The Changing Nature of Work

This joint opinion article by Catherine Livingstone, President of the Business Council of Australia and Richard Dobbs, a Director of the McKinsey Global Institute, was published in The Australian Financial Review on 4 December 2015, under the title 'Work is changing radically and we must change with it'.

We are living in a time of massive technological disruption, and it is easy to understand why people are concerned about what this could mean for employment.

Increasingly, it is not just routine clerical or repetitive factory tasks that are being automated but more skilled jobs too. Lawyers are already using text-mining techniques to read thousands of documents collected during discovery, for example.

The concern that technology could kill jobs is far from new. In his famous 1930 essay, Economic Possibilities for our Grandchildren, the British economist John Maynard Keynes coined the term "technological unemployment" for situations when innovation destroyed more jobs than it created.

In fact, history shows that technology-driven productivity can be, and has been, compatible with rising employment. In the United States, more than two-thirds of the years since 1929 have seen positive gains in productivity and employment. In France, a 2011 McKinsey study showed that over the previous 15 years, the internet had created 2.4 jobs for every job destroyed.

What is changing, however, and changing very rapidly, is the nature of the employment available.

One-third of new jobs created in the US in the past 25 years barely existed at the beginning of that period. They include computer programmers, computer system analysts, fitness instructors and medical technicians.

Indeed, the very nature of work is changing: today, pilots actively steer aircraft for just three to seven minutes of any flight, with autopilot guiding the rest of the journey. New research by the McKinsey Global Institute suggests that while very few occupations will be fully replaced by machines, up to 45 per cent of work activities could be automated using already-demonstrated technology.

This will require entire business processes to be transformed and jobs performed by people to be redefined, much like the bank teller's job was redefined with the advent of the ATM.

The labour market has started to bifurcate, with menial low-wage jobs on one end and high-skill, high-wage careers on the other. At the same time, companies report wide labour gaps in sectors ranging from health care to technology, and fret about the future availability of workers with the necessary skills.

Employees with science, technology, engineering and maths (STEM) backgrounds will be in particularly short supply. In the past few years there has been a huge increase in the size of the global labour pool but the next era will be defined by a global battle for talent as companies compete to hire people with the crucial - and rare - skills that they need.

Amid these enormous transformations, the challenge for government and business everywhere is clear: we should be preparing ourselves for the jobs of the future, and preparing in a way that will offer people rewarding, continuous work, as industries change and adapt to external forces.

We can already see that many of the future jobs will likely be in idea-intensive businesses such as media, pharmaceuticals, IT and finance. Manufacturing, where the traditional model has been capital intensive, is now becoming ideas-intensive, as we see in advanced technologies, including 3D printing. Idea-intensive sectors accounted for 17 per cent of the profits generated by Western companies in 2000, but that share is up to 31 per cent today.

Such shifts have important repercussions for education systems. Foundational skills of computational thinking, design thinking and problem solving can be developed through a combination of humanities and STEM subjects. Where Australia has a gap at the moment in primary and pre-primary education is in the STEM side of the curriculum.

Within the STEM disciplines, especially the later years of schooling and university, there will need to be a new focus on workplace needs. In an era of big data, for example, we all need to make decisions on the basis of large sets of incomplete data with a lot of variance. So for future managers, a strong grasp of statistics will be important, more so even than a detailed knowledge of calculus.

The changing workplace may prompt a rethink of workplace relations laws and social security regimes. There is a likelihood that a growing number of the jobs of the future will be ones where people offer their talent on a freelance basis rather than working full-time for a single company.

We can already see this development with the mushrooming of online talent platforms, including TaskRabbit and Upwork, which have created online marketplaces connecting some 4 million businesses and more than 9 million freelancers in 180 countries.

For governments, perhaps the most complex question to address will be that of the likely growing inequality, between the technologically savvy, highly paid workers sought by companies and those displaced by the disruption that digital innovation will inevitably bring.

There are no easy answers, and governments may have to find ways to mitigate the impact of some job losses. But that is certainly preferable to the impossible mission of trying to stand in the way of the technological change.