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New world, few jobs

By Marianne Haahr, Project Director, Mandag Morgen Global Institute, @HaahrMarianne

73 million youth are without a job, and more looks set to join them in the unemployment line. On the African continent alone 200 million more youth will have entered the work force by 2020. Behind the numbers lie real people and real problems. A day without a job is a loss of income, of self-esteem and of access to a social network. And behind every person is a story of why they don´t have a job. Many youth were laid off during the financial crisis due to first-in-first-out policies. Others were entering the work force just when economies crumpled. Seen from a more elevated perspective, we see economies picking up speed again, but jobs are not returning. Jobless growth is a characteristic of the new world of work currently unfolding. There is a real risk that the world is entering a era of chronic low employment. A whole generation may be wasted.

The New World of Work

The way we work is transforming. The emerging trends are jobless growth, work shifting from humans to robots, rise of online labor markets, more one-person companies, mobile work, rapid job-shifting, the individual as brand and continuous skill development. Jobless growth is partly driven by innovations in technology. While technology is a solid driver for growth and employment, in some ares it is also seen to have a negative effect on job creation.

The news is, this negative effect can be spreading into high-end jobs also. Studying medicine used to be something close to a job guarantee. After all, the world will always need doctors the saying goes. But that was before the super computer Watson entered the labor market. The robot developed by IBM is capable of reading 229 million scientific texts in three seconds and diagnose. Today, Watson will be assisting doctors but he could end up taking over a sizeable part of the entire profession. Robots have already put many skilled workers out of a job. Many jobs in the middle layer of the labor market have vanished. Next artificial intelligence is expected to disrupt work in the higher educated segments of labor markets when more Watsons are ready to take over, estimates a study by Oxford University.

It is a hard trend that intelligent machines will take over more functions. A hard trend means that it is something that will happen. As opposed to soft trends which may happen. Automation has already displaced workers from routine manufacturing and service jobs. Many entry-level jobs and minimum-wage tasks are on their way out, if not already gone. And now Watson is threatening the higher educated. The study by Oxford University estimates that in the future 702 job titles can be replaced by robots.

The internet is driving the formation of online global labor markets. Platforms such as oDesk are part of this trend where people offer freelance labor on-line. Companies can get a job done without in-house hiring. Platform based labor markets hint to fever full-time jobs in the future and more short term work. On the online labour market the assignments will be solved where the costs are lowest if quality is comparable. In the short term this points to a shift in online labor from West to East. The online labour markets are only open to the educated and well connected. Online labour markets means that work is to a lesser extent a place you go but a thing you do.

One in a million

In a globalised labour market the chances of getting onto a short list of candidates is ‘one in a million’. The individual will invest in developing a personal brand as a means of differentiation in a crowded market. Continuous skill development to respond to rapidly shifting demands is a requirement and will increasingly take place online. Those with no, just one or a less a marketable education may be forced to take jobs below qualifications.

Broken school-to-work pipeline

The existing mismatch between skills supply and demand is projected to increase. Today the school-to-work pipeline is broken in many places. One reason is that skills demanded change while students are in the class rooms. In addition, businesses are constantly re-designing work by outsourcing, shifting to different platforms and scaling up and down.

On the African continent the school-to-work pipeline problem is particularly acute. The Millennium Development Goal on education has succeeded in filling the continent with schools but without factories and private business being created at the same pace. Northern Africa and the Middle East have the world’s highest rates of youth unemployment of 27, 2 percent. More than half of the region’s population is under 25 years old and 2.8 million young people enter the labour market every year. Income from oil has fuelled massive investments in education, but translating a degree into a job has proven difficult for many youth. Study points to educations not being tailored develop to the skills needed for private sector jobs.

In Europe youth was hard hit by the economic downturn. Between 2008 and 2010, Europe lost around 5.5 million jobs due to the economic slowdown. Lack of availability of jobs in Europe is part of the problem, but not the whole story. Rigid labour market legislation makes it more difficult for youth to hold onto a job. But mismatch of skills supply and demand is also a problem in Europe. A study reveals that many European employers are dissatisfied with applicants’ skills: 27 percent reported that they have left a vacancy open in the past year because they could not find anyone with the right skills.

At a global level the mismatch between skills supply and demand is projected to increase. Projections show that by 2020 the global economy will run short of 40 million workers with a tertiary education, 45 million workers with a secondary education in developing economies. And there will be 95 million too many low-skilled workers than needed.

Scenarios for the future

The Institute for the Future has identified four scenarios for the labour market in 2019, with elements of all four already happening. The first scenario is growth with continuing restructuring of the economy. Shorter-term tasks and contract workers dominate and automation eliminates work in some areas while creating opportunities in emerging fields.

The second is collapse where reduction in the number of both low- and high-skill jobs is mismanaged and creates deep social and economic divides. The chain between school and the labor market is broken, youth hold unmarketable degrees. Most new jobs are in the platform economy as contract workers. Few generate income to consume, and employers constitute a small consuming elite.

The scenario is constraint where companies shift their focus toward cost savings and efficiency measures. Companies use new technologies to reduce transaction costs. “Career path” no longer means holding three or four jobs ending in a senior management position but rather zigzagging in and out of different career paths.

Finally, transformation which is a “deinstitutionalized economy” where people pursue their passions in new and exciting ways. An institutional platform is no longer needed rather people create single-person companies. The ability to use marketplaces like oDesk and Elance has grown to be used globally by most companies.

 

The journey from risk to opportunity

The Global Opportunity Report turns five big risks into opportunities each year. This year the risk of wasting a generation due to persistent youth unemployment is on the agenda. Eight opportunity Panels around the world will co-create opportunities to un-lock the youth unemployment crisis. The proposed list of seventeen sustainable development goals contains an aspiration to create decent jobs for everyone. We identify ways to get there inspired by perspectives from business and political leaders.

Learn more about the Global Opportunity Report 2017

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