THE FUTURE OF SKILLS EMPLOYMENT IN 2030
FUTURESKILLS.PEARSON.COM
Hasan Bakhshi Jonathan M. Downing Michael A. Osborne Philippe Schneider
Research partners Future of Skills Authors
Philippe Schneider, Hasan Bakhshi and Harry Armstrong Future of Skills Foreword
Given recent debates about automation and the future of work you’d be forgiven for thinking the job of policymakers was easy: governments should simply upskill workers to move from routine-intensive occupations in manufacturing and services that will be automated in the future to those that are not. However, the picture is considerably more complex and uncertain: not least because automation is just one of a number of technology trends - such as biotechnology, nanotechnology and the Internet of Things - that will have profound implications for the composition of the workforce. And technology change in turn is just one of multiple global trends that will impact on employment. Consider the ageing population, climate change, urbanisation and rising income inequality - each of which will have important sectoral implications.
Future of Skills
As part of an ambitious study predicting the skills mix required of the workforce in 2030, in late 2016 we held two foresight exercises in the UK and the USA. We brought together a group of leading domain experts, and asked them to reflect on the implications of global structural change in all its forms for the future labour market. Their task was to provide the human intelligence needed to train a machine learning algorithm that predicts the future demand for individual occupations. To enable a discussion of the workforce implications of these trends and their interactions, and to ground it in hard evidence, we produced a global trends slide deck, which we are publishing today. The positive reaction we received made us realise that we had produced a resource that could be of independent value in informing strategic labour market planning, whether that is in policy, education or business. We’d very much welcome your feedback.
Hasan Bakhshi, Executive Director, Creative Economy and Data Analytics, Nesta Future of Skills Foreword
Predicting the future of work is one of the most exciting - and difficult - areas of research within education today. The implications of changing demand for particular skills on our education systems are enormous. This is why I was delighted to be a part of the foresight exercise to determine the changing demand for skills.
The discussions were rich and sophisticated, in large part because of the quality of the thought leaders convened. The discussion was made richer still because we were provided with what you now have: a rigorous catalogue of the trends that will shape the future of work.
Our aim in sharing this set of insights is twofold: one, to make visible as much of the research process as possible, and two, to provide you with insights that you can apply, build on, and, of course, critique. Future of Skills
I hope you will share my excitement for the eventual results of this research. Given that learners who are starting formal education now will be graduating into jobs in 2030, the implications of this work for learning are far reaching--meaning action is needed not in some distant future, but today.
That’s why we think the future of jobs is one of the most important conversations in education.
Amar Kumar, SVP Efficacy & Research, Pearson Future of Skills Technological change Globalisation Demographic change Environmental sustainability Urbanisation Increasing inequality Political uncertainty Future of Skills
Technological change Automation: force for job Technological change destruction or creation?
Technological progress and job creation
Adoption and diffusion
Specific technology trends
Globalisation
Demographic change
Environmental sustainability
Urbanisation
Increasing inequality
Political uncertainty
References Future of Skills
Technological change Automation: force for job destruction or creation? Automation: force for job destruction or creation? Technological progress Historically, over optimism about This newspaper headline is from the New York and job creation potential of new technology has sat Times in 1928 Adoption and diffusion alongside fears about impacts on jobs Specific technology trends • Perennial fears about impact of technology, Globalisation particularly automation, on employment Demographic change (especially in times of economic stagnation) (Mokyr et al., 2015). Environmental sustainability • At the same time, predictions about future pace of technological change, especially Urbanisation artificial intelligence, repeatedly over-optimistic Increasing inequality (Armstrong et al, 2014).
Political uncertainty • Jobs and skills composition of workforce have changed only gradually over time (Handel, 2012). References • Most dramatic historical shift was from agriculture to industry rather than ICT-driven transformation.
9 Future of Skills
Technological change Automation: force for job destruction or creation? Automation: force for job destruction or creation? Technological progress Jobs are a complex bundle of tasks, and job creation How to add value Example many of which are complementary Adoption and diffusion with technology Step up You may be senior A brand manager Specific technology trends management material orchestrates all Going forward – you’re better at activities required Globalisation considering the big to position brand picture than any successfully. • Estimates of impact of future automation vary. computer is. Demographic change Frey and Osborne (2013) estimate 47 per cent Step You bring strengths to A creative can intuit Environmental of US employment at risk. aside the table that aren’t which concept sustainability about purely rational, will resonate with • In contrast, using task-based analysis, share codifiable cognition. sophisticated Urbanisation of automatable jobs estimated at 9 per cent customers.
(Arntz et al., 2016). Step in You understand how A pricing expert Increasing inequality software makes routine relies on computers • For other jobs, specific tasks may be automatable decisions, so you to optimise pricing Political uncertainty but separating these from other tasks may also monitor and modify its on a daily basis function and outputs. and intervenes as References create coordination costs. necessary for special cases or experiments. • For example, lawyers carry out document reviews which could be automated in Step You specialise in A wrap advertising narrowly something for which specialist has deep some contexts, such as discovery but they no computer program expertise in using also perform factual investigation, client has yet been developed vehicles such as mobile (although theoretically billboards. advice, legal writing and negotiation which it could be). are harder to automate. Step You build the next A digital innovator forward Technology will also be complementary with generation or seizes on new way to application of smart use data to optimise some types of labour and amplify comparative machines – perhaps for some key decision, advantage of human ability. For example, a vendor of them. such as cable video ad buys. possible roles in marketing.
Source – Kirkby and Davenport (2016)
10 Future of Skills
Technological change Automation: force for job destruction or creation? Automation: force for job destruction or creation? Technological progress Organisational and job design affects Job and organisational design important too: and job creation whether technology complements or Even seemingly routine jobs can be designed in Adoption and diffusion replaces labour ways that permit and reward creativity, judgment Specific technology trends and commonsense (Hendel and Spiegel, 2014). Routineness and susceptibility to automation Globalisation are not inevitable features of occupations. Demographic change
Environmental Share of jobs with high performance work sustainability practices (HPWP) and mean HPWP score
Urbanisation 45 3.1
Increasing inequality 40 3.0
35 Political uncertainty 2.9
30 References 2.8
25 2.7 20
2.6 15
2.5 10
5 2.4
0 2.3
d A K R R N T S A T E IT IRL ISR FIN GRC TUR SV KO FRA CHL SV POL ESP DEU JPN ES AU NOR CZE CAN US NZL NLD AU BEL SW DNK
GBR-NI Average GBR-ENG Percentage of jobs with high HPWP (left) Mean HPWP index (right) Source – OECD (2016)
11 Future of Skills
Technological change Automation: force for job destruction or creation? Automation: force for job destruction or creation? Technological progress High performance work practices include: In the UK, task discretion fell sharply in 1990s and job creation and remained flat since 2001 (Inanc et al., 2013). Adoption and diffusion • Autonomy • Mentoring
Specific technology trends • Task discretion • Job rotation
Globalisation • Collaboration • Application of new learning Demographic change
Environmental Task discretion in UK workforce, 1991-2012 sustainability 90 Urbanisation
Increasing inequality 85
Political uncertainty 80 References
75 per cent of jobs 70
65
60 1992 1997 2001 2006 2012
All Men Women Source – Inanc et al. (2013)
12 Future of Skills
Technological change Technological progress and job creation Automation: force for job destruction or creation? Technological progress Technological progress gives rise to and job creation entirely new occupations and sectors Adoption and diffusion
Specific technology trends US employment growth faster in occupations with more novel tasks Globalisation Evidence from the US: In 1990, 8.2 per cent of US Demographic change workers employed in occupations not catalogued in 1977. Environmental sustainability More recently, this has decreased: (See chart on ‘Employment growth by decade Urbanisation plotted against the share of new job titles’) Increasing inequality • In 2000, only 4.4 per cent of workers in jobs not Political uncertainty catalogued in 1990.
References • In 2007, <0.5 per cent of workers in jobs not catalogued in 2000 (Berger and Frey, 2016).
In parallel, stark reversal in demand for high skill occupations in 2000s, notwithstanding growth in the supply of high education workers (Beaudry, Green and Sand, 2016).
13 Future of Skills
Technological change Employment growth by decade plotted
Automation: force for job against the share of new job titles destruction or creation? 200 Technological progress and job creation 150 Adoption and diffusion
Specific technology trends 100
Globalisation 50
Demographic change 0
Environmental -50 sustainability
-100 Urbanisation
Increasing inequality -150
Political uncertainty Percentage change in employment growth over next ten years -200 0 20 40 60 80 References Share of novel tasks and jobs within occupational group at beginning of decade
1980–1990 1990–2000 2000–2007
Source – Acemoglu and Restrepo (2016). Methodology based on Lin (2011) which uses data on new occupational titles from revisions to the census occupation classification system.
14 Future of Skills
Technological change Technological progress and job creation
Automation: force for job destruction or creation? Technological progress Even in cases where technological 4 Moretti (2010) estimates that each job created and job creation change destroys jobs, it triggers by US high-tech sector created five additional Adoption and diffusion offsetting market adjustments jobs through multiplier effects - higher than Specific technology trends other industries. For European evidence, see Lowers production and distribution costs and 1 Goos et al., (2015) and Gregory et al., (2016). Globalisation therefore prices for some goods and services, (See chart on ‘Number of additional nontradable stimulating aggregate demand. Demographic change jobs created by sector (US)’) (See chart on ‘Labour time needed to buy Environmental selected US Products, 1908-2014’) sustainability 2 Surplus income can be spent on healthcare, Urbanisation education and arts - ‘cost disease’ sectors Increasing inequality that are resistant to automation and have consequently experienced sharply rising costs Political uncertainty but demand for which is typically raised by References growth in purchasing power. (See chart on ‘Growth of real health spending and GDP per capita (2000-2015)’ )
3 By helping to grow market, introduction of ATMs in 1970s actually boosted employment of human tellers in US even though number of tellers per branch fell (Bessen, 2015).
15 Future of Skills
Technological change Labour time needed to buy selected
Automation: force for job US Products, 1908-2014 destruction or creation?
Technological progress and job creation Eggs 80 7 5 6 1 dozen Min Adoption and diffusion
Specific technology trends Milk 9 7 6 1/2 gal 39 Min Globalisation Woman’s Demographic change 63 Haircut 27 137 Min Environmental Product Unit Unit NY to LA 71 sustainability Product 366 Flight 16 10 Hrs Urbanisation Dish 140 463 69 28 20 Hrs Increasing inequality washer
Political uncertainty 1,638 Car 4,696 1,365 1,388 Hrs References
1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2014
Source – Blackrock Investment Institute (2014). Calculations are based on US prices divided by average manufacturing wages (excl. taxes and benefits).
16 Future of Skills
Technological change Growth of real health spending and GDP per
Automation: force for job capita (2000-2015) destruction or creation?
Technological progress 6 and job creation Slovak Republic Latvia Netherlands Poland Adoption and diffusion 5 Estonia United Kingdom Specific technology trends Ireland 4 Switzerland Globalisation Norway Czech Republic 3 Germany Demographic change Denmark Spain Luxembourg Hungary 2 Austria Environmental Solvenia sustainability Italy France Iceland 1 Greece Urbanisation 0 Increasing inequality Portugal -1 Political uncertainty Growth in real health spending per capiita (per cent) 0 1 2 3 4 5 6
References Growth in real GDP per captia (per cent)
Source – OECD
17 Future of Skills
Technological change Number of additional nontradable jobs
Automation: force for job created by sector (US) destruction or creation? 6 Technological progress and job creation
Adoption and diffusion 5 Specific technology trends 4.9 Globalisation 4 Demographic change
Environmental sustainability 3
Urbanisation 2.5 2 Increasing inequality 1.9 Political uncertainty 1.6 1 References 1 0.7
0
Tradable Tradable unskilledsector e.g cars Tradable Sector goods sector skilled sector Tradable durable High -tech sector Tradable nondurable goods sector e.g food
Source – Moretti (2010) Note: Skilled sector represents workers with college education or greater.
18 Future of Skills
Technological change Adoption and diffusion Automation: force for job destruction or creation? Technological progress Are adoption lags decreasing? and job creation
Adoption and diffusion • Evidence of accelerating consumer adoption.
Specific technology trends However, PCs, Internet, smartphones and music streaming services based on similar underlying Globalisation technologies and infrastructure leading to lower Demographic change learning and switching costs. (See chart on ‘US technology adoption rates Environmental (1900-2014)’) sustainability • Slower productivity growth suggests business Urbanisation adoption not as fast. OECD (2015) argues that Increasing inequality problem lies in ‘diffusion machine’ not slowing of innovation by most advanced firms. Political uncertainty
References
19 Future of Skills US Technology RatAdoption es, 1900-2014
Technological change US technology adoption rates (1900-2014)
Automation: force for job 100% destruction or creation?
Technological progress and job creation
Adoption and diffusion 75% Specific technology trends
Globalisation
Demographic change Adoption rate 50%
Environmental sustainability Adoption rate
Urbanisation 25%
Increasing inequality
Political uncertainty 0% References
1900 1920 1940 1960 1980 2000 2014
Telephone Electricity Autos Radios Color TVs VCRs
Computers Mobile Phones Internet Access Smart phones
Source – Blackrock Investment Institute (2014) (Adoption rates are based on household ownership except for cell phone and smart phones, which are based on ownership per capita.)
20 Future of Skills
Technological change Adoption and diffusion Automation: force for job destruction or creation? Technological progress Any number of microeconomic reasons Adoption is also affected by wages which are and job creation why new technologies take time to diffuse endogenous e.g., automation might lead to falling Adoption and diffusion wages making further substitution of capital 1 Behavioural reasons: potential losses tend to Specific technology trends for labour less attractive. loom larger than potential gains. Value of new Globalisation technologies lies in scope for long- rather than Demographic change short-term improvement.
Environmental 2 Organisational reasons: including need for sustainability complementary investments in management structures, incentive schemes and skills. Urbanisation Weaknesses in management practices may Increasing inequality further prevent the trickle-down of innovation (Haldane, 2017). Political uncertainty 3 Labour market institutional reasons: Unions may References be sceptical about new technologies, fearing headcount cuts. (See Chart on ‘Trade union desnsity’) But reality is more complex. It has been suggested that countries with more regulated labour markets typically see less union resistance, in contrast to countries like UK and US with higher labour market flexibility (Doucouliagos and Laroche, 2012).
