location. The same is true at the global level, where immigration policies are particularly important. To create globally competitive companies, firms must be allowed to engage in a wider search for talent, and recruit the brightest graduates, whatever their origin. It is no accident that immigrants have started well over a third of Silicon Valley start-ups, and are over-represented in key indicators of innovation -- including the registering of patents, the winning of Nobel prizes, and the creation of technological disruptors (SpaceX, Google, Apple, and Yahoo). The worrying reversal of openness to these Exceptional People in the US and across Europe will make these societies less prepared for change and more unequal.

Active Labor Market Policies, aimed at assisting and incentivizing unemployed people to find employment, can also play an important role in reducing long-term joblessness. These include (re)training programs, internships, help with job applications and interview training and other policies, many of which already have been adopted in a number of cities. These best practices need to be studied, adapted and expanded.

The digital divide needs to be overcome not only between countries that have very uneven access to new technologies (not least the Internet), but within societies, where a surprisingly large number of individuals have not connected to fast Internet. This is about geographic location, with the poorest and most remote locations often worst connected, but also age, with the elderly particularly at risk.

Tax policies matter too. The difference between gross labour costs and take-home pay (tax wedges) can be considerable. These comprise employers' and employees' social security contributions and personal income taxes. Lowering tax wedges can be an effective way to boost take-home pay or raise employment. But if labor gets a greater share of the wage, and less is deducted, how would social security and other benefits be funded? This could happen by raising top marginal income tax rates, increasing capital income tax rates, introducing wealth taxes and reducing tax avoidance. Several countries have increased their top personal income tax rates in recent years, and although this leads to predictable protests from the small minority most affected, there is no evidence that when done carefully it leads to a repression of investment or entrepreneurial zeal. The closing of tax loopholes and arbitrage opportunities -- not least by the global technology companies that book the lion's shares of their revenues to offshore tax havens -- would provide additional means to fund social security and put a growing proportion of wages into workers' pockets, thereby reducing inequality and boosting consumption and overall growth.

Technological progress is the source of immense new possibilities but also brings new risks, not least to labor. New technologies are a boon to skilled entrepreneurs able to benefit from a vibrant digital marketplace, and provide us all with wider choice, often at a lower cost. This is one of the reasons why inflation is no longer a threat. But for technological change to improve lives requires not only the extraordinary inventiveness and risk taking of entrepreneurs and investors; it also requires actions on the part of cities, states and governments to ensure that the benefits are more widely enjoyed.

Technological change always poses a threat to the future of work. But we can choose whether the technologies being developed lead to widening inequality and threaten our well-being or whether they ensure productive and fulfilling working lives for current and future generations.

The WorldPost is hosting a Future of Work conference on March 5th and 6th in London. To find more information, visit The WorldPost conference web site.