European Hustle

The Digital Revolution – Labour Market Shifts

Humanity has gone through multiple cycles of societal evolution and decay. But never before has human ingenuity output more innovation and at a faster rate than today. Yet this new suddenly fast paced environment has caught us by surprise and created many divisions along lines such as income or political ideology. We had gone through vast changes before, most notably during the Industrial Revolution. The Industrial Revolution broadly lasted from 1712 to 1914, with the so called “Second Industrial Revolution” lasting from 1870 to 1914, when most extraordinary inventions were made. In 1811, only about 100 years after the beginning of the Industrial Revolution, the Luddite movement formed in England to protest the labour market shifts caused by the Industrial Revolution. The Luddites protested with violence and over the course of five years destroyed many machines, before they were suppressed with military force. More violent protests, such as the 1877 Great Railroad Strike in the US occur over the course of the revolution, due to unfair working conditions and widespread suffering of the workforce. Over time institutions such as labour and trade unions were established and helped to negotiate fairer wages and work conditions, raising living standards and keeping the peace within countries, until the outbreak of the Great War in 1914.
Today we are beginning to see similar divisions forming in society, with some groups of people and indeed political parties, striving to preserve the status quo and halt the spread of globalisation and ever newer technologies and industries that are replacing existing ones.
Being familiar with all this from history, why are we finding it so difficult to cope with the Digital Revolution? The Digital Revolution is happening much faster than the Industrial Revolution. The McKinsey Global Institute estimates that it is happening 10 times faster and at 300 times the scale, so in theory, it could be much less painful, as new generations can adapt to the changes faster too, as they grow up with them. This time around, people have the rights, freedoms and access to new technologies to potentially benefit from the changes. At the same time, innovation may just have gotten so fast that we cannot evolve with it anymore. Innovation may be outpacing our own abilities to comprehend and adapt to an ever-changing environment. Have we reached the limits of what is humanly possible? Are we destined to all be replaced by autonomously thinking machines?

Evidence suggests that this is not the case at all. In fact, the ever-increasing wage gap between different kinds of professions signals to us which jobs will soon become obsolete and which will become increasingly more valuable. Machines are cheap labour; cheaper than cheap human labour. Ergo, a company that automates its processes can afford to invest more money into their remaining employees, on whom they will increasingly rely. The big demand and competition for high level employees also drives increasingly better salaries and working conditions for those fortunate enough to find themselves in that corner of the work force.

A study on The Impact of Industrial Robots on EU Employment and Wages by Bruegel finds that there already is a small measurable displacement effect, meaning that machines replace workers in some instances, particularly workers of middle education and young people. Men tend to also be more affected than women. The study shows us that while some people are losing their jobs due to automatisation, the effect is so far very limited and applies mostly to particular cohorts of workers.

To legislators now falls the incredibly difficult task to ensure that those that currently fall into the low-level employee category receive a chance to move up to the high-level category. If they can manage this, they can effectively lower income inequality within the 99% and most importantly, prevent the Digital Revolution, from becoming akin to the bloody Russian Revolution.

The good news is, we are getting another step closer to people no longer having to do meaningless and monotonous tasks for a living. We are moving towards a more flexible, diverse and rich economy that values one thing above all else: creativity.

The Drum’s Creative, Marketing and Digital Salary Survey 2017 showcased an increase of over 10% in salaries across the industry and 16% increase in job openings since 2016. Over 70% of people surveyed were largely satisfied with their current job roles and trends continue to point towards more automatisation and AI integration.

The bad news is that creativity is in very short supply. In June 2018 CNBC reported that there are more jobs in the US than unemployed people. There simply is a mismatch in skills of the unemployed and what employers are looking for. That is why by the basic laws of supply and demand turns positions that require creative thought into extremely well-paid positions, while all those positions that can be standardised and automated, become expendable and do not receive any wage increase. The key factor here is not that wages for manual jobs are being lowered, but that they are stagnating and that the amount of jobs available for unqualified and low-qualified workers is shrinking at a rapid pace.

In order to survive and indeed thrive in the currently shifting markets, these workers must now adapt and learn new skills to make themselves viable again for the labour market. Unfortunately, that is much easier said than done. The OECD has analysed that because the market changes are so monumental, the amount of effort one worker would have to put into retraining him- or herself to reach a viable level of employability is next to impossible. An adequate metaphor might be someone who was trained to use a typewriter and only now learns to use Microsoft Office after countless hours of training. The competition is so far ahead of them, they could just as well go back to school and relearn all the basic skills that the youth of today picks up naturally. That is essentially, what needs to happen. The education systems across Europe were all designed over 200 years ago, when industrialisation called for workers that were good at following instructions and completing repetitive tasks. As such, 8-12 years of schooling was sufficient to prepare children for the entry into the workforce and they no longer needed further education to succeed in their careers over the course of their adult lives.

Now we are faced with an ever expanding and changing market that requires creative and critical thinking and our schools are not able to produce graduates with those skill sets. In fact, sometimes our schools even inhibit the development of these skills, as they try to train students for outdated professions. Countries like China and most recently Finland, have already adapted and their schools now focus primarily on fostering creativity in their students. Western countries must take those same steps as soon as possible, in order to ensure their next generations can compete with their Eastern counterparts.

Studies have also shown that it is not the amount of time spent learning that determines a child’s educational progress, but the way that it is taught. Teaching methods that provide for greater interactivity, e.g. learning by doing approaches that aim to awaken creative thought in a child appear more effective than a full day of learning, using traditional methods.

Seeing as older generations will continue to have to compete with younger generations that will grow up with new technologies when they first emerge, it is also important to ensure that older generations get the necessary schooling to compete with the youth. This can only be achieved by shortening the actual time spent in class and making school a lifelong experience, rather than a one-time preparation for entry into the labour market.

Dominik Kirchdorfer
Dominik is a European writer and entrepreneur of Austrian and Polish descent. His passion is storytelling and he wants to do everything in his power to give the story of Europe a happy ending. He is currently the President of the EFF - European Future Forum, Editor In-Chief of Euro Babble and EU Adviser to the Austrian Savings Banks Association. Dominik recently published his first SciFi novel, The Intrepid Explorer: First Flight under the nome de plume Nik Kirkham. Twitter: @NikKirkham

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