21 Future of Skills
Technological change Trade union density by industry in UK (2015)
Automation: force for job destruction or creation? EdEducationucation
Technological progress PublicPublic administration and defence; compulcompulssaaryry socialEducation securitsecurityy and job creation Public administrElectricityation and,, gas,gas, defence; ststeam and compuls air conditioningary social security supply
Adoption and diffusion ElectricityHuman, gas, st eamhealth and and air social conditioning work activities supply
Specific technology trends Human health andTr socialansport w orkand activities ststoorrage WaWateterr supplysupply,, sesewweerraagege,, wawastste management andTr reremediationansportmediation and activities storage
Globalisation Water supply, sewerage, waste management and remediationAll emploempl activitiesoyyees Demographic change ManufacturinManufacturingAll employeesg Arts, entererttaainmentinment Manufacturingand rerecrcreation
Environmental Arts,FiFinancialnancial entert ainmentand insur andance recr activitieseation sustainability Financial and insuranceConstruction activities Urbanisation WholesWholesalalee,, rretail trade; repair of motor vehicles andConstruction momottoorrccyycclesles Wholesale, retail trade; repair of motor vehiclesOther andservice mot activitiesorcycles Increasing inequality OtherMining service and quarryinquarrying activitiesg Political uncertainty MiningReal estes andtaatte quarrying activities AdministAdministrraationtion and supportReal service estate activities References AdministrInformationInformationation andand communicationsupport service activities
Professional,Information scientific and communication and technical activitiesactivities
PrAofessional,ccommodation scientific and and food technical service activities
AccommodationAgricultu and refood, foforre estryservicestry and activities fishinfishingg
Agriculture, forestry and fishing 010203040650 0
010203040650 0
Source – BIS (2015)
22 Future of Skills
Technological change Adoption and diffusion Automation: force for job destruction or creation? Technological progress And there are macroeconomic and job creation barriers to diffusion too Adoption and diffusion
Specific technology trends 1 Strong societal preferences: concerns about 3 Vested interests can block innovation: UK rail safety and growing power of Monsanto in 1990s companies used safety regulation - so-called Globalisation led to bans on cultivating GM crops in almost 60 Red Flag Acts in the 1860-1890s - to discourage Demographic change states, against advice of scientists. Autonomous people from using cars. Sharing economy vehicles face challenge of how to distribute liability platforms like Uber banned by states worried Environmental in case of accident (e.g. algorithmic morality). about impact on local firms(See figure on ‘Uber sustainability bans worldwide’). Public may also put special weight on ideals Urbanisation and values of certain occupations. Research finds that technologies diffuse more Increasing inequality (See pages 76, 84) slowly in countries where legislative authorities For instance, lawyering is deeply rooted in, Political uncertainty have more flexibility; but also in nondemocratic and essential for, rule of law; nursing and caring regimes and ones with a weak judiciary (Comin References entails respect for dignity and autonomy of and Hobijn, 2009). patient - features which might be lost with greater use of technology.
2 Fast growth can lead society to value safety over further growth. New technologies, while raising growth, may also introduce small chance of catastrophe e.g. environmental disasters, bioengineered viruses, killer robots. Countries may value more days of life to enjoy their high consumption over prospect of still higher future consumption (Jones, 2016)
23 Future of Skills
Technological change Uber bans worldwide
Automation: force for job destruction or creation?
Technological progress and job creation
Adoption and diffusion
Specific technology trends
Globalisation
Demographic change
Environmental map sustainability
Urbanisation
Increasing inequality
Political uncertainty
References
Source – Washington Post, TIME, Business Insider, NYTimes, Huffington Post, Reuters, Wall Street Journal, CNN and local news reports
24 Future of Skills
Technological change Specific technology trends – Digital technologies Automation: force for job destruction or creation?
Technological progress Wave of new Information Technologies and job creation (ITs) since late 1960s to present Adoption and diffusion ITs and digital technologies recognised as Specific technology trends General Purpose Technology (Bresnahan Digital technologies and Trajtenberg, 1996): Sharing economy Internet of things • Continual technological progress. Hardware and materials Biotechnology • Pervasive use in wide range of sectors.
Globalisation • Complementary innovations and spillovers. Demographic change However, productivity may fall in short run Environmental as economy adjusts. sustainability Media, retail, transport and hotels well down Urbanisation the road to full digitisation. Healthcare, financial services and capital goods relative laggards Increasing inequality (Morgan Stanley, 2017). Political uncertainty
References
25 Future of Skills
Technological change 1960s ‘70s ‘80s ‘90s 2000s ‘10s
Automation: force for job Mainframes and databases destruction or creation? Desktop and personal computing Technological progress and job creation Business software
Adoption and diffusion Internet and e-commerce
Specific technology Mobile broadband trends Digital technologies Social media Sharing economy Internet of things Big data Hardware and materials Biotechnology Assets/ technologies Globalisation • Modern • Desktop and PCs • Enterprise software • Internet • GPS • Social media • Smart devices and programming • Basic office technologies • Wi-Fi, 2G/3G • Smartphones and sensors Demographic change languages software • Personal computing • Laptops apps • Predictive • Algorithmic • Games and visual • Mobile phones algorithms, machine Environmental advancement graphics learning sustainability Business impact • Business • Document • Efficiency and • B2B and B2C • Remote work and • Digital advertising • Predictive analytics, Urbanisation calculations processing automated e-commerce 24/7 connectivity and marketing natural language, analyses • File storage business processes • Email, chat big data, Internet of Increasing inequality • Database Things management Political uncertainty systems People impact References • Limited • Individuals with • Creative • Email, chatting, and • Connected anytime, • Multiple devices per • Data generation, computers in larger destruction of jobs VolP anywhere person content creation firms • E-commerce • Individual as • Digital devices • Gaming and • Remote work via content creators everywhere, document VPBs consuming hours processing each day
Source – McKinsey Global Institute (2015)
26 Future of Skills
Technological change Specific technology trends – Digital technologies Automation: force for job destruction or creation?
Technological progress Productivity impacts: and job creation Solow paradox renewed Adoption and diffusion • Increase in US labour productivity growth in mid- Specific technology trends 1990s largely reflected diffusion of ITs, resolving Digital technologies Solow Paradox: ‘you can see the computer age Sharing economy everywhere except in the productivity statistics’. Internet of things Hardware and materials Modest increase in IT diffusion clouded by weak Biotechnology non-IT productivity in UK. (See chart on ‘Trend in Globalisation Labour productivity growth in UK’)
Demographic change • However, even in the US, productivity surge ended in 2000s prior to global financial crisis, Environmental especially in IT-producing and IT-using sectors sustainability (Fernald, 2014).
Urbanisation • Moreover, Acemoglu et al., (2014) shows for Increasing inequality US manufacturing that where there is evidence of more IT-intensive industries having faster Political uncertainty labour productivity growth, it is associated with References falling output and even more rapidly falling employment. With employment declines in IT- intensive industries leveling off after 2000, so productivity growth returns to its earlier pace.
27 Future of Skills
Technological change Trend in labour productivity growth in the UK
Automation: force for job (GDP per hour worked; average annual rate) destruction or creation? 7 Technological progress and job creation 6 Adoption and diffusion 5 Specific technology trends 4 Digital technologies Sharing economy 3 Internet of things Hardware and materials 2 Biotechnology 1 Globalisation 0 Demographic change -1 Environmental sustainability -2
Urbanisation -3
1975 Increasing inequality 1970 1980 1985 1990 1995 2000 2005 2010 2015
Political uncertainty Annual growth rate Trend growth References Source – OECD data (2016) with simple trend growth estimate
28 Future of Skills
Technological change Specific technology trends – Digital technologies Automation: force for job destruction or creation?
Technological progress Digital debates and controversies and job creation
Adoption and diffusion Pros Cons • Mis-measured productivity: consumers have • Consumer surplus from IT falls short of the Specific technology trends free access to Google, Wikipedia and Facebook. ~ $2.9 trillion ‘missing output’ resulting from Digital technologies productivity growth. Productivity associated with • Digital technologies enable experimentation Sharing economy innovations has always been mis-measured. Internet of things and more rapid knowledge creation. Cost of Hardware and materials Alternative measures e.g. business startup rates sequencing human genome fallen sharply due Biotechnology also point to declining dynamism. to techniques such as polymerase chain reaction. Globalisation • With expanding knowledge base, innovators • Tech revolutions always proceed in fits and compelled to devote more time to keeping pace Demographic change starts. Models such as S-curve, which implies with, rather than pushing, technology frontier. technology bursts onto scene, gives what it has Environmental To sustain constant growth in GDP per person, sustainability and then matures, simplistic. US productivity one estimate for US suggests that it must double during electrification experienced acceleration, amount of research effort searching for new Urbanisation then slowdown (1924-32), then second boom ideas every 13 years to offset increased difficulty (1932-1940). (See chart on ‘Labour productivity Increasing inequality of finding them (Bloom et al., 2016). growth during the electrification era (1890-1940) Political uncertainty and the IT era (1970-2012) in the US (1915=100 • Comparisons with electrification should be References and 1995=100)’) treated with caution given data limitations and fact that productivity boom may have been driven by pressures to innovate during WWII and Cold War.
29 Future of Skills
Technological change LabourLabour productivityproductivity growth growth during during the electrificationthe era (1890-1940) and the IT era (1970-2012) in the United States (1915 = 100 and 1995 = 100) Automation: force for job electrification era (1890-1940) and the IT era destruction or creation? (1970-2012) in the US (1915=100 and 1995=100)
Technological progress and job creation
1975 Adoption and diffusion 1970 1980 1985 1990 1995 2000 2005 2010 2015 2020 180 Specific technology trends Digital technologies 160 Sharing economy Internet of things Hardware and materials 140 Biotechnology
Globalisation 120 Demographic change
Environmental 100 sustainability
80 Urbanisation
Increasing inequality 60
Political uncertainty 40 References
1890 1895 1900 1905 1910 1915 1920 1925 1930 1935 1940
Electrification IT
Source – Kendrick (1961) Byrne, Oliner, and Sichel (2013) Source: Kendrick (1961); Byrne, Oliner, and Sichel (2013)
30 Future of Skills
Technological change Specific technology trends – Sharing economy Automation: force for job destruction or creation?
Technological progress The rise of the sharing economy? Activity likely to due to and job creation • Growth of micro-businesses and contract work. Adoption and diffusion 0.5 per cent of workers sell services through online platform (Katz and Krueger, 2016). Specific technology • Changing attitudes to asset ownership. trends Between 2012 and 2015, cumulative percentage Digital technologies of adults who had ever earned income through • Greater role for platforms in buffering income Sharing economy an online platform increased 47-fold (Farrell and and spending shocks. Internet of things Hardware and materials Greig, 2016). • Revival of community-based exchange. Biotechnology Market impacts Globalisation • Platforms like Airbnb highly differentiated from Demographic change established providers - cannibalisation limited to Environmental particular market segments: net effect on supply sustainability positive (Zervas et al., 2016).
Urbanisation • Services like Uber and Lyft less differentiated from traditional ones, though may increase Increasing inequality ease of access: net effect on supply less clear (Sundararajan, 2016). Political uncertainty
References • But even in cases of lower supply, secondary occupations e.g. car mechanics, may benefit as assets used more intensively require ongoing repair and maintenance.
• Sharing assets, such as cars, may leave consumers with more money to spend on things they enjoy (e.g. experiences).
31 Future of Skills
Technological change Factors affecting sharing of goods and
Automation: force for job services destruction or creation? Price The higher the price of a good/service, the more likely it is to be rented out.
Technological progress Frequency of usage Goods that are used frequently by owners are less conducive to being shared. Frequently rented goods can and job creation also entail significant transaction costs (for example costs of delivery). Adoption and diffusion Income Rental markets may also emerge in areas where the latent rental value of the asset represents a higher percentage of its owner’s income. Specific technology trends Depreciation rate The more rapidly an asset depreciates, the more likely it will be rented as owners seek to maximise its value before it ‘perishes’. Digital technologies Sharing economy Predictability of usage Goods for which usage can be planned in advance are typically easier to rent. Internet of things Hardware and materials Where a product has personal significance or the act of ownership provides value in itself, it may be less Biotechnology Ownership value well suited to peer-to-peer rental.
Globalisation Customisation Goods that are idiosyncratic or full value of which is realised through repeated use are more likely to remain owned than rented. Demographic change
Environmental sustainability
Urbanisation
Increasing inequality
Political uncertainty
References
32 Future of Skills
Technological change Specific technology trends – Sharing economy Automation: force for job destruction or creation?
Technological progress The risk of regulatory backlash • Monopoly power because of platform network and job creation effects e.g. growing number of initiatives such Employment terms e.g. in US, Californian court has Adoption and diffusion as Platform Cooperativism movement seeking given green light to Uber drivers to sue to establish Specific technology to reclaim power of platforms over decision- legal status as employees (and so entitled to be trends making and personal data for users. Digital technologies reimbursed for expenses). Sharing economy • As many regulations were designed with Internet of things • Service quality e.g. the Uber driver with poor Hardware and materials traditional business in mind, open question qualifications or rowdy Airbnb guest disrupting Biotechnology whether policymakers can resolve these issues neighbours (cities like Berlin, New York and Paris without stifling continued development of sharing Globalisation have passed laws banning short-term rentals for economy. Other issues e.g. platform workers who this reason). Demographic change cannot access credit because they do not earn a steady income also require consideration. Environmental sustainability Different regulatory visions for sharing Urbanisation economy
Increasing inequality Regulation via Third Party Self-regulatory Organisation Government Direct Regulation online platform (SRO)
Political uncertainty Definition Regulation via sharing platforms’ Regulation rests with privately-run SROs Government sets explicit rules for sharing References technology reducing information with no or limited govt. involvement economy asymmetries
Example Online feedback; digitally verified Medical Association, Bar Association (law) Government’s accreditation for online government IDs of providers courses; health and safety standards
Enforcement Reputational damage SRO has audit and penalising powers Government fines and sanctions, if rules are breached
Source – Morgan Stanley (2016)
33 Future of Skills
Technological change Specific technology trends – Internet of Things Automation: force for job destruction or creation?
Technological progress Increasing computing power and smaller Pace of adoption will depend on and job creation chips have allowed for advances in • Cheap and energy-efficient chips. Adoption and diffusion Internet of Things Specific technology • Availability of good and unique datasets. trends New sensors, big data and cloud computing improve: Digital technologies • Development of common standards for • Process efficiencies Sharing economy interoperability and solutions to privacy Internet of things Hardware and materials • Understanding of customer behaviour and cybersecurity concerns. Biotechnology • Speed of decision-making Globalisation • Consistency of delivery Demographic change • Transparency of costs Environmental sustainability Impacts on
Urbanisation • Industries with complex supply chains, short lead times and uncertain preferences, such as Increasing inequality manufacturing, oil and gas, consumer packaged and fashion-led products. Political uncertainty
References • Business models: firms can monitor use of their products and provide customised pay-as- you-go services.
• Service-oriented occupations, such as customer advisors, account managers, marketing specialists, researchers and sales/business experts.
34 Future of Skills Unit-wise, the potential is significant Computing Growth Drivers over Time, 1960-2030
Technological change Computing growth drivers over time (1960-
Automation: force for job 2030) destruction or creation? 1,000,000
Technological progress and job creation Internet Adoption and diffusion of things
Specific technology Mobile trends 10,000 Internet Digital technologies Sharing economy Desktop Internet Internet of things Devices/Users Tens of Hardware and materials (MM in Log Scale) billions Billions of units Biotechnology PC of units 1 Billion+ Globalisation 100 Minicomputer units/users 100mm+
Demographic change Devices/Users (MM in Log Scale) units Mainframe 10mm+ Environmental units sustainability 1mm+ 1 units Urbanisation
1960 1970 1980 1990 2000 2010 2020 2030 Increasing inequality Source – Morgan Stanley (2014) Political uncertainty Source: Company data, Morgan Stanley Research References
35 Future of Skills
Technological change Specific technology trends – Hardware and Automation: force for job materials destruction or creation?
Technological progress Commercial 3D printing could Impacts and job creation overhaul design and production McKinsey Global Institute (2013) estimates that Adoption and diffusion in broad range of sectors 3D printing could generate economic impact of Specific technology $230 billion to $550 billion by 2025 based on 1 Large manufacturing companies are lead users trends shorter production cycles, reduced waste and Digital technologies of technologies like 3D printing to support value of customisation. Sharing economy distributed manufacturing e.g. GE reportedly uses Internet of things Hardware and materials 300 3D printers to produce 25,000 fuel nozzles Biotechnology p.a. for its LEAP jet engine. The assembly combines Globalisation 18 different parts into one piece that is less prone to ice accumulation and joint and welding Demographic change weakness and requires limited assembly labour.
Environmental 2 Manufacturing, transport and medical sustainability industries present greatest opportunities for 3D Urbanisation printing: activities that rely on highly complex, low-volume, highly customisable parts e.g. Increasing inequality prototyping, automotive tooling, aerospace and medical devices. Political uncertainty
References 3 However, even in next decade, traditional manufacturing techniques likely to retain an advantage over 3D printing for most high- volume products due to differences in material costs and build speeds.
