Future of work and shared prosperity hinge on policies, efforts

If Americans are going to build better careers and share prosperity as technological changes occur, the U.S. will have to implement more comprehensive policies, according to an MIT task force’s preliminary report titled The Work of the Future: Shaping Technology and Institutions. The task force, convened in spring 2018, was motivated by the paradox that despite a decade of low unemployment and rising prosperity in the U.S., there is a pessimism surrounding technology and work, which it says is “a reflection of a decades-long disconnect between rising productivity and stagnant incomes for the majority of workers.”

In examining different aspects of the relationship between work and technology, the MIT report notes that technological advances realized from 1940-1980 delivered rising productivity and relatively evenly distributed wage gains to the vast majority of workers. However, that broke down in decades since 1980, when “even though wage growth tracked productivity growth on average, the distribution of gains was so highly skewed that earnings for the typical (median) worker stagnated. Only those workers with four-year college and graduate degrees saw sustained earnings growth.”

That inequality and wage gap is also highlighted in a recent report from McKinsey & Company, The future of work in black America.  The report notes that the racial wealth gap (studies indicate the median white family in U.S. holds more than 10 times the wealth of the median African American family) “threatens to grow as norms, standards, and opportunities in the current U.S. workplace change and exacerbate existing income disparities. One critical disrupter will be the adoption of automation and other digital technologies by companies worldwide.” The report holds that blacks could be disproportionally affected, partially because they are often overrepresented in the support roles most likely to be affected by automation. They also found that many African Americans are geographically removed from future job growth centers and more likely to be concentrated in areas of job decline.

In order to limit the adverse effect of automation on African American workers, two sets of solutions are provided in the McKinsey report. The first set targets geographies — improving economic conditions in regions in which African Americans are currently concentrate or enabling African American worker mobility. The second set targets capabilities — improving skill development and education levels to create additional pathways to better occupations at lower risk for disruption by automation.

A separate report from McKinsey explores not only what the future of work will entail, but the geography of where the work will happen, finding that just 25 urban areas have accounted for a majority of the country’s job growth since the Great Recession and are home to a disproportionate share of high-growth industries and high-wage jobs. The report identifies 54 trailing cities and roughly 2,000 rural counties facing challenges such as older and shrinking workforces, higher unemployment and lower educational attainment. Between those ends of the spectrum are some fast-growing niche cities that include emerging tech hubs and larger mixed middle cities that are home to one quarter of the U.S. population but post only modest employment growth. “The challenge for all these places is to boost economic growth or risk falling behind,” the report states. It also has implications for where and how companies invest, and contains challenges including skill sets of the population and widening income disparities. The story urges CEOs to understand better how technological change and widening geographic disparity could influence a range of investment decisions and to “seek opportunities to take the lead in positioning people and communities for success.”

The MIT report asserts that the failure of the U.S. labor market to deliver broadly shared earnings gains despite rising productivity “was not an inevitable byproduct of current technologies or free markets.” The ability to shape productivity growth and income distribution lies within educational systems, labor market regulation, collective bargaining regimes, financial markets, public investments, and tax and transfer policies, the task force says. To do better over the next several decades will require proactive policies and investments, as well as a concerted public and private action. Whether we are able to realize better living standards and greater economic security “depends on the institutions of governance, societal investment, education, law, and public and private leadership to transform aggregate wealth into greater shared prosperity instead of rising inequality.” To generate such prosperity, bold actions will be required, the authors say.

While the task force continues working on its recommendations, it has set out some preliminary policy areas that should accompany education and training:

• Rebalancing fiscal policies away from subsidizing investment in physical capital to human capital;
• Restoring the role of workers as stakeholders in corporate decision-making;
• Fostering technological and organizational innovation to complement workers; and,
• Reinvigorating America’s leadership position in technology and innovation.

The task force notes that these responses will require key public and private institutions to adapt and modernize to meet the needs of the digital economy. “Change is overdue, not only for education and training institutions, but also in the areas of tax policy, labor representations, and public investment.”