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Looking to the past to help shape the future of work

Looking to the past to help shape the future of work

The debate around the future of jobs is a polarised one: on the one hand, there are the pessimists, who believe we should prepare now for a world of no work.

On the other are the optimists, who see the current challenges within global labour markets as a mere blip in a long-term trend of growing prosperity and employment. But neither of these outcomes is predetermined, and neither perspective is entirely new.

Many of the changes we are seeing today have occurred in some way, shape, or form before. Previous periods of technological disruption have typically led to creative destruction (e.g. replacement of music cassettes by CDs and eventually by mp3 files), widespread job displacement, and reactive populist politics.

It was the responses of civil society, policymakers, and their market counterparts that shaped how we went from doom and gloom to labour market boom. And it will be the decisions of their contemporaries that shape the future of work in the coming decades.

Each era of mass disruption and displacement is different from the last. Today, change is happening on a grander scale, much faster than it ever has before.

Deep income inequality, coupled with the potential of machines to increasingly do tasks typically reserved for humans, is creating legitimate cause for concern among workers and policymakers. But reflecting on the past can help us find lessons for the future.

One lesson is that technology typically drives costs low enough to expand markets and grow new ones, in turn creating demand for jobs to serve new customers. The assembly line allowed the Ford Motor Company to increase the speed of production eightfold and drop the price of the Model T by around 60% in seven years, making it affordable to middle class consumers. As Ford himself wrote in 1922, “it has been my policy to force the price of the car down as fast as production would permit, and give the benefits to users and labourers – with resulting surprisingly enormous benefits to ourselves.”

Increased demand for cars increased jobs in other, related fields, including repairs, sales, transportation and logistics. Such changes would be beneficial even to the African consumer, in the form of lowered prices.

Banking provides another example. The introduction of ATMs in the US starting in 1969, reduced the number of tellers per branch by roughly a third.

But the cost savings made branch expansion cheaper, which led to the number of bank branches increasing by around 40% during that same period. The net result was more branches, and more jobs for tellers.

This is quite similar to the way that mobile banking on the continent has resulted in increased access to financial services for underserved populations. This exemplifies another lesson: new jobs require new skills, which requires us to adapt our education and training systems accordingly.

Although ATMs eventually created more jobs for tellers, the role of the teller fundamentally shifted, from one that was largely based around processing transactions, to one that facilitated transactions in conjunction with more complex customer service functions: tellers were now required to solve problems for customers, to sensitise them and sell new products and services to them.

As the complexity of functions required of employees has increased, pedagogy had to adapt, moving from rote memorisation to more dynamic approaches to learning. In the future, foundational literacy and numeracy skills will be increasingly coupled with “soft skills” – communication, critical thinking, problem-solving, among others – that are more transferrable and more resilient to automation, as opposed to technical and vocational skills.

Automation does not eliminate the need for certain human skills, but instead forces a shift in relative importance between them, from our hands to our heads, and increasingly to our hearts. Globalisation has also taught us the value of trade to developing country workers and developed country consumers.

Lower communication and transportation costs have allowed emerging markets to utilise their lower labour costs to tap global supply chains, and international firms have passed these savings on in the form of cheaper products. Between 2000 and 2008, GDP per capita increased from $325 to over $625 in the least-developed countries, much of this attributable to an increase in trade and foreign investment.

Despite vehement anti-trade sentiments, lower manufacturing employment and calls for “reshoring” of factories back to the West, trade still has tremendous development potential.

Trade in services, as opposed to typical trade in products and components, should be more thoroughly examined as a means of boosting growth and employment.

India’s outsourcing sector serves as a useful example of how tradable services can contribute to development. IT and outsourcing companies leveraged cheap telecommunications and labour to grow rapidly.

Since the mid-2000s the industry has seen rapid double-digit growth, with growth slowing recently to a still impressive 12% in 2015-2016, and 10% projected for this year. Today, the outsourcing industry is valued at around $150bn, and IT and business process outsourcing is estimated to employ upwards of 3.5m people in India, contributing almost 10% to India’s GDP.

As the ubiquity of the digital economy increases with access to cheap and reliable IT and communication connectivity, an increasing array of services could present domestic and international employment opportunities for workers in developing countries, so long as education and skills development can keep pace.

Lower-complexity financial and legal services are already being outsourced, and one can imagine a future where “telerobotic” services such as medical procedures and housekeeping are done remotely – similar to experiments in drone delivery today.

History has also taught us that functioning social safety mechanisms are crucial to protecting vulnerable workers in times of disruption. The evolution of the modern welfare state in the West has largely been a reaction to job losses brought on by major labour disruptions.

Otto von Bismarck created the German pension scheme as a reaction to job losses during the period of industrialisation. President Franklin Delano Roosevelt signed the Social Security Act in 1935 during the Great Depression.

Most recently, President Barack Obama signed the American Recovery and Reinvestment Act in 2009 as a way of protecting jobs lost to the recession and providing temporary relief to those most affected. Giving social spending a haircut during periods of structural unemployment and slow growth may at times be politically expedient, but it is no way of ensuring workers’ future prosperity.

Informed action is crucial

If history is any guide, the current period of low growth and sluggish employment will eventually lead to greater productivity, jobs, and prosperity, so long as we can weather the storm while getting there. But history never repeats itself exactly. And faith in the inevitability of progress can lead to a dangerous passivity. The collective and informed actions of our policymakers, business and civil society leaders today will chart our course for tomorrow.

By Devang Vussonji and Diptesh Soni of Dalberg Advisors, a leading global strategy consulting firm focusing on development issues.

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