36 Future of Skills
Technological change Specific technology trends – Hardware and Automation: force for job materials destruction or creation?
Technological progress The rise of the robots Going forward and job creation 1 Use of collaborative robots (‘cobots’) that work Adoption and diffusion Estimated that 120,000 industrial robots sold in 2013, with China overtaking US. alongside humans small but growing fast (60 per Specific technology trends cent growth in annual sales in 2014 vs. 27 per Adoption lags in SMEs Digital technologies cent for traditional robots). Sharing economy They do not have production volumes to Internet of things justify use. Only 36 per cent of medium-sized 2 Use of mobile robots (‘mobots’) to perform Hardware and materials European companies use industrial robots, tasks like inventory management (Amazon and Biotechnology compared with 74 per cent of companies Kiva Systems). However, Google sold Boston Globalisation with >1,000 employees (OECD, 2016). Dynamics due to weak near-term earnings visibility. Demographic change Adoption heavily concentrated in car industry
3 Development of machine learning (ML) Environmental • Seven times greater than in other sectors. sustainability techniques that can generalise from learned • Increasing customisation has led some concepts to solve related problems or use Urbanisation manufacturers to return to human labour. them to learn more complex concepts e.g. commonsense reasoning based on sparse Increasing inequality Evidence that industrial robots increase data (Davis and Marcus, 2015; DARPA, 2016 on labour productivity and wages Political uncertainty current limits of ML); debates around how to Though diminishing marginal returns to use. achieve sufficient computing power to scale References Little effect of robots on overall labour share ML for broad use. or total hours worked, though some reduction in low-skilled employment (Michaels and Graetz, 2015). Stronger effects tentatively found by Acemoglu and Restrepo (2016) for US local labour markets: each additional robot reduces employment by about seven workers with limited evidence of offsetting employment gains in other industries.
37 Future of Skills Global sales of industrial robots, 1983-2013
Technological change Global sales of industrial robots (1993-2013)
Automation: force for job 140,000 destruction or creation?
Technological progress and job creation 120,000
Adoption and diffusion
Specific technology 100,000 trends Digital technologies Sharing economy 80,000 Internet of things Hardware and materials Biotechnology 60,000
Globalisation 40,000 Demographic change
Environmental 20,000 sustainability
Urbanisation 0 Increasing inequality 2011 1993 1995 1997 1999 2001 2003 2005 2007 2009 2013 Political uncertainty
References EU OECD North America China Japan Korea
Source – IFR Statistical Department at World Robotics, quoted in OECD (2016)
38 Future of Skills
Technological change Specific technology trends – Hardware and Automation: force for job materials destruction or creation?
Technological progress New materials such as graphene have and job creation many potential applications but long lead Factors slowing adoption Adoption and diffusion times • Current limited production volume. Specific technology for commercialisation trends • High production, storage and transport costs. Digital technologies Nanotechnology research has found that at Sharing economy dimensions of 1 to 100 nanometers, physical, • Need for complementary processing techniques so Internet of things Hardware and materials chemical and biological properties of materials can that graphene can be integrated into final products. Biotechnology differ in profound and valuable ways e.g. graphene • Uncertainty in health and safety issues (e.g. (developed in Manchester): Globalisation research suggests that nanomaterials exhibit
Demographic change • One-sixth weight of steel per unit of volume widely varying levels of toxicity). but more than 100 times as strong. Environmental sustainability • Can be compressed without fracturing.
Urbanisation • 35 per cent less electrical resistance than copper.
Increasing inequality • Ten times conductivity of copper and aluminum.
Going forward Political uncertainty Deloitte predicts graphene sales unlikely to References pass $100 million by end of decade. On average, commercialisation of advanced materials can take 20 years (e.g. development of polyethylene applications beyond insulation and radar housing).
39 Future of Skills
Technological change Graphene applications classified by
Automation: force for job technology readiness level destruction or creation?
Applied research Technological progress Research Demonstration Commercial and job creation and development
Adoption and diffusion Water membranes Electron Specific technology OLED/LED lighting microscopy trends Semiconductor Graphene Photodetectors Digital technologies growth Films Sharing economy Optoelectronics Sensors Flexible transparent conductors Internet of things
Hardware and materials DNA sequencing Biotechnology
Printed electronics Globalisation Filtration systems Oils and functional Humidity sensor fluids Demographic change Metal alloys Ceramic composites Go Flakes Environmental and GNP Li-ion batteries sustainability Polymer Supercapacitors composites Multifunctional Urbanisation coatings Thermal interfaces and Increasing inequality heat spreaders Technology Technology Proof of Validation Validation Prototype Prototype Qualified Operation Political uncertainty readiness concept concept lab field real and tested levels environment References
Source – Zurutuza and Marinelli (2014)
40 Future of Skills
Technological change Specific technology trends – Biotechnology Automation: force for job destruction or creation?
Technological progress Synthetic biology and gene editing, allied Challenges and job creation with modern genomics, are in place to • Fit for purpose government regulations. Adoption and diffusion begin a bio-based revolution Specific technology • Ownership and Intellectual Property rights. trends Fast and affordable DNA sequencing technology Digital technologies and better understanding of biological systems • Development of standards. Sharing economy means it is increasingly possible to design and Internet of things • Ethical and security concerns (e.g. controversy Hardware and materials build biological parts, devices and systems. around H5N1 avian influenza research). Biotechnology For example, full genome synthesis, when Going forward Globalisation combined with evolutionary screening or selection, Steady growth likely to continue, though can generate improved cellular strains for Demographic change applications more advanced at the molecular biomanufacturing while enabling ‘reverse genetics’ or cellular than the systems level. Developments Environmental that underpin faster scientific discovery. sustainability in use of computer models as well as quick, UK activity concentrated in healthcare: accurate and cheaper DNA manipulation e.g. Urbanisation concentration of health biotech companies higher CRISPR and sequencing technologies opening up new applications, with promise of higher Increasing inequality in UK than most OECD countries (OECD, 2014). productivity in other sectors. Impacts Political uncertainty Biggest impacts on chemicals, pharmaceuticals, References energy and agriculture industries. Outside health, biotech has potential to improve environmental performance by decoupling activities such as agriculture from fossil fuels.
41 Future of Skills
Share of number of companies by sub-component of industrial biotechnolog y an bioenergy Technological change Share of number of UK companies by sub-component
Automation: force for job of industrial biotechnology and bioenergy destruction or creation?
Technological progress 3% and job creation 3% 4% Adoption and diffusion 6% 25% Biofuels Specific technology trends Specialist services Digital technologies Sharing economy 7% Food/drink Internet of things Hardware and materials Environmental Biotechnology Fine and speciality chemicals Globalisation 12% Agro-industry Demographic change Pharmaceutical intermediaries
25% Environmental Commodity chemicals sustainability 15% Personal care/Cosmetics Urbanisation
Increasing inequality Source – BIS (2013) Political uncertainty
References Source: Department for Business Innovation and Skills, Strength and Opportunity 2013
42 Future of Skills
Technological change Globalisation Globalisation Unwinding trade imbalances
Peak globalisation?
The importance of place
Specific trade opportunities
Growing global middle class
Demographic change
Environmental sustainability
Urbanisation
Increasing inequality
Political uncertainty
References Future of Skills
Technological change Unwinding trade imbalances Globalisation
Unwinding trade imbalances
Peak globalisation? Globalisation is an important force
The importance of place shaping labour markets Specific trade opportunities Extent of globalisation: Growing global • World trade growing twice rate of global GDP. middle class
Demographic change • Developing countries doubling share of exports to over 40 per cent. Environmental sustainability • Global Foreign Direct Investment flows almost back at pre-financial crisis levels. Urbanisation
Increasing inequality • Fourfold rise in effective world labour force.
Political uncertainty Sizeable impacts on employment References Globalisation and job creation Globalisation and job destruction • Access to more goods and services • Acemoglu et al (2016): job losses from rising Chinese import at lower prices. competition (1999–2011) 985,000 in manufacturing and 2.0–2.4 • Efficiency savings. million in all of US. • Increased innovation. • Indirect effects through supply chains and second-round However, benefits not spread equally effects via reduced aggregate demand also affect across population. employment opportunities.
44 Future of Skills
Technological change Unwinding trade imbalances Globalisation
Unwinding trade imbalances
UK trade in goods and services with China Peak globalisation? Unwinding of trade imbalances should UK trade in goods and services with China increase output and employment in The importance of place tradable sectors in deficit countries 30 Specific trade opportunities 20 Growing global Rebalancing trade - looking ahead 10 middle class Rebalancing could have large scale effects. 0 Demographic change For example, in US, McKinsey Global Institute (2013) estimates that deficit reduction from 2 £ billion -10 Environmental per cent to 1.3 per cent of GDP in knowledge- -20 sustainability intensive manufacturing alone could: -30 Urbanisation £ billion • Raise US GDP by $200 billion annually by 2020 -40 Increasing inequality (~ 1 per cent of GDP); -50
4 5 6 7 8 11 4 0 0 0 0 0 10 0 12 13 1 0 2 0 0 0 20 20 20 2 2 2 Political uncertainty 20 20 2009 2 • Create 600,000 new jobs (or ~0.4 per cent
References of workforce). Service exports Goods exports Goods imports Service imports Balance
Source: US Department of Commerce
Source – Office for National Statistics
45 Future of Skills
Technological change Unwinding trade imbalances Globalisation
Unwinding trade imbalances
Peak globalisation? Capital inflows have benefited House prices and the current account housing and construction Looking ahead, as trade imbalances unwind, The importance of place other downward pressures on interest rates Specific trade opportunities Capital inflows in trade deficit countries have should protect sectors like housing and Growing global reduced interest rates, supporting sectors like construction from capital outflows. middle class housingHouse prices and and construction the current account (Aizenman and Jinjarak, Demographic change 2014; Sa et al., 2015).
Environmental sustainability 15 Urbanisation
Increasing inequality
10 New United Political uncertainty Zealand Spain Kingdom France Austria Belgium References Ireland Sweden Denmark Norway United States Canada Percentage growth in real house prices 5 Italy Netherlands Finland
Switzerland
0
Germany Japan
-5 -10 -5 0 5 10 15 20
Current account/GDP
Source – Sa, Towbin and Wieladek (2011) estimate a cross-country panel vector autoregressive model and identify monetary policy and capital inflows shocks to establish effects on housing
46 Future of Skills
Technological change Unwinding trade imbalances Globalisation
Unwinding trade imbalances
Peak globalisation? Factors affecting rebalancing of trade • Higher saving rates in surplus countries as larger share of population reaches The importance of place • Nature of real exchange rate movements. ‘prime savings’ age. Specific trade opportunities • Fall in precautionary household savings in surplus • Later retirement dates in surplus countries with Growing global countries with deepening social safety net. middle class ageing populations boosting household saving. • Financial development of surplus countries Demographic change • Households in deficit countries continuing enabling the creation of financial instruments to repair balance sheets. Environmental attractive for local savers. sustainability • Improved corporate governance in emerging Urbanisation economies increasing dividends and reducing Increasing inequality incentives for firms to retain earnings and save.
Political uncertainty • Policy resistance in emerging economies References to more flexible exchange rates.
• Rising capital flows with integration of emerging economies into global capital markets.
47 Future of Skills
Technological change Peak globalisation? Globalisation World trade (percentage of GDP) Unwinding trade imbalances
Peak globalisation? Rapid expansion of global trade may World trade (percentage of GDP)
have run its course 70 The importance of place Specific trade opportunities Evidence that trade has become less responsive 60 Growing global to global GDP growth - suggesting that trade middle class slowdown is not just a temporary phenomenon 50
Demographic change reflecting the crisis (Constantinescu, Mattoo and Ruta, 2014). 40 Environmental sustainability • Leveling off of offshoring? 30
Urbanisation • Stabilisation of China’s manufacturing share 20
Increasing inequality • Stronger domestic production base in 1965 1975 1985 1995 2005 2015
Political uncertainty emerging economies Source – World Bank (2016) Source: World bank References • Weaker (trade-intensive) business fixed investment as percentage of GDP in Four-year rolling sensitivity (elasticity) of advanced economies global real-trade growth to global real-gdp
growth4 End of Soviet Union Going forward (1991) If trade slowdown is structural, impacts of trade
on labour market will in future be very different US recession Oil Shock (1960-61) (1979) from what they have been in past. 2
GATT WTO (1947-94) (1995-Present)
0 1955 1971 1987 2003
Source – Goldman Sachs (2016)
48 Future of Skills
Technological change Peak globalisation? Globalisation
Unwinding trade imbalances
Peak globalisation? Protectionist sentiment is rising, Growing number of restrictions but impact on trade minimal so far The importance of place • Since 2008, new trade restrictions have Specific trade opportunities Protectionist, anti-immigration, anti-globalisation outnumbered positive trade measures by Growing global sentiment all on the rise, in part reaction to factor of four (WTO, 2016). middle class perception that globalisation does not benefit all (See chart on ‘Number of discriminatory measures implemented November 2008 - Demographic change and inability of social insurance policies to keep up with trade shocks e.g. Chinese import shock May 2016’) Environmental found to be key driver of regional support for sustainability • However, to date these measures have affected Brexit (Colantone and Stanig, 2016). only 5 per cent of global imports and focus on Urbanisation commodities with clear supply glut such as steel Evidence that voters respond more to job losses Increasing inequality and other metals (WTO, 2016). caused by offshoring than to job losses from other Political uncertainty causes, such as technological change or domestic • Evidence that threats to raise tariffs can reduce References competition (Margalit, 2011). trade even if not followed through (Crowley et al., 2016).
49 Future of Skills
Technological change Number of discriminatory measures implemented Globalisation 800 Unwinding trade imbalances
Peak globalisation?
The importance of place 600 Specific trade opportunities
Growing global middle class Number of discriminatory measures implemented 400 DemographicNovember change 2008 - May 2016 Environmental sustainability
Urbanisation 200
Increasing inequality Number of discriminatory measures
Political uncertainty implemented November 2008 - May 2016 0 References USA Italy India Brazil China Russia Turkey Japan France Mexico Canada Australia Germany Indonesia Argentina South Korea South Africa Saudi Arabia United Kingdom United
Source – GlobalSource: Trade AlertGlobal Trade Alert
50 Future of Skills
Technological change The importance of place Globalisation
Unwinding trade imbalances
Peak globalisation? Barriers to offshoring have • Growing demand for customisation. limited employment losses in • Customer awareness and concern about supply The importance of place some manufacturing sectors chain and inventory risks. Specific trade opportunities
Growing global Limits to offshoring activities: • Emerging markets losing manufacturing cost middle class advantage over developed economies domestic • Lack of capacity to manage high value-added competition (Margalit, 2011). Demographic change activities in low-cost locations. (See table on ‘Percentage change in emerging Environmental • Learning and coordination benefits from and developed market manufacturing cost sustainability keeping production and R&D together. differential; 2014 vs. 2004’) Urbanisation • Poor access to raw materials, high Regional producers e.g. food, printing and Increasing inequality transportation costs, and lack of proximity sectors that are R&D-intensive and need close to demand limit tradability. Political uncertainty proximity to markets e.g. cars, chemicals, have References only seen modest decline in employment over last two decades compared with other industries (McKinsey Global Institute, 2012). Percentage change in emerging and developed market manufacturing cost differential; 2014 vs. 2004
us uk germany
china 9 per cent 8 per cent 5 per cent
south korea 5 per cent 4 per cent 1 per cent
mexico 0 per cent -1 per cent -3 per cent
0 per cent india -1 per cent -2 per cent
= emerging costs higher than developed market = emerging market has closed part of the gap with developed market
Source – BCG (2014)
51 Future of Skills
Technological change The importance of place Globalisation
Unwinding trade imbalances
Peak globalisation? Going forward, could this lead Evidence to date of manufacturing to manufacturing renaissance renaissance limited The importance of place in advanced economies? Specific trade opportunities But companies likely to add new production Growing global Where these considerations are particularly capacity at home rather than abroad or relocate middle class salient, this may drive reshoring of activity. previously offshored activities to neighbouring PWC (2014) estimates that this could create Demographic change countries - ‘nearshoring’. ~100-200,000 UK jobs over next decade, and Environmental boost sales by £6-12 billion p.a. in today’s prices Questionable whether it will see large number sustainability by mid-2020s (See chart on ‘EY reshoring index’). of low-skilled manufacturing jobs, insofar as Urbanisation production simultaneously becomes more digital, Other ‘catalysts’ could help favour reshoring: intelligent and technology-intensive. Increasing inequality • Exploration and appraisal of economic potential Political uncertainty of shale gas. References • Policy could support specialised clusters, upgrading transport infrastructure, access to finance, especially among manufacturing supply chains.
