Human capital and the changing nature of work – Irving Wladawsky-Berger

MIT Sloan Visiting Lecturer Irving Wladawsky-Berger

MIT Sloan Visiting Lecturer Irving Wladawsky-Berger

From The Wall Street Journal 

People have long feared that machines are coming for our jobs. Throughout the Industrial Revolution there were periodic panics about the impact of automation on work, going back to the so-called Luddites, textile workers who in the 1810s smashed the new machines that were threatening their jobs.

Automation anxieties have understandably accelerated in recent years, as our increasingly smart machines are now being applied to activities requiring intelligence and cognitive capabilities that not long ago were viewed as the exclusive domain of humans. But on balance, such fears appear to be unfounded, noted the World Bank in a comprehensive recent report on The Changing Nature of Work. Our problem is not that there won’t be enough work in the future. Our key problem is that, in many countries, the workforce is not prepared for our fast unfolding future.

How is the nature of work changing?

The World Bank report discussed five such changes:

While the idea of robots replacing workers is striking a nerve, the threat to jobs from technology is exaggerated – and history has repeatedly taught this lesson.

“We know that robots are taking over thousands of routine tasks and will eliminate many low-skill jobs in advanced economies and developing countries. At the same time, technology is creating opportunities, paving the way for new and altered jobs, increasing productivity, and improving the delivery of public services.”

Several recent studies agree with the World Bank’s assessment. In a December 2017 report, based on data from 46 countries comprising almost 90 percent of global GDP, McKinsey examined the work that’s likely to be displaced by automation through 2030, as well as the jobs that are likely to be created over the same period.

McKinsey’s overall conclusion was that a growing technology-based economy will create a significant number of new occupations which will more than offset declines in occupations displaced by automation. However, “while there may be enough work to maintain full employment to 2030 under most scenarios, the transitions will be very challenging – matching or even exceeding the scale of shifts out of agriculture and manufacturing we have seen in the past.”

Technology is reshaping the skills needed for work. Workers need to be good at complex problem-solving, teamwork and adaptability.

“The demand for less advanced skills that can be replaced by technology is declining. At the same time, the demand for advanced cognitive skills, sociobehavioral skills, and skill combinations associated with greater adaptability is rising. Already evident in developed countries, this pattern is starting to emerge in some developing countries as well.”

Automation has been most successful when applied to routine tasks, that is, tasks or p

rocesses that follow precise, well understood procedures that can be well described by a set of rules. The occupations most susceptible to automation have included blue-collar physical activities such as manufacturing and other forms of production, as well as white-collar, information-based activities like accounting, record keeping, and many kinds of administrative tasks. As a result, these occupations have experienced the biggest declines in employment opportunities and earnings.

On the other hand, labor markets have been increasingly rewarding jobs requiring social skills, that is, interpersonal skills that facilitate interactions and communications with others. Automating the more routine parts of such job will increase the productivity and quality of workers, by complementing their skills with machines and computers, as well as enabling them to focus on those aspect of the job that most need their attention.

In his 2017 article, The Growing Importance of Social Skills in the Labor Market, Harvard professor David Deming showed that since 1980, jobs requiring high levels of social interaction enjoyed most of the employment growth across the whole wage spectrum, and that employment and wage growth have been particularly strong in jobs that require both high cognitive and high social skills. Social skills reduce coordination costs, allowing workers to specialize and work together more efficiently.

Digital technologies are blurring the boundaries of firms, as evident in the rise of platform marketplaces. The rise of digital platform firms means that technological effects reach more people faster than ever before.

“Using digital technologies, entrepreneurs are creating global platform–based businesses that differ from the traditional production process in which inputs are provided at one end and output delivered at the other. Platform companies often generate value by creating a network effect that connects customers, producers, and providers, while facilitating interactions in a multisided model.”

Read the full post at The Wall Street Journal.

Irving Wladawsky-Berger is a Visiting Lecturer in Information Technology at the MIT Sloan School of Management. 

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