The End of Work as We Know It

January 18, 2017

Three charts that explain what’s happening with jobs and automation.

Will we soon have to figure out what to do with all our leisure time, as the likes of utopians (and John Maynard Keynes) have long predicted?

Some labor economists have estimated that nearly one-half of all jobs in the United States (and likely other advanced economies) are at risk of being displaced by technology or algorithms within the next two decades. The World Economic Forum expects automation to result in the loss of at least 5 million jobs globally by 2020.

Others are less pessimistic. It is unlikely, they argue, that entire occupations will be eliminated. Some tasks within an occupation may change, but then that has been going on for a long time already. Therefore, a recent OECD brief suggests, “a better approach to analyzing the number of jobs at risk of automation is to analyze the task content of individual jobs instead of the average task content of all jobs in each occupation.”

By those numbers, OECD reports, just 9 percent of jobs across 21 countries are at a high risk of being automated.

Some countries will be hit harder by automation

Whatever the number, the impact will differ across countries, depending on their economic focus (those based more heavily on manufacturing, for example, may be affected more). As the figure below shows, 12 percent of jobs in Austria, Germany and Spain are at high risk for automation compared with 6 percent or fewer in Finland and Estonia. High-risk jobs are those in which at least 70 percent of the tasks can be automated.

Potential for Automation of Jobs by Countries

The least skilled are at highest risk but more education may not be the answer

While many may dream of more time for leisure, the flipside of this job retooling is less benign. Job loss is a real threat for many, particularly those with limited education or the inability to adapt to new job demands. And with job polarization comes economic instability.

The figure below shows that across OECD countries, workers with the least education are at the highest risk of displacement. As the OECD reports, up to 40 percent of workers with a high school degree or less (a lower secondary degree) are at risk for job automation, fewer than 5 percent with a college (tertiary) degree are. “Thus, automation could reinforce existing disadvantages faced by some workers.”

Share of workers with jobs at risk of automation OECD

This is no new concern. In 1964, a 2015 Atlantic article writes, “a committee of scientists and social activists sent an open letter to President Lyndon B. Johnson arguing that ‘the cybernation revolution’ would create ‘a separate nation of the poor, the unskilled, the jobless,’ who would be unable either to find work or to afford life’s necessities.”

Education used to be the solution. But, say economists like Paul Krugman, “Better education won’t do much to reduce inequality if the big rewards simply go to those with the most assets,” as is happening today. Unlike in the past, today those with capital (those who own companies or are landlords, for example) are benefiting more than those who rely on their skills (and subsequent wages) for their livelihood. One bit of evidence for this: The wage premium for college degrees has been declining since 2000.

Zsolt Darvos and Guntram Wolff in a recent Bruegal report see this happening in Europe as well. There, he finds, the skill premium is generally smaller than in the United States and has been declining steadily.

Middle-skilled jobs are also threatened

For years now, the labor market has been “hollowing out” with the loss of middle-skilled jobs, many lost to automation. If you were to draw a picture of today’s economy, it would look like a barbell: many high-skilled jobs and many low-skilled jobs but few in the middle.  The chart below shows this job polarization in the European Union, Japan and the United States. In all three countries, employment rates in high-skilled jobs are rising while midlevel jobs with routine tasks are declining.

Change in percentage of job share

So where to from here? As with most “disruption,” when one job disappears another often emerges. Most economists grant that automation and its fallout will create new, different jobs. But most agree that the road ahead will be one of constant change, not all of it for the better.

Featured image: Getty Images

 

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