• Digital manufacturing, 3D printing and Internet of Things could all reduce supply chain costs. (See pages 34, 36)
52 Future of Skills
Technological change EYEY reshoringreshoring ind indexex Globalisation Electrical and optical products Unwinding trade imbalances Repair of aerospace Peak globalisation? Leather products Aerospace The importance of place Paints and Varnishes Specific trade opportunities Pharmaceutical Paper and paper products Growing global Tobacco products middle class Other chemical products Coke and refined petroleum Demographic change Inorganic chemicals Other transport Environmental Repairs of ships sustainability Other manufactured goods Ships and boats Urbanisation Electrical equipment Increasing inequality Motor vehicles Wearing apparel Political uncertainty Fabricated metal products Machinery References Dairy products Processed food Other food products Soft drinks Rubbers and plastics Bakery products Meat products Concrete, cement and plaster Printing and recording services Glass and ceramics
0 0.05 0.10 0.15 0.20 0.25 0.30 0.35 0.40
Source – EY (2015) The reshoring index takes into account a number of country and sector drivers. Country drivers compare the UK’s ability to attract businesses against the global average in areas such as tertiary educational attainment, import intensity, imports as a share of trade, GVA over output of the industry, sector productivity and energy costs. Sector drivers examine sector characteristics that favour reshoring such as expenditure on R&D and transportation costs, capital intensity of production, skills requirements and length of supply chains.
53 Future of Skills
Technological change Specific trade opportunities Globalisation
Unwinding trade imbalances
Peak globalisation? Trade creates employment opportunities 5 Vehicles other than railway or tramway in sectors where advanced economies rolling stock, and parts and accessories The importance of place enjoy comparative advantage thereof ($50.7 billion). Specific trade opportunities
Growing global For example advanced manufacturing and 6 Travel ($42.9 billion). middle class knowledge-intensive services. 7 Transport ($41.2 billion). Demographic change Small number of products typically dominate 8 Pharmaceuticals ($35.9 billion). Environmental country’s exports. Globally, country’s top export sustainability on average accounts for 23 per cent of all 9 Mineral fuels, oils, products of their distillation ($32.8 billion). Urbanisation exports, with top three exports at 46 per cent, though concentration ratios typically decline with 10 Electrical machinery and equipment and parts Increasing inequality country’s level of income (Hanson, 2012). thereof; sound recorders and reproducers, Political uncertainty (See chart on ‘Net export of mature economies, television ($29.1 billion). percentage of GDP’) References Top 10 UK exports, 2015 (source: ITC)
1 Other business services ($93.2 billion).
2 Financial services ($84.7 billion).
3 Machinery, mechanical appliances, nuclear reactors, boilers; parts thereof ($64.3 billion).
4 Natural or cultured pearls, precious or semi-precious stones, precious metals, metals clad ($55.1 billion).
54 Future of Skills
Net export of mature economies, percentage of GDP Technological change Net export of mature economies1, percentage of Globalisation GDP 2.0 Unwinding trade imbalances 1.5 Peak globalisation? Surplus 1.0 The importance of place Surplus Specific trade opportunities 0.5
Growing global 0 middle class -0.5 Demographic change -1.0 Environmental sustainability -1.5 Deficit -2.0
Urbanisation Deficit
Increasing inequality -2.5
-3.0 Political uncertainty -3.5 References
1994 1996 1998 2000 2002 2004 2006 2008 2009
Knowledge-intensive manufacturing Knowledge-intensive services Labour-intensive services
Capital-intensive services Capital-intensive manufacturing Health, education, public service
Labour-intensive manufacturing Primary resources
Source – OECD; McKinsey Global Institute analysis 1. Mature economies; United States, Japan and EU-15 excluding Luxembourg. 2. Knowledge intensive; Services and businesses heavily reliant on professional knowledge. 3. Labour intensive; Services and businesses reliant on large workforce or large amount of work in relation to output.
55 Future of Skills
Technological change Specific trade opportunities Globalisation
Unwinding trade imbalances
Peak globalisation? However, there are barriers to growth Tackling these barriers would deliver substantial of global market in services benefits, but progress patchy: trade in services The importance of place virtually neglected in Doha Round and increasing Specific trade opportunities Services still five times less likely to be exported reliance on bilateral and plurilateral efforts. Growing global than manufacturing products (Jensen, 2011). middle class Non-trade barriers such as licences, quotas, Demographic change standards and other regulatory constraints prevent Environmental efficient provision of services across borders. sustainability
Urbanisation STRI average, minimum and maximum Increasing inequality scores by sector Political uncertainty STRI average, minimum and maximum scores by sector
References 1.0
0.9
0.8
0.7
0.6
STRI score 0.5
0.4
0.3
0.2
0.1 STRI score 0
Legal Banking Courier Insurance Telecoms Maritime Computer Rail freight Distribution Engineering Accounting Road freightConstruction Architecture Broadcasting Air transport Motion pictures Sound recording
Maximum Minimum Average
Source: OECD Services Trade Restrictiveness database (2014). The indices cover 40 countries. Air transport and road freight currently cover only commercial establishment (with accompanying movement of people) Source – OECD Services Trade Restrictiveness database (2014). The indices cover 40 countries. STRI = Services Trade Restrictiveness Index
56 Future of Skills
Technological change Growing global middle class Globalisation
Unwinding trade imbalances
Peak globalisation? Rise of emerging market middle class globally will lead to growth in spending The importance of place and consumption Specific trade opportunities
Growing global • Emerging market economies have produced middle class three-quarters of global growth in recent years.
Demographic change • Consumption in Asia Pacific region set to Environmental increase seven-fold to 2030 and its share sustainability of global consumption swell to 60 per cent.
Urbanisation
Increasing inequality
Political uncertainty
References
Source – Kharas (2010) Middle class is households with daily expenditures between USD10 and USD100 per person in purchasing power parity (PPP) terms
57 Future of Skills
Technological change Growing global middle class Globalisation
Unwinding trade imbalances
Peak globalisation? Growth in middle class consumption Looking ahead, commodity spending may have peaked but global demand for consumer The importance of place associated with demand for specific goods and services durables, particular high-end durable goods such Specific trade opportunities as dishwashers or luxury cars will increase. Growing global middle class
Demographic change
Environmental sustainability Ladder of spending in 2012 and 2030 Ladder of spending in 2012 and 2030 Urbanisation
2012 2030 Increasing inequality International Tourism International Tourism Domestic Tourism Domestic Tourism Services Insurance Insurance Political uncertainty United Russia Ad Spending States Ad Spending Luxury Cars DM Average Luxury Cars References Dishwashers Germany Dishwashers Cars Washing Cars Durables Washing Machines Machines China Copper Russia Copper Brazil Energy Energy EM Average Meat EM Average Meat Protein Brazil Protein Wheat Wheat India Commodities India China 0 1000 2000 3000 4000 5000 0 1000 2000 3000 4000 5000 Per Capita Income (US$) Per Capita Income (US$)
The marker for each spending category denotes the ‘sweet spot’ Source: Goldman Sachs (2013) or income level at which per capita demand is at its maximum (income level associated with peak spending impact) Source – Goldman Sachs (2013)
58 Future of Skills
Technological change Growing global middle class Globalisation
Unwinding trade imbalances
Peak globalisation? Emerging markets face hurdles • Emerging economies vary greatly in terms in fulfilling growth expectations of productivity, demographics, debt levels, The importance of place commodity reliance, trade openness and Specific trade opportunities • Growth in emerging economies has slowed political stability. Growing global since financial crisis. middle class • Forecasts only extrapolating recent performance • Transitioning from resource-driven growth to miss important sources of heterogeneity and Demographic change growth based on innovation and high quality tend to be over-optimistic, particularly at longer institutions is difficult. Of 101 middle-income Environmental horizons (Ho and Mauro, 2014). sustainability economies in 1960, only 13 became high (See chart on ‘Average GDP growth in large income by 2008 (World Bank, 2012). Urbanisation emerging economies’)
Increasing inequality • Premature industrialisation - manufacturing’s share of output and employment peaking at much earlier Political uncertainty per capita GDP levels than advanced economies, References shutting off a historically potent engine of growth. Latin American and African countries particularly hard hit (Rodrik, 2015).
59 Future of Skills
Average GDP growth in large emerging economies
Technological change Average GDP growth in large Globalisation emerging economies
Unwinding trade imbalances
Peak globalisation? 12 The importance of place
Specific trade opportunities
Growing global middle class 9 Demographic change
Environmental China sustainability India Urbanisation 6 Increasing inequality EME aggregate
Political uncertainty GDP real Average percentage changes percentage growth, 2012-15; annual 2012-15; growth, References 3 Average real GDP growth, 2012-2015; annual percentage changes
Brazil Russia 0
0 3 6 9 12 Average real GDP growth, 2000-07 Source – ECB (2016) Average real GDP growth, 2000-07
Note: The sample includes Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hong Kong, Hungary, India, Indonesia, Malaysia, Mexico, Poland, Russia, Saudi Arabia, Singapore, South Africa, South Korea, Taiwan, Thailand, Turkey and Venezuela. The EME aggregate is a GDP-weighted average of these countries.
60 Future of Skills
Technological change Growing global middle class Globalisation
Unwinding trade imbalances
Peak globalisation? UK will benefit from emerging market opportunities, but only to limited extent The importance of place Specific trade opportunities Emerging economies account for increasing, Growing global but small, share of UK trade: middle class • UK only commands 0.9 per cent China’s import Demographic change share, making it 24th largest exporter to China.
Environmental • In India, UK is 21st largest exporter. sustainability • By 2030, share of UK exports to largest seven Urbanisation emerging economies forecast by PWC (2015) to Increasing inequality grow to 13 per cent, up from 9 per cent, even as Political uncertainty exports to China slow. References • Focus likely to remain on established trading partners such as EU and US. Even in 2030, share of UK exports to Germany projected to remain higher than that going to China, though uncertainties about Brexit.
61 Future of Skills
Technological change Growing global middle class Globalisation
Unwinding trade imbalances
Peak globalisation? Emerging markets face challenges in • Emerging economies will also find it harder competing with advanced economies in to move up value chain if they cannot retain The importance of place their traditional areas of export strength their young, educated workforce (Gaulé 2010; Specific trade opportunities Breschi et al., 2015). (See figure on ‘Ten largest Growing global • Despite growth in R&D spending, composition Ten largest South-North migration corridors for middle class of exports from emerging economies still inventors (net), 2001-2010’) Demographic change different from advanced economies and pace of convergence has slowed (Fontagne, Gaulier and • Rather than head-to-head competition in global Environmental Zignago, 2008; Edwards and Lawrence, 2013). markets, most likely change is rise of credible sustainability local competitors within emerging markets. • Even when exports classified in same product Urbanisation category, differences in unit values suggest that Increasing inequality emerging market exports are more standardised Political uncertainty and thus only imperfect substitutes for advanced economy exports. References • History suggests specialisation patterns will converge when emerging economies approach advanced economy per capita income levels - unlikely for many years yet (Edwards and Lawrence, 2013).
62 Future of Skills
Technological change Ten largest South-North migration corridors Globalisation for inventors (net), 2001-2010
Unwinding trade imbalances
Peak globalisation?
The importance of place
Specific trade opportunities
Growing global middle class
Demographic change
Environmental sustainability
Urbanisation
Increasing inequality
Political uncertainty
References Source – Miguelez and Fink (2013) map migratory patterns of inventors, extracted from residency and nationality information included in patent applications filed under the Patent Cooperation Treaty. Note UK, France and Germany saw more inventors emigrating than immigrating over this period.
63 Future of Skills
Technological change Globalisation Demographic change Demographic change
Ageing population
Millennials Environmental sustainability
Urbanisation
Increasing inequality
Political uncertainty
References Future of Skills
Technological change Ageing population – Macroeconomic impacts Globalisation Total fertility (children per woman) Demographic change Slowing population growth, and Ageing population Macroeconomic impacts population ageing due to low fertility Sector impacts rates and increasing life expectancy.
Millennials 7 Total fertility (children per woman) Environmental sustainability 6 Urbanisation
Increasing inequality 5 Political uncertainty
References 4
3
2
1
0
1955 1975 1995 2015 2035 2055 2075 2095
More developed regions Less developed regions United Kingdom United States
Source – United Nations Population Division (2015)
Source: United Nations, Population Division (2015) 65 Future of Skills Longevity (life expectancy at age 20)
Technological change Longevity (life expectancy at age 20)
Globalisation 80 Demographic change
Ageing population 70 Macroeconomic impacts Sector impacts 60 Millennials Environmental sustainability 50
Urbanisation 40 Increasing inequality
Political uncertainty 30
References 20
10
0
1955 1975 1995 2015 2035 2055 2075 2095
More developed regions Less developed regions United Kingdom United States
Source – United Nations Population Division (2015)
Source: United Nations, Population Division (2015)
66 Future of Skills
Proportion of population >60 years old (1950-2070E) Technological change Proportion of population >60 years old
Globalisation 40 Demographic change
Ageing population 35 Macroeconomic impacts
Sector impacts 30
Millennials 25 Environmental sustainability 20 Urbanisation 15 Increasing inequality
Political uncertainty 10
References 5
0
0 0 5 7 10 0E 0E 0E 9 0 3 5 7 1 19 1990 2 0 0 0 2 2 2 2090E
More developed regions Less developed regions United Kingdom United States
SourceSour c–e United: United NationsNations, P opulaPopulationtion Division Division (2015) (2015)
67 Future of Skills
Technological change Ageing population – Macroeconomic impacts Globalisation Demographic change Ageing reduces labour force growth: • Increasing dependency ratios mean smaller Ageing population proportion of population entering productive Macroeconomic impacts a ‘headwind’ for economic growth Sector impacts years, reducing saving and therefore investment. • Working-age population already contracting in Millennials some advanced countries, including Japan, Italy, Environmental and Germany, but set to accelerate in many large sustainability emerging economies, such as China. Working age (15-64) population growth by regions Urbanisation Increasing inequality Working age (15-64) population growth by regions Political uncertainty 14% References 12%
10%
8%
6%
4%
2%
0%
-2%
-4%
1955 1975 1995 2015 2035 2055 2075 2095
More developed regions Less developed regions United Kingdom United States
Source – United Nations Population Division (2015)
Source: United Nations, Population Division (2015) 68 Future of Skills
Dependency ratios across regions (ratio of population aged 65+ per 100 population 15-64) Technological change Dependency ratios across regions (ratio of Globalisation population aged 65+ per 100 population 15- 64) Demographic change 60 Ageing population Macroeconomic impacts Sector impacts 50 Millennials Environmental sustainability 40 Urbanisation
Increasing inequality 30 Political uncertainty
References 20
10
0
1950 1970 1990 2010 2030 2050 2070 2090
More developed regions Less developed regions United Kingdom United States
Source – United Nations Population Division (2015)
Source: United Nations, Population Division (2015)
69 Future of Skills
Technological change Ageing population – Macroeconomic impacts Globalisation Demographic change Weaker labour force growth means that Arnott and Chaves (2012) show that Ageing population larger populations of retirees (65+) erode Macroeconomic impacts without faster labour productivity growth, Sector impacts GDP growth is slower. economic growth.
Millennials • Looking ahead, McKinsey (2015) predicts GDP From a purely supply perspective, automation may Environmental growth could fall by 40 per cent globally and be less a threat than a solution as it compensates sustainability by 10 per cent in UK over next 50 years even for a shrinking workforce. Urbanisation assuming productivity grows at its historical rate. Accordingly, it is found that countries undergoing Increasing inequality • Productivity would need to grow 80 per cent more rapid population ageing adopt more robots (Abeliansky and Prettner, 2017; Acemoglu and Political uncertainty faster over next 50 years than historical average to negate effect. Restrepo, 2017). References • However, older people slower at adopting new This does not address risk of lower household technologies so productivity growth may also demand (robots do not buy things), adding to the be lower. question ‘who owns the robots’ and the pathways to widened ownership e.g. employee stock GDP growth and demographic shares ownership plans (Freeman, 2016). 0.2
0.1
0
-0.1
-0.2
-0.3
-0.4
0 10-14 20-24 30-34 40-44 50-54 60-64 70+
Age Group Source – Arnott and Chaves (2012)
70 Future of Skills
Technological change Ageing population – Macroeconomic impacts Globalisation Demographic change Demographic pressures on labour • Employment rate for older people around the Ageing population markets moderate in UK relative to Macroeconomic impacts OECD average with scope for improvement: Sector impacts other advanced countries increasing rates to Swedish levels, the best performing EU country would increase annual UK Millennials • Working age population in UK projected still to GDP by around £100 billion (PWC, 2015). Environmental grow, albeit more slowly than current rate, while sustainability other advanced economies may see decline. Urbanisation • UK also enjoys high and stable labour force Increasing inequality participation rates due to:
Political uncertainty - High self-employment rate which provides References flexibility to older workers and women - High immigration rates since 2005 and higher participation rate of immigrants, especially important in sectors such as food processing, cleaning, clothers, manufacturing, R&D and IT. (See chart on ‘Net immigration: UK Vs US’)
• Policy change examples:
- UK has raised retirement age and introduced single tier pension
- Exploring systems for strengthening lifelong learning
71 Future of Skills
Technological change Net immigration: UK vs. US Globalisation United States United Kingdom Demographic change Projected Projected Ageing population Macroeconomic impacts Sector impacts 0.9 Millennials 0.8 Environmental sustainability 0.7 Urbanisation
Increasing inequality 0.6
Political uncertainty 0.5 References 0.4 Percentage of working population 0.3
0.2
Percentage of working population population working of Percentage 0.1
0
-0.1
1990 2000 2010 2015
Source – Bank of England (2016)
72 Future of Skills
Technological change Ageing population – Macroeconomic impacts Globalisation Demographic change Political obstacles to responding to these Ageing population Macroeconomic impacts demographic pressures Sector impacts • Older people consider public pensions and Millennials healthcare higher priority than public education. Environmental Particular risk for countries with a large share of sustainability young people not in employment, education or Urbanisation training (UK=14.6 per cent; OECD=13.9 per cent).
Increasing inequality Despite increase in retirement age across OECD, pace has been modest (2.5 years=men and 4 Political uncertainty years=women between 2010 and 2050).
References (See chart on ‘First or second priority for extra government spending: Western Europe’)
• Voter participation increases with age up to 60, further skewing political incentives.
• Discrimination in workplace - perceptions of ageism in UK are among the highest in Europe (Eurobarometer, 2015).
• Backlash against immigration.
Silver lining Need to replace retiring workers will support jobs even in occupations where demand will otherwise fall.
73 Future of Skills
Technological change First or second priority for extra government Globalisation spending: Western Europe Demographic change
Ageing population Macroeconomic impacts 100 Sector impacts
Millennials Environmental sustainability
Urbanisation
Increasing inequality
Political uncertainty 50
References % of Respondants % of Per cent of Respondants
0 21 31 41 51 61 71 79 Age
Healthcare Pensions Education Environmental Assisting the poor
Source – De Mello, Schotte, Tiongson and Winkler (2016) using Life Transition Survey 2010
74 Future of Skills
Technological change Ageing population – Macroeconomic impacts Globalisation Demographic change Pressure on public finances, Ageing population Macroeconomic impacts intensifying need for reforms Sector impacts Age-related spending like pensions, healthcare, Millennials long-term care and education projected to rise Environmental by 3.4 per cent of GDP 2015-2050 in advanced sustainability economies, though with country variation Urbanisation (UK =2 per cent of GDP) (Standard & Poor’s, 2016).
Increasing inequality Without policy action, S&P estimates net general Political uncertainty government debt will rise to ~135 per cent of GDP by 2050 in these countries (UK=~175 of GDP per cent). References Fiscal vulnerabilities reflect UK’s initial budgetary position and debt level, rather than surge in age-related entitlements.
75 Future of Skills
Technological change FiscalFiscal spac space:e: dis distancetance to coun to tcountry-specificry-specific limits on de bt (debt/GDP ratio, ppts)
Globalisation limits on debt (debt/GDP ratio, ppts)
Demographic change Norway 246
Ageing population South Korea 241.1 Macroeconomic impacts Sector impacts New Zealand 228.1 Sweden 188.8 Millennials Environmental Finland 171.7 sustainability Germany 167.9
Urbanisation United States 165.1
Increasing inequality Netherlands 158.1 Austria 156.6 Political uncertainty Malta 151.1 References Canada 149.8
Iceland 145.3
United Kingdom 132.6
Belgium 124.3
France 116.9
Spain 115.2
Ireland 105.5
Portugal 58.8
0 50 100 150 200 250
Source – IMF (2015) Source: IMF (2015) This figure highlights wide estimates in room for manoeuvre between current debt ratios and public debt limits; however, with already high debt levels there may be more limited scope for policy to support growth and employment than in the past.
76 Future of Skills
Technological change Ageing population – Sector impacts Globalisation Demographic change How ageing population spends • So, ongoing shift in consumption shares Ageing population Macroeconomic impacts disposable income has implications towards this group: Sector impacts for sectors and occupations - Now makes up majority of consumption Millennials • 50 plus generation has substantial economic spending in US, Japan and Germany. Environmental sway in terms of wealth and income e.g. in US, sustainability - UK an exception: consumption expenditure it controls almost 80 per cent of aggregate share for 50+ group only 42.8 per cent, Urbanisation net worth while 60 per cent of those earning but growing. Increasing inequality $200,000+ p.a. are baby boomers.
Political uncertainty 2015-30 Projected Consumption Growth (percentage) References 2015-30 projected consumption growth (percentage)
North America Western Europe North East Asia North America Western Europe Northeast Asia
75-plus 21.7 75-plus 24.7 75-plus 39.9
60-74 25 60-74 34.6 60-74 18.4
45-59 11.6 45-59 7.9 45-59 23.8 Age in years 30-44 19.3 30-44 12.1 30-44 3.9
15-29 12.3 15-29 11.5 15-29 6.6
0-14 10.2 0-14 9.2 0-14 7.3
0 10 20 30 40 0 10 20 30 40 0 10 20 30 40
Age groups 60-plus Age groups 0-59
Source – McKinseySource: McKin sGlobaley Global Ins Institutetitute (2016)
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Technological change Changing age-specific consumption Globalisation expenditure shares: 2005-2013 Demographic change Japan USA Germany UK Ageing population 2005 2013 2005 2013 2005 2013 2005 2013 Macroeconomic impacts Sector impacts Under 20 0.5 per cent 0.4 per cent 0.2 per cent 0.2 per cent 0.3 per cent 0.3 per cent 0.2 per cent 0.2 per cent Millennials 20-29 8.1 per cent 6.3 per cent 9.2 per cent 8.7 per cent 10.9 per cent 9.9 per cent 9.4 per cent 11.0 per cent Environmental sustainability 30-39 16.6 per cent 14.8 per cent 19.1 per cent 17.3 per cent 15.3 per cent 11.5 per cent 24.4 per cent 20.7 per cent Urbanisation 40-49 18.4 per cent 20.1 per cent 23.6 per cent 19.7 per cent 19.8 per cent 18.7 per cent 24.6 per cent 25.3 per cent Increasing inequality 50-59 22.9 per cent 18.1 per cent 20.5 per cent 21.7 per cent 19.9 per cent 23.4 per cent 20.3 per cent 19.7 per cent Political uncertainty 60+ 33.5 per cent 40.3 per cent 27.4 per cent 32.5 per cent 33.9 per cent 36.2 per cent 21.1 per cent 23.1 per cent References
Source – Credit Suisse (2015)
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Technological change Ageing population – Sector impacts Globalisation Demographic change That people live for longer and more Over 65s spend more than other groups across Ageing population Macroeconomic impacts healthily has implications for industries broad range of leisure services - in 2014, average Sector impacts traditionally targeted at younger expenditure by 65-plus age group was £3,372 versus
Millennials consumers £2,469 for 55-64 year olds, £2,664 for 35-54 year olds and £1,626 for 18-34 year olds (Barclays, 2014). Environmental Living for longer increasingly defined as younger sustainability for longer, not older for longer. Three-stage view With 65-plus age group projected to account Urbanisation of life - education, career and retirement - giving for most of the increase in leisure time in next decade, activities from tourism, film-going, reading Increasing inequality way to a more fluid pattern. As more people from different age groups pursue similar life through to cosmetics, fashion and fitness likely to Political uncertainty stages, greater potential for cross-generational benefit (McKinsey Global Institute, 2016). Leisure References understanding? (Gratton and Scott, 2016). time also used to invest in skills, health and relationships. Also viewed as a time when people pursue creative interests and grow emotionally.
Consistent with evidence that relationship between wellbeing and age is U-shaped: high in youth, falling in midlife, and rising again in old age. Socio-economic drivers, though evidence that relationship is also rooted in biology: similar pattern exists in great apes (Weiss et al., 2012). Retirement linked with leisure satisfaction though not necessarily life and income satisfaction.
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Technological change Ageing population – Sector impacts Globalisation Demographic change Elderly are the largest consumers of • Cost-containment may prompt move away from Ageing population Macroeconomic impacts healthcare; expanding costs means inpatient and outpatient care (currently ~two- Sector impacts healthcare sector ripe for innovation thirds of healthcare spending in OECD) to home
Millennials health, skilled nursing facilities and other means • In UK, average healthcare spending for 65+ to engage communities. Environmental and 85+ is 2 and 3.6 times national average sustainability respectively. (Nuffield Trust, 2016). Urbanisation • Health problems such as neurodegenerative Increasing inequality disorders do not sharply curtail patient lifespans Political uncertainty and care likely to remain labour-intensive.
References • Science-based and organisational innovation have potential to boost productivity, though new medicines and surgical techniques can also contribute to growth in health spending and in public expectations (Smith et al., 2009).
• NHS has seen improvements through greater horizontal and vertical integration, but take up of new technologies and plurality of provision comparatively low (Evennett and Barlow, 2013).
• Uneven public willingness to share health data, reducing potential of self-diagnostic technologies to put GPs out of business (25-40 per cent of population have low levels of patient activation).
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Technological change Long-term projections and other cost Globalisation pressures 20 FSR 2015 (Updated population projections and spending plans) Demographic change Low productivity Ageing population Constant other pressures Macroeconomic impacts 15 Sector impacts Declining other pressures
Millennials
Environmental 10 sustainability Per cent GDP Per Urbanisation 5 Increasing inequality
Political uncertainty
References 0
2015-16 2025-26 2035-36 2045-46 2055-56 2065-66
Source – OBR (2016) Chart shows OBR (FSR) central projection as well as projections based on other cost pressures e.g. relative healthcare costs and technological progress which central projection does not take into account. Low productivity scenario in line with long-term average rate of health sector productivity growth of 1.2 per cent a year.
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Technological change Ageing population – Sector impacts Globalisation Demographic change Growing preference among older people - Specialist developments may benefit Ageing population Macroeconomic impacts to ‘age in place’ has implications for though owner-occupied retirement housing Sector impacts housing-related sectors represents just 2 per cent of UK’s total
Millennials housing stock due to lack of competition • Older individuals increasingly want to age and regulatory barriers. Environmental comfortably and safely in place: 85 per cent of sustainability over 65s plan to remain in their neighbourhood • ‘Ageing in place’ may also be associated with Urbanisation for a number of years (Lloyd and Parry, 2015). shift in demand from rental to owner-occupied housing at aggregate level, as elderly substitute Increasing inequality • Current housing stock lacks easy access and owner occupation for renting, which will in turn manoeuvrability: over half of mainstream Political uncertainty have implications for sectors like construction, housing requires adaptation and over a quarter References legal and financial services. of inaccessible homes are not adaptable at all. Housing is also too large for older people raising • Possible demand for long-term care levels of under-occupation against a backdrop of which currently accounts for 2 per cent of constrained supply (Torrington, 2015). employment in OECD. In Japan, number of long- term care workers more than doubled since • Over-60s in England alone have £1,200 billion 2001 following introduction of long-term care in unmortgaged housing wealth to address insurance programme. these constraints:
- May give rise to important market in retrofitting and remodelling of housing stock: from ‘Do It Yourself’ to hire someone to ‘Do It For Me’.
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Technological change Ageing population – Sector impacts Globalisation Demographic change Population ageing creates major • Low interest rate environment poses risks for Ageing population Macroeconomic impacts opportunities for financial savings industry savers, retirees, pension funds and insurance Sector impacts companies that cannot meet funding liabilities. • With longer lives, individuals face greater risk of Millennials outliving savings: estimates of global annuity and • Doubts whether investors can continue to Environmental pension-related longevity risk exposure $15-$25 rely on past investment performance to justify sustainability trillion (Bank for International Settlements, 2014). future return prospects (Deutsche Bank, 2013; Urbanisation Even in optimistic scenarios, individuals face MGI, 2016). considerable shortfall in retirement saving. Increasing inequality • Search for yield and uncorrelated returns present opportunities for alternative Political uncertainty • Closure of defined benefit pension schemes (~85 per cent UK schemes now closed to new investments, such as real assets. References members and further accruals from existing • Will more money in retirement savings and members) and tumbling value of state pension demand for predictable returns steer investee (OECD, 2016). companies away from experimentation and • More onus on individuals who may have trouble innovation? (Erixon and Weigel, 2016). planning for retirement because of behavioural and cognitive barriers - potentially higher demand for financial advisors, though scope for self-service tools too (See table on ‘Estimated number of individuals aged 22 to state retirement with inadequate income under pensions commission replacement rate targets.’)
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Technological change Ageing population – Sector impacts Globalisation Demographic change Estimated number of individuals aged 22 to Ageing population Macroeconomic impacts state retirement with inadequate income under Sector impacts pensions commission replacement rate targets
Millennials Target 80 per cent 70 per cent 67 per cent 60 per cent 50 per cent All Environmental replacement sustainability rate Income Under £12,000 £12,000-£22,100 £22,100-£31,600 £31,600-£50,500 Over £50,500 All Urbanisation bracket Increasing inequality Total 1.3 4.3 4.4 8.9 9.0 27.8 Political uncertainty individuals (millions References Number 0.1 1.2 1.7 3.4 4.2 10.7 with income below target (millions) Percentage 11 per cent 29 per cent 39 per cent 39 per cent 47 per cent 38 per cent with income below target
Source – DWP (2012) Replacement rate refers to income in retirement expressed as percentage of income before retirement. Simulations run before introductions of automatic enrollment.
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Technological change Millennials Globalisation Demographic change Millennials show different consumption • Millennials postponing major life decisions, such Ageing population behaviours which create new market as getting married, saving and having children Millennials opportunities and risks and spending more time when young on travel, Environmental culture and artisanal products (‘experiences’). • Millennials, the cohort born between 1980 and sustainability Millennials devote more time and money to 2000, make up one-fifth of UK population. Likely to Urbanisation exercising and eating than previous generations. emerge as main source of wealth and spending as (Some choices may reverse as they grow older Increasing inequality they inherit assets over next few decades. and become wealthier). Political uncertainty • Millennials first group to come of age after • Not all industries can respond to these Internet, social media, mobile and video gaming References preferences without major disruption, however became widespread. They have more information e.g. survey evidence identifies banking as and choice than previous generations, but have industry most likely to be transformed by heightened expectation millennials given perception it is excessively of immediacy, participation and transparency transactional and poorly aligned with their that is driving innovation in many industries. personal values. • Technology may have increased the value of leisure time: among lower-skilled male millennials, evidence in US of weakening attachment to the labour force due to allure of video games (Aguiar et al., 2016).
85 Future of Skills
Technological change Home ownership rates by age for
Globalisation each generation: UK Demographic change 80 Ageing population
Millennials Environmental sustainability 60
Urbanisation
Increasing inequality 40 Political uncertainty Percentage Percentage Percentage References Silent gen (1926-1945) Baby Boomers (1946-1965) 20 Gen X (1966-1980) Millennials (1981-2000)
0 20 25 30 35 40 45 50 55 60 65 70
Age
Source – Resolution Foundation (2016)
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Technological change Millennials Globalisation Demographic change The UK workforce is engaged in alternative But surprisingly little evidence of change Ageing population working arrangements. in past two decades. Millennials However, many occupations are amenable Environmental Estimated that 25 per cent of working age sustainability population in UK derive primary or secondary to new forms of work. income from alternative work e.g. self-employment, Urbanisation multi-jobbing (McKinsey Global Institute, 2016). Increasing inequality
Political uncertainty Changes in structure of UK employment 1996-2016 References 90 85.1 84.5 1996 2016 78.9 79.3 80
70 63.5 62.5 60
50
Percent 40
30
20 14.9 13.4 10 6.3 5.2 5.0 3.5 0.8 2.5 1.1 0.6
Employees Permanent Full-time Self-employees Temporary Second job Zero hours Other jobs Employees Employees holders
Source – The Work Foundation (2016) Permanent employees are total employees minus temporary employees. Second job holders include self-employed. Other jobs are unpaid family workers and people on government training schemes.
87 Future of Skills
Technological change Occupations amenable to alternative
Globalisation work arrangements Demographic change Transient workers Workers with widely available skills, in jobs with • Food service Ageing population high turnover or seasonality. • Retail sales
Millennials Experts Workers with specialised, scarce skills who • Computer scientists
Environmental More ameanable can split their time between multiple clients or • Doctors sustainability employers, given the demand for their service. Generalists Workers with widely available skills, in • Electricians Urbanisation jobs made up of discrete tasks and easily • Drivers transferable knowledge. Increasing inequality Project-based managers Managers in project-based occupations. • Construction managers Political uncertainty Workers in jobs that consist of discrete tasks • Accountants References Traditional ‘company workers’ but require some contextual knowledge. • Metal Workers
Managers Managers or executives with ongoing, typically • Managers non-project-based work. • Executives • Production supervisors Operational workers Workers who carry out ongoing operations and • Media Specialists long-term projects and strategies. Less ameanable
Source – McKinsey Global Institute (2016)
88 Future of Skills
Technological change Millennials Globalisation Demographic change Mixed evidence that millennials • Adopt more conservative attitudes to risk Ageing population are embracing alternative working • Believe individual success depends more on Millennials arrangements luck than hard work Environmental sustainability Despite popular view that millennials especially likely to avoid traditional careers (WEF, 2016), US • Support more government redistribution and Urbanisation evidence suggests they stay longer with employers have less confidence in public institutions and Increasing inequality than Generation X workers did at same age. democracy (Giuliano and Spilimbergo, 2009; Malmendier and Nagel, 2011). Political uncertainty UK evidence finds millennials 30 per cent less likely to move jobs in their 20s than generation X References Benefits of job security, better matches and on- (Resolution Foundation, 2017). (See chart on ‘Job the-job learning accompanied by costs: switching tenure in years for millennials and Generation X at jobs important determinant of wage growth for age 18 to 30 (percentage)’) younger workers while increased job tenure across the economy can raise long-term unemployment. One explanation is that labour markets have become less fluid since 1990s with fewer employer switches, reflecting predominance of older, larger firms that do not contract or expand as rapidly (Hyatt and Spletzer, 2013; Davis and Haltiwanger, 2014).
Another explanation stems from finding that cohorts like millennials which experience recession during their formative years tend to:
89 Future of Skills
Technological change Job tenure in years for millennials and Globalisation Generation X at age 18 to 30 (percentage)
Demographic change 50
Ageing population 45 Millennials Environmental 40 sustainability Generation X 35 Millennials Urbanisation
Increasing inequality 30
Political uncertainty 25
References 20
15
10
5
0 <1 1 +1
Source – Council of Economic Advisors (2014)
90 Future of Skills
Technological change Globalisation Environmental Demographic change
Environmental sustainability sustainability
Impact of climate change
Transition to low carbon economy
Urbanisation
Increasing inequality
Political uncertainty
References Future of Skills
Technological change Impact of climate change Globalisation
Demographic change Global warming: 1983-2012 warmest 30- Environmental year period for Northern Hemisphere in sustainability 1,400 years and accompanied by rise in Impact of climate change extreme weather and climate events Transition to low carbon economy Signatories to Intergovernmental Panel on Climate
Urbanisation Change now 95 per cent certain that warming of climate system attributable to human influences. Increasing inequality To keep average global temperature rise below Political uncertainty 2°C - the de facto target for global policy - cumulative CO2 emissions need to be capped at References one trillion metric tons above levels of late 1800s. Global economy has already produced over half that amount.
92 Future of Skills
Global land-ocean temperature index
Technological change Global land-ocean temperature index
Globalisation 1.0 Demographic change
Environmental sustainability
Impact of climate change
Transition to low 0.5 carbon economy
Urbanisation
Increasing inequality
Political uncertainty
References 0.0 Temperature anomaly (C) anomaly Temperature
-0.5
1880 1900 1920 1940 1960 1980 2000 2020
Temperature anomaly refers to the departure from 1951-1980 average temperatures
Annual mean 5 years mean
Source – NASA’s Goddard Institute for Space Studies (GISS) Source: NASA’s Goddard Institute for Space Studies (GISS). Credit: NASA/GISS
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Number of disasters in the world (1980-2012) Technological change Number of natural disasters in the world (1980-2012) Globalisation 1200 Demographic change
Environmental sustainability 1000
Impact of climate change
Transition to low 800 carbon economy
Urbanisation 600 Increasing inequality
Political uncertainty 400
References
200
0
1982 1980 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
Geophysical Meteorological (storms) Hydrological(floods) Climatological (temperature anomaly)
Source – Munich Re (2012)
Source: Munich Re
94 Future of Skills
Technological change Impact of climate change Globalisation
Demographic change Climate change has wide-ranging Environmental consequences which impact on sustainability many industries. Impact of climate change • Increased severity of natural disasters. Transition to low carbon economy • Environmental changes like desertification Urbanisation and loss of biodiversity.
Increasing inequality • Higher heating and cooling costs. Political uncertainty • Declines in labour productivity. References Agriculture, tourism, insurance, forestry, water, infrastructure and energy directly affected, though linkages with socio-economic and technological systems mean that risks can accumulate, propagate and culminate in larger impacts (See figure on ‘Global risks interconnections map’).
Economic stakes huge: damage from climate change could shave 5 per cent-20 per cent off global GDP p.a. by 2100 according to Stern Review, though estimates vary depending on sector, assumed damage function and discount rate.
95 Future of Skills
Technological change Global risks interconnections map
Globalisation
Demographic change
Environmental sustainability
Impact of climate change
Transition to low carbon economy
Urbanisation
Increasing inequality
Political uncertainty
References
Source – WEF (2016)
96 Future of Skills
Technological change Impact of climate change Globalisation
Demographic change Massive implications for insurance strategies Environmental sustainability • Some regions may be able to adapt to changes
Impact of climate change in temperature and precipitation by adopting farming practices from warmer or drier climates Transition to low carbon economy i.e. more tolerant crops. May not be feasible for
Urbanisation regions already at climate thresholds.
Increasing inequality • Increase in extreme weather events may lead to higher insurance premia in vulnerable regions. Political uncertainty Natural catastrophe reinsurance demand could References increase by 50 per cent in developed markets and 100 per cent in emerging markets by 2020 (vs. 2012) (Swiss Re, 2016). (See chart on ‘Increasing trend of natural catastrophes over the last four decades’)
Opportunities but also challenges for insurers, notably capacity to assess and price financial risk (Bank of England, 2015; Bank of Canada, 2016). Also increases government contingent liabilities e.g., overall risk exposure of US National Flood Insurance Program increased four-fold from 1980 to $1 trillion in 2005.
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Technological change IncreasingIncreasing trend of natural trend catastrophes of natural over thecatastrophes last 4 decades over the last four decades Globalisation
Demographic change 450 Environmental 400 sustainability
Impact of climate change 350
Transition to low 300 carbon economy $ Billions 250 Urbanisation
200 Increasing inequality $ Billions
150 Political uncertainty
References 100
50
0
1972 1978 1982 1970 1974 1976 1980 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Total losses Insured loses Trend line (Total losses) Trend line (Insured losses)
Source: Swiss Re Sigma Source – Swiss Re Sigma
98 Future of Skills
Technological change Transition to low carbon economy Globalisation
Demographic change Meeting emissions reduction targets However, ‘dirty’ technologies continue to Environmental requires investment in low carbon have structural advantages: sustainability technologies and reducing fossil • Network effects and switching costs direct Impact of climate change fuel subsidies innovation efforts to improving dirty technologies Transition to low carbon economy LED lighting, onshore wind, solar PV, and hybrid and intermediate sources of energy e.g. carbon capture and storage, geoengineering and Urbanisation and electric vehicles stand out as technologies with most potential to disrupt markets and lower extraction of shale gas. Increasing inequality emissions in next 10-15 years. Adoption driven • Incumbent fossil fuel companies politically by falling costs e.g. global electricity generation Political uncertainty influential and make up sizeable proportion costs for new onshore wind farms and large References of public pension funds. solar panel plants fell by ~30 per cent and 65 per cent respectively between 2010 and 2015 (IEA, • Entrenched consumer behaviour particularly 2016). Prospect of large scale, distributed storage in areas such as heating and transport. capacity promises further efficiencies. • Market and policy support for new technologies Investments in green technology and infrastructure volatile e.g solar PV. (~$93 trillion through 2030E) present opportunities • Technology and sector-specific factors e.g. for finance e.g. $50-60 billion of green bonds issued bioenergy operates at major production levels in 2016. at comparable costs to fossil fuels, but causes UK enjoys comparative advantage in electric pollution and puts pressure on land devoted to vehicles and has potential innovation strengths producing food crops. in wind turbines (Zachmann, 2016).
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Technological change Low carbon technologies by market size and the three-year compound annual growth rate Globalisation (CAGR) Demographic change (3-year trailing volume growth CAGR indicated in)
Environmental Biomass sustainability Smart grid (6.8%) (5.7%)
Impact of climate change Nuclear (-1.7%)
Transition to low 1. Solar PV (36.3% CAGR) carbon economy
Urbanisation Hydro (3.5%) Increasing inequality
Political uncertainty
References CSP
Offshore wind 2. Onshore wind (10.3% CAGR) Geothermal 2nd gen biofuels 1st gen biofuels (4.3%) FCV
Stationary battery storage
CCS 3. Hybrids and EVs (32.3% CAGR) Smart appliances
Marine 4. LEDs (73.0% CAGR)
Source – Goldman Sachs (2016)
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Technological change Transition to low carbon economy Globalisation
Demographic change The implications for employment Environmental are ambiguous sustainability
Impact of climate change 1 Will the green economy create more jobs 2 How much of the economy and than it destroys? employment will be affected? Transition to low carbon economy For For Urbanisation Evidence that job gains in green sectors exceed Firm-level evidence that environment-related Increasing inequality losses in polluting sectors due to higher labour innovation has substantially larger spillovers intensity of green activities, particularly in than fossil-fuel technologies and even emerging Political uncertainty construction, manufacturing and installation. Many fields such as robotics, biotech and 3D printing, References activities non-tradable e.g. retrofitting buildings, meaning wider impacts for the economy (See implying greater share of overall spending and pages 37, 41, 36) (Dechezleprettre et al., 2013; job creation remains within country. Benefits Gagliardi et al., 2016). especially large for countries relying on imported Against oil and gas (Pollin, 2015). OECD (2012) estimates that by 2030, change in Against sectoral composition of employment will be minor Higher prices and costs for clean energy in (c.1-2 per cent of all jobs). medium term could reduce purchasing power of consumers, lowering aggregate demand.
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Technological change Transition to low carbon economy Globalisation
Demographic change In UK, ONS estimates that green economy Environmental contributed 357,200 full-time equivalent jobs sustainability in 2012, an increase of 5.3 per cent (18,000 jobs) Impact of climate change since 2010. Transition to low carbon economy Green jobs include
Urbanisation • Production of environmental goods such Increasing inequality as windmills and energy-efficient buildings.
Political uncertainty • Services such as recycling and work related to reducing emissions and energy and resource References consumption, such as environmental and work safety and facilities and logistics management.
102 Future of Skills
Technological change Transition to low carbon economy Globalisation
Demographic change National laws and regulations related to CO2 emissions Tackling climate change and transitioning National laws and regulations related Environmental to low-carbon economy is fundamentally to CO emissions sustainability 2 dependent on government 400 Impact of climate change Supportive regulation has grown across 350 Transition to low carbon economy major advanced and emerging economies. 300 In UK, 2008 Climate Change Act was first law Urbanisation 250 in world to set emissions reduction targets Increasing inequality (toughened by Parliament to ‘at least 80 per 200
Political uncertainty cent below 1990 levels by 2050’). It also created 150 five-yearly carbon budgets to help ensure cost- References 100 effective trajectory towards long-term goal. It operates one of the world’s toughest carbon 50
pricing schemes and has decided to phase out 0
4 4 coal by 2025. However, subsidies for wind and 0 1 5-09 10- 0 0 e 2000 2 for 2000- 20 solar have been scaled back. e B
Legibility Executive
SourceSou –rc Granthame: Grantham R eResearchsearch Institu tInstitute/LSEe/LSE (2015)
Database covers 99 countries (33 developed countries and 66 developing countries)
103 Future of Skills
Technological change Transition to low carbon economy Globalisation
Demographic change Policies for low carbon economy likely PricePrice of EU of carbon EU emission carbon allowance emission allowance Environmental to remain piecemeal over next 15 years sustainability
€18 Impact of climate change Efforts are likely to be: €16 Transition to low • Set nationally rather than multilaterally with €14 carbon economy China, EU and US key veto players. €12 Urbanisation €10 • Sector- and technology-specific, rather than Carbon price per tone Increasing inequality supported by comprehensive measures such €8 €6 Political uncertainty as carbon pricing. Where carbon pricing arrangements operate, they suffer from low €4 References price levels and limited emissions coverage. €2 €0 • Politically controversial and subject to change Nov 2010Feb 2011May 2011Aug 2011Nov 2011Feb 2012May 2012Aug 2012Nov 2012Feb 2013May 2013Aug 2013Nov 2013Feb 2014May 2014Aug 2014Nov 2014Feb 2015May 2015Aug 2015 (Pew 2015).
Source: Goldman Sachs International Energy Agency modelling of impact Source – Goldman Sachs (2016) of Paris Agreement - most important global deal since Kyoto Protocol - suggests that while commitments will slow global emissions growth, it will continue to rise towards 2030.
104 Future of Skills
Technological change Is climate change a very serious problem?
Globalisation
Demographic change
Environmental sustainability
Impact of climate change
Transition to low carbon economy
Urbanisation
Increasing inequality
Political uncertainty
References
The chart shows the percent of respondents across 40 countries who consider climate change is a very serious problem. A global median of 54 per cent consider it a very serious problem, compared with only 45 per cent in US and 41 per cent in UK. Pew (2015).
105 Future of Skills
Technological change Globalisation Urbanisation Demographic change
Environmental sustainability
Urbanisation
Latest wave of urbanisation
Growing demand for infrastructure
Increasing inequality Political uncertainty
References Future of Skills
Technological change Latest wave of urbanisation Globalisation
Demographic change Over half of world’s population now lives in Traditionally magnets for young, cities Environmental urban areas, up from 30 per cent in 1950 are greying: sustainability Number of over 65s in urban areas in OECD Urbanisation Context: pace of current wave of urbanisation without precedent - population in cities risen by countries grew 23.8 per cent over 2001-2011 Latest wave of urbanisation average of 65 million people p.a. over past 30 years. vs 18.2 per cent in non-urban areas. Growth in Growing demand older population contrasts with total population for infrastructure Led by emerging economies: increase in cities of just 8.8 per cent over same Increasing inequality • 17 of world’s 22 megacities – with >10 million period (OECD, 2015).
Political uncertainty populations – are in emerging economies; Cities need to review urban design to be attractive References • By 2030, eight of world’s 10 largest cities will for older populations e.g. greater emphasis on public be in emerging economies (UN, 2013). transport vs. private automobiles.
Cities also playing more important role in The world’s urban and rural populations, advanced economies: 1950-2030 7 Urban
In US, large metropolitan areas (>1 million 6 Rural inhabitants) have grown twice as fast as smaller 5 metropolitan areas (<250,000 inhabitants), while population living in non-metropolitan areas has 4 seen overall decline in recent years (Frey, 2013). 3
comparison images of shanghai 2 (millions) Population
1 Population (billions)
0
1970 1990 1950 2010 2030
Shanghai in 1990 vs. 2010 Source – UNDP (2014)
107 Future of Skills
Technological change Latest wave of urbanisation Globalisation
Demographic change Urbanisation brings with it important • Growing calls for authorities to build low-cost Environmental changes in industrial structure, new homes or introduce rent controls and sustainability employment, living environment improve public transport so that individuals Urbanisation and lifestyle can commute to high-growth areas. House prices Latest wave of urbanisation in South East would be 30 per cent lower than • Urban life offers greater and more varied today if planning regulation as permissive as in Growing demand consumption and employment opportunities. for infrastructure North East (Hilber and Vermeulen, 2016). (See Increasing inequality • Lack of decent affordable housing means figure on ‘Client group rate change in London, opportunities not even evenly distributed. In 2004-14’). Political uncertainty 2014, UK house prices per square metre were the • Medical conditions such as obesity and diabetes References second highest in the world, surpassed only by also linked to features of urban environments: Monaco. Average house price-earnings ratio (6.6) more high-calorie foods, more passive at highest level in eight years (Lloyds Bank, 2016). transportation, less open space, more mass (See figure on ‘The affordability gap‘) media and less work-related physical activity • For some, this means foregone spending on (worldwide obesity more than doubled over other essentials; for others, it limits affordable past 30 years). housing choices to suburbs or low income areas centred around declining industries (Dix-Carneiro, 2014).
108 Future of Skills
Technological change The affordability gap
Globalisation
Demographic change
Environmental sustainability
Urbanisation
Latest wave of urbanisation
Growing demand for infrastructure
Increasing inequality Political uncertainty
References
McKinsey Global Institute (2014): housing affordability gap is defined as the difference between the cost of an acceptable standard housing unit which varies by location and what households can afford to pay using no more than 30 per cent of income.
109 Future of Skills
Technological change Client group rate change in London, 2004-14
Globalisation
Demographic change
Environmental sustainability
Urbanisation
Latest wave of urbanisation
Growing demand for infrastructure
Increasing inequality Political uncertainty
References
Client group rate measures percentage of working-age people claiming one or more key Department for Work and Pensions benefits. While deprivation is still more concentrated centrally, percentage of most deprived areas is rising rapidly in suburbia. In London there are now more poor people living in outer boroughs than inner ones. Source: Smith Institute (2016)
110 Future of Skills
Technological change Latest wave of urbanisation Globalisation
Demographic change New innovation districts build on • Offices configured with flexible work spaces Environmental strengths of cities e.g. hackable buildings. sustainability
Urbanisation Cities conducive to high-value, • New forms of micro-housing (private spaces knowledge-intensive sectors: typically 300 to 600 square feet) with easy access Latest wave of urbanisation to larger public spaces. Growing demand • Proximity allows trust, collaboration and flow of for infrastructure ideas - benefits that dissipate rapidly with distance. • Growth of cafes, concerts and art shows providing Increasing inequality social context for interactions. • Large numbers of firms and workers for Political uncertainty improved labour pooling and matching. To date innovation districts remain a hypothesis, not a proven development strategy; though with References These features of cities particularly valuable in increasing competition for talent between cities, periods of ‘combinatorial innovation’ where different interest is likely to grow – along with potential for inputs - digital, material, process and artistic - can be blind duplication and overinvestment. combined to create new applications.
Urban planners are building these elements into Progress also depends on significant devolution fabric of cities via investment in innovation districts of budgetary and other powers to city-regions, that seek to integrate work, housing, and recreation. including a greater say for local employers in These include: shaping training and apprenticeships - an agenda that has been impeded by high levels of political and economic centralisation (Emmerich, 2017).
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Technological change Models of innovation district
Globalisation
Demographic change Name Characteristics Examples
Environmental sustainability Anchor plus Mixed-use developments centered around • Here East, London (key tenant - BT Sports) major institution i.e. research university or • Advanced Manufacturing Innovation District, Urbanisation research-oriented medical hospitals and University of Sheffield supportive base of firms, entrepreneurs and Latest wave of urbanisation spin-off companies. Typically found in city downtowns and mid-towns. Growing demand Reimagined urban areas Transformation of once industrial or warehouse • Media City, Manchester for infrastructure areas, enabled by availability of historic building • Bristol Temple Quarter stock, access to transport and proximity to • Custard Factory, Birmingham Increasing inequality downtown in high rent cities. Sometimes found Political uncertainty near or along historic waterfronts. Urbanised science park Leveraging innovation capabilities in suburban • Cambridge Science Park References and ex-urban areas that have traditionally been isolated and effectively ‘urbanising’ them with introduction of businesses, housing and restaurants.
Adapted from Katz and Wagner (2014)
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Technological change Growing demand for infrastructure Globalisation
Demographic change Cities becoming ‘smarter’, leveraging • Intel and San Jose (US) installing air quality, sound Environmental information generated by infrastructure and microclimate sensors to measure particulates sustainability to optimise performance in air, noise pollution, and traffic flow. Urbanisation History shapes design of cities e.g. European cities Smart cities likely to raise demand for digital Latest wave of urbanisation established mass rail transit systems at turn of 20th infrastructure, technology and engineering Growing demand services and urban planning (UK government for infrastructure Century, while Australia and US built automotive and suburban cities after WW2. expects global smart cities market to be over £245 Increasing inequality billion by 2020). Political uncertainty Today, cities are gearing up for more data-led development: This may imply lower fixed investment relative to References previous episodes of urbanisation as technology • Bristol (UK) has introduced two city-wide enables assets to be used more efficiently. projects - Bristol is Open and SPHERE to monitor interactions, opening up ~200 of city’s data sets on traffic flows, energy use, crime and health. It has also built tools to simulate other cities to improve learning.
Smart cities may need less commercial Transport and energy will still likely require real estate per capita e.g. retail, offices and significant capital outlays, notwithstanding bank branches owing to online alternatives changes in materials, civil construction and better and telecommuting. In areas such as digital information flow. Cities with legacy investments infrastructure, greenfield cities may be able to may find it harder and costlier to upgrade. leapfrog to cheaper and newer technologies.
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Technological change Growing demand for infrastructure Globalisation
Demographic change The smart cities agenda has Environmental increasingly come to focus on sustainability sustainability and resilience. Urbanisation • This is often played out through environmental Latest wave of urbanisation consideration and innovations. Growing demand for infrastructure • European cities produce most waste per capita Increasing inequality at 511kg compared with 465kg in Latin America and 405kg in Africa. Political uncertainty
References • US and Canadian cities recycle more than European cities at 26 per cent compared to 18 per cent of waste.
• Scope for additional policy focus and investment in ‘greening’ of both US and Canadian and European cities.
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Technological change Libelium Smart World
Globalisation Source – Siemens Green City (2015)
Demographic change CO2 Emissions: The US & Canada Index cities have
higher per capita CO2 emissions the Europe and Environmental Asia combined sustainability
Urbanisation
Latest wave of urbanisation
Growing demand for infrastructure
Increasing inequality Political uncertainty
References
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Technological change Growing demand for infrastructure Globalisation
Demographic change Infrastructure investment as percentage UK gross government investment in infrastructure Environmental of GDP has declined in UK and US lower than peers but has picked up since 2013. sustainability Levels remain low even after accounting for Emerging economies projected to account for 60 Urbanisation rising private spending following privatisation and per cent of global infrastructure investment (~$2 Latest wave of urbanisation liberalisation of the 1980s (OECD, 2015). trillion per annum) 2016-20; however, advanced Growing demand for infrastructure economies also face challenges.
Increasing inequality Gross government fixed capital formation Political uncertainty Gross government fixed capital formation
References 7 United Kingdom 6 United States 5 France 4
3
2
Percentage of GDP of Percentage 1 0
1971 1980 1990 2000 2010
Source – OECD (2015)
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Technological change Growing demand for infrastructure Globalisation
Demographic change Quality of infrastructure deteriorating too McKinsey Global Institute (2016) estimates that Environmental UK and US will need to raise infrastructure sustainability In UK, roads and railways are perceived to be of spending by 0.4 and 0.7 percentage point of GDP low quality; despite progress in rollout of high- Urbanisation respectively each year to support current growth speed digital services, it trails leading countries in Latest wave of urbanisation projections. the uptake of fast and ultrafast fixed broadband. Growing demand for infrastructure Electricity generating market viewed as providing poor value for money. Increasing inequality Political uncertainty
References Quality of overall infrastructure, 2015-2016, 1 to 7 (best)
7.0 2015-2016 2005-2007
6.5
6.0
5.5
5.0
4.5
Japan Spain Finland France Sweden Norway Belgium Australia Germany Denmark Switzerland Netherlands South Korea United States United Kingdom Source – WEF
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Technological change InfrastructureInfrastructure quality quality vs. Spending vs. spending
Globalisation 1.2 Demographic change High quality, high spending High quality, low spending 0.8 Japan Environmental Spain France Austria sustainability Switzerland 0.4 China Indonesia United Arab Emirates Germany Urbanisation Canada India 0 Latest wave of urbanisation Sweden United Kingdom Zimbabwe Growing demand United States -0.4 for infrastructure Australia Saudi Arabia Increasing inequality -0.8 Italy
Quality relaive to income Index to relaive Quality Norway Political uncertainty Low quality, high spending Brazil Low quality, low spending -1.2 References -3.0 -1.5 0 1.5 3.0
Infrastructure spending gap % of GDP
Source – McKinsey Global Institute (2016) Difference between historical spending levels from 2008-13 and the investment spending as a share of GDP that will be needed in 2016-30
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Technological change Growing demand for infrastructure Globalisation
Demographic change Over next 15 years, ongoing debates about Impacts: Environmental role of fiscal policy will shape outlook for Closing UK infrastructure gap in next 15 years sustainability infrastructure investment would have powerful stimulus effect, assuming Urbanisation project pipeline and regulatory barriers are Austerity and concerns about debt sustainability Latest wave of urbanisation addressed (McKinsey Global Institute, 2016). have limited scope for fiscal policy. However, signs Growing demand However, looking ahead, how much investment for infrastructure that fiscal easing is moving up political agenda, prompted by: occurs constrained by competing calls on public Increasing inequality purse, lack of political consensus and difficulties • Continued slow growth. Political uncertainty in making cost-benefit case for next-generation infrastructure. Support for additional spending on References • Low borrowing costs. research, expansion of benefits for low- and middle- • Recognition of limits and risks of further income households combined with steps to offset monetary stimulus. age-related spending may have more traction. • Growing appetite for infrastructure projects from institutional investors.
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Technological change Globalisation Increasing inequality Demographic change
Environmental sustainability
Urbanisation
Increasing inequality
Inequality and its drivers
Macro and microeconomic impacts
Political uncertainty
References Future of Skills
Technological change Inequality and its drivers Globalisation
Demographic change Gap between rich and poor in advanced Middle class squeeze: Environmental economies highest in decades: ex-President Distribution of labour income has shifted towards sustainability Obama’s ‘defining challenge of our times’ higher and lower ends of distribution, squeezing Urbanisation income share going to middle. Measures of overall inequality based on Gini Increasing inequality coefficients of incomes have increased since Being in work not necessarily a guarantee Inequality and its drivers mid-80s in most developed economies, though against poverty: Macro and microeconomic have levelled off more recently. Evidence finds that In UK, two-thirds of children growing up in poverty impacts two-thirds of this increase arises from growing wage live in household where at least one parent works Political uncertainty gap between high-paying and low-paying firms. (IFS, 2016).
References Top 1 per cent has experienced largest gains: In UK and US, share of income more than doubled since 1980 to around 15 per cent.
Picture even starker with respect to wealth: Top 1 per cent’s share of wealth now around one-third – more than bottom half of population put together. Wealth dynamics are driven largely by increases in house prices.
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Gini coefficients of income inequality, mid-1980s and 2013, or latest date available Technological change Gini coefficients of income inequality, mid-
Globalisation 1980s and 2013, or latest date available
Demographic change Increase Little change Decrease
Environmental 0.50 sustainability
Urbanisation 0.45
Increasing inequality 0.40 Inequality and its drivers
Macro and microeconomic 0.35 impacts
Political uncertainty 0.30
References 0.25
0.20
0.15
Italy Israel Japan France Turkey Norway FinlandSweden Canada Mexico Greece Denmark HungaryGermany Australia OECD22 Belgium Netherlands Luxembourg New Zealand United States Czech Republic United Kingdom
1985 2013 or latest
Source – OECD
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Technological change TopTop 1% 1 perand bottom cent 90%and of bottom wealth distribution, 90 per cent 1980-2010 of Globalisation wealth distribution, 1980-2010
Demographic change Top 1 per cent Bottom 90 per cent
Environmental 0.40 0.50 sustainability 0.45 0.35 Urbanisation 0.40 Increasing inequality 0.30 0.35 Inequality and its drivers 0.25 0.30 Macro and microeconomic impacts 0.20 0.25
Political uncertainty 0.20 0.15
References 0.15 0.10 0.10
0.05 0.05
0 0
France United United France United United States Sweden Europe States Sweden Europe Kingdom Kingdom
1980 2010
Source – IMF (2015)
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Technological change Inequality and its drivers Globalisation
Demographic change A number of factors have driven this Uncertain outlook for future investment returns Environmental higher inequality may also limit inequality (financial and real assets sustainability disproportionately owned by the rich). Urbanisation • Rising skills premia. Overall, good reasons to think inequality will • Superstar effects supported by technology Increasing inequality persist - history suggests delivering deep and allow top performers to capture larger share Inequality and its drivers lasting reductions in inequality may be difficult of returns. Macro and microeconomic in the absence of violent shocks (Scheidel, 2017). impacts • Rising concentration and monopoly power in Still inequality is becoming harder Political uncertainty sectors like finance and insurance, retail and to ignore politically: References transport accounting for higher profit share, and supported by lower rates of firm entry. • Consider growing interest in radical ideas such as basic income e.g. pilots in Finland • Declining unionisation. and Utrecht. • Regressive taxation.
• Changes in corporate governance favouring executives.
However, changing demographics may work against rising inequality in future:
• Larger labour force in 1970s and ’80s, underpinned by integration of low- and middle- income countries into global economy, drove real wages lower and inequality higher in advanced economies. As labour force ages and labour force growth weakens, real wage growth may increase.
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Technological change Macro and microeconomic impacts Globalisation
Demographic change Macroeconomic relationship between Social mobility: Environmental inequality and growth contested - recent Lower-income households may be unable to sustainability studies highlight costs of rising inequality afford higher education resulting in less human Urbanisation capital accumulation. Countries with higher levels Channels highlighted in literature include: Increasing inequality of income inequality tend to have lower levels of mobility between generations with implications for Inequality and its drivers Sustainability: Unequal societies can enjoy spells of rapid growth; efficient allocation of talent.(See chart on ‘Income Macro and microeconomic impacts however, these tend to be shorter-lived. Regions equality and social mobility’)
Political uncertainty and countries with high levels of inequality may be more divided and less able to deal with external References shocks. (See chart on ‘Effect of increase of different factors on growth spell duration’)
Demand: Affluent households have lower propensity to consume which means that higher inequality may dampen aggregate consumption, which may in turn disincentivise innovation. This economic drag may have been concealed in past by unsustainable expansion in credit among lower income groups.
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EFFECT OF INCREASE OF DIFFERENT FACTORS ON GROWTH SPELL DURATION Technological change Effect of increase of different factors on growth spell duration Globalisation
Demographic change External debt Environmental sustainability Exchange rate competitiveness Urbanisation
Increasing inequality Foreign direct investment Inequality and its drivers
Macro and microeconomic impacts Political institution Political uncertainty
References Trade openness
Income equality
0 10 20 30 40 50 60
Per cent change in expected growth duration
Source – Berg and Ostry (2011) For each variable the length of the bar shows the percentage increase in growth spell duration resulting from an increase in that variable from the 50th to the 60th percentile, with other variables at the 50th percentile. A 10 percentile improvement in the Gini coefficient from 0.40 to 0.37 increases the expected length of a growth spell by 50 per cent.
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Technological change Income equality and social mobility
Globalisation 0.5 Italy United Kingdom Demographic change United
Environmental France States sustainability 0.4 Urbanisation
Increasing inequality Japan Intergenerational Germany Inequality and its drivers earnings elasticity, 1960s-1960s -1990s 0.3 New Zealand Macro and microeconomic (less mobility) Sweden impacts Canada Australia Political uncertainty
1960s-1990s (less mobility) 0.2 References Intergenerational earning elasticity, Norway Finland Denmark
0.1 20 25 30 35
Income inequality, 1980s (more mobility )
Source – Corak (2013)
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Technological change Macro and microeconomic impacts Globalisation
Demographic change Increasing inequality will have This may have tempered non-housing Environmental microeconomic implications too consumption growth among lower income groups. sustainability Product categories that would benefit most • Increasing inequality and poverty may contribute Urbanisation strongly from a more widely shared recovery to greater health and social Increasing inequality include food for off-premise consumption, problems, raising demand for healthcare vehicles, recreational goods, healthcare, Inequality and its drivers and social services. clothing and footwear. Macro and microeconomic impacts • Occupations dedicated to protecting property rights and managing conflict like police, lawyers Political uncertainty and security larger in countries with higher levels References of income inequality (Bowles, 2012).
• Increasing disparities in income mirrored by disparities in consumption, particularly of non- durables and services such as education and childcare (Aguiar and Bils, 2015).
• Lower income groups have seen disposable incomes rise slightly since financial crisis, in contrast to higher income groups. Rent, however, has increased as percentage of household income, eating into disposable income.
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Technological change Globalisation Political uncertainty Demographic change
Environmental sustainability
Urbanisation
Increasing inequality
Political uncertainty
Economic impacts of uncertainty
Rising political uncertainty?
Drivers of policy uncertainty
References Future of Skills
Technological change Economic impacts of uncertainty Globalisation
Demographic change Decisions that impact on labour markets • Way in which managers are remunerated may Environmental sensitive to domestic political and amplify negative effects of uncertainty. Evidence sustainability geopolitical uncertainty suggests that when equity-based compensation Urbanisation becomes more important - exposing managers • Uncertainty increases cost of capital, which Increasing inequality to greater firm-specific risks - investment falls lowers desired capital stocks and investment. (Panousi and Papanikolaou, 2012). Political uncertainty • Uncertainty also creates an option value for Economic impacts agents of waiting to invest in cases where of uncertainty economic decisions involve sunk costs, such as Rising political uncertainty? when firms delay investing in new technologies, Drivers of policy uncertainty households put off purchasing big ticket items References and individuals are reluctant to invest in cutting- edge skills. Decisions that can be more easily reversed will be less affected: uncertainty tends to have greater impact on business investment than employment.
• Uncertainty also harms productivity by hindering reallocation of resources from low to high productivity firms.
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Technological change Rising political uncertainty? Globalisation
Demographic change Indicators of geopolitical uncertainty have doubled after 9/11 Environmental sustainability Heightened geopolitical risks even if terms related Urbanisation to terrorism and Middle East are excluded. Sectors Increasing inequality like oil and gas, aviation and tourism particularly exposed to geopolitical instability. Political uncertainty Benchmark geopolitical risk index Caldara and lacoviello (2016)
Economic impacts of uncertainty Benchmark Geopolitical Risk Index
Rising political uncertainty? 500 Iraq Transatlantic Drivers of policy uncertainty Gulf War 9/11 invasion aircraft plot Ukraine/ISIS TWA/Air India hijackings References 400 Madrid bombings US bombs Paris Libya attacks 300 London Kuwait USS Cole bombings Index invasion bombings (2000-2009=100)
200 Index (2000-2009=100)
100
0
1991 2011 1985 1987 1989 1993 1995 1999 2001 2003 2005 2007 2009 2013 1997 2015
Source – Caldara and Iacoviello (2016). Index based on references in 11 newspapersSource: to 99Index phrases computed related based on to references actual ingeopolitical 11 newspapers events to 9 phrases: and geopolitical risk(S), geopolitical tension(s), geopolitical uncertainty(ies), geopolitical concern(s), war risk(s), (or risk(s) of (a) war), military threat(s), terrorist act(s), and (Middle East and tensions) geopolitical threats
131 Future of Skills
Technological change Rising political uncertainty? Globalisation
Demographic change Three-fold increase in policy uncertainty Environmental post-financial crisis in UK sustainability
Urbanisation Rising policy uncertainty refers to the weakening in remits, frameworks and institutional structures that Increasing inequality enable authorities to act credibly and consistently. Political uncertainty Evidence suggests that migration-related fears Economic impacts of uncertainty spillover into policy uncertainty. Since 2005, these fears have trended upward strongly. Measures of Rising political uncertainty? migration fear today twice as high as they were in Drivers of policy uncertainty late 1990s - period that coincided with Kosovo War References and refugee crisis as well as Tony Blair’s promise of tougher immigration controls (Bloom et al., 2016).
Rising populism e.g Brexit and President Trump election has reinforced both these trends.
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United Kingdom economic policy uncertainty: all and Brexit/EU Technological change United Kingdom economic policy uncertainty:
Globalisation all Brexit/EU
Demographic change 500 Brexit Environmental Eurozone sustainability crises
Urbanisation 400
Lehman Increasing inequality General Treaty of Brothers Scottish election Accession/ failure and independence 300 Political uncertainty Golf War II financial referendum Policy crisis Economic impacts uncertainty index Northern Rock of uncertainty and Global 200 9/11 and financial Rising political uncertainty? Afghanistan crisis
Drivers of policy uncertainty Policy uncertainty index
References 100
0
2000 2003 2006 2009 2012 2015
All economic policy uncertainty Brexit/EU economic policy uncertainty
Source – Baker, Bloom and Davis (2016)
UK post-2001 index constructed from daily count of articles from 650 national and local UK newspapers that contain terms related to economics, uncertainty, and policy terms like ‘deficit’, ‘regulation’, or terms relating to fiscal and monetary policy.
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Technological change Rising political uncertainty? Globalisation
Demographic change This depresses economic activity in Policy uncertainty may also threaten trade: 1 per Environmental sectors that are capital-intensive and/or cent increase in uncertainty is associated with a sustainability exposed to government 0.02 pp. reduction in goods and services trade Urbanisation volume growth (Constantinescu et al., 2017). An increase in policy uncertainty comparable Increasing inequality to that experienced from 2005 to end-2011 is Political uncertainty associated with the following impacts:
Economic impacts of uncertainty • 1.2 per cent decline in industrial production.
Rising political uncertainty? • 6 per cent decline in gross investment.
Drivers of policy uncertainty • 0.5 per cent decline in employment References (Baker, Bloom and Davis, 2016).
Declines bottom out after 12-18 months and converge only slowly back to trend.
Impacts of increased uncertainty largest in sectors like defence, finance, construction, engineering and healthcare that require extensive investment commitments and/or have high government exposure.
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Technological change Drivers of policy uncertainty Globalisation
Demographic change Growth in government spending, taxes, Policymakers’ actions can become more Environmental sustainability and regulation, while often beneficial, can uncertain in times of trouble. When economy raise policy-related uncertainty by adding to doing well, governments prefer to stick with Urbanisation complexity of environment in which businesses policies which appear successful. When Increasing inequality make decisions. conditions weaken, they may look to experiment Political uncertainty with new ways to restore growth.
Economic impacts of uncertainty
Rising political uncertainty? Growing interconnections and interdependencies Geopolitical landscape characterised by a greater Drivers of policy uncertainty in global economy mean there are multiple distribution of power that has strained the References pathways through which risks can spread when capacity of the international system to provide systems fail. The ubiquity of communications public goods and respond effectively to a host of mean that people can mobilise and ideas spread security and economic challenges. across borders with much greater speed e.g. Arab Spring.
Sources — OECD (2011) Pastor and Veronesi (2012) Davis (2015)
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Technological change Drivers of policy uncertainty Globalisation
Demographic change Political institutions can drive Proportionality of elections over time Environmental policy uncertainty sustainability 100
Urbanisation Political landscape in UK less polarised than US, 95 but may hide deep divisions: main parties have in Increasing inequality 90 recent years elected moderate leaders. However,
Political uncertainty centrism leaves many voters without voice and 85 Proportionality Economic impacts dissatisfied as seen in falling levels of election 80 of uncertainty turnout, party membership and trust in politicians 75 Rising political uncertainty? (Ford, 2014). 70 Drivers of policy uncertainty Problem exacerbated by first-past-the-post voting 1950 1951 1955 1945 1959 1964 1966 1970 1974 1979 1983 1987 1992 1997 2001 2005 2010 2015 References which struggles with an electorate wanting to back Election more and more parties over time. Source – Blumenau et al., (2015) The chart shows the ‘proportionality’ of elections in the UK since 1945: Electoral landscape also dominated by safe seats, where a score of 100 means that each party wins exactly the same proportion of seats in the House of Commons as its proportion of votes with little competition for votes within them. With little ability to shape outcomes, voters may have few incentives to become informed about choices ‘Do you think that British politicians are out (Milazzo, 2015). merely for themselves, for their party, or to do their best for their country?’ Danger that if political and economic differences Themselves 48 are suppressed, may generate disaffected voters Their party 36 38 35 Their country and insurgent politicians, who react against a 28 30 22 22 system which they perceive as not reflecting their 10 interests, raising policy uncertainty e.g. Brexit. 1944 1972 2014 Source – Jennings et al., (2014) Survey question originally asked by Gallup in 1944 and replicated by YouGov/University of Southampton.
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Technological change References Globalisation Technological change Demographic change Acemoglu, D., Autor, D., Dorn, D., Hanson, G. and B. Price (2014) Berger, T. and Frey, C.B. (2015) ‘Industrial Renewal in the 21st Century: Environmental ‘Return of the Solow Paradox? IT, Productivity, and Employment in US Evidence from US Cities?’, Oxford Martin School Working Paper. American Economic Review: Papers & Proceedings sustainability Manufacturing’, 2014, 104(5): 394–399. Bessen, J. (2015), Learning by Doing: The Real Connection between Innovation, Wages, and Wealth, Yale University Press, New Haven. Urbanisation Acemoglu, D. and P. Restrepo ‘The Race Between Machine and Man: Implications of Technology for Growth, Factor Shares and Employment’, Bloom, N., Jones, C., Van Reenan, J. and Webb, M. (2016) ‘Are Ideas Increasing inequality NBER Working Paper No. 22252. Getting Harder to Find?’, mimeo.
Political uncertainty Armstrong, S., Sotala, K. and S. O’Heigeartaigh (2014) ‘The errors, Bix, A. Inventing Ourselves Out of Jobs?: America’s Debate over insights and lessons of famous AI predictions - and what they mean Technological Unemployment, 1929-1981, Johns Hopkins University References for the future’, Journal of Experimental & Theoretical Artificial Intelligence, Press.Blackrock Investment Institute (2014) ‘Interpreting Innovation’. Volume 26, Issue 3. Technological change Bonnefon, J.,Shariff, A. and I. Rahwan (2015) ‘The social dilemma of Arntz, M., Terry, G. and U. Zierahn (2016) ‘The Risk of Automation autonomous vehicles’, Science, Vol. 352, Issue 6293, pp. 1573-1576. Globalisation for Jobs in OECD Countries: A Comparative Analysis’, OECD Social, Employment and Migration Working Papers. Botsman, R. and R. Rogers (2011) What’s Mine Is Yours: The Rise of Demographic change Collaborative Consumption, HarperCollins Business Environmental sustainability Autor, D., Levy, F. and R. Murnane (2003) ‘The Skill Content of Recent Technological Change: An Empirical Exploration,’ The Quarterly Journal Brynjolfsson, Erik, Hitt, Lorin M., and Yang, Shinkyu (2002). ‘Intangible Urbanisation of Economics, 118(4): 1279–1333. Assets : Computers and Organizational Capital,’ Brookings Papers on Economic Activity no. 1, 137-81. Increasing inequality Autor, D. (2015), ‘Why Are There Still So Many Jobs? The History and Future of Workplace Automation’, Journal of Economic Perspectives, Brynjolfsson, Erik and Andrew McAfee (2014), The second machine age: Political uncertainty 29(3), pp. 3-30. work, progress, and prosperity in a time of brilliant technologies, WW Norton & Company. Baumol, W., Malach, M., Pablos-Mendez, A., Wu, L. and D. De Ferranti (2013) The Cost Disease: Why Computers Get Cheaper and Health Care Carson, R. (2016) ‘Estimating the biotech sector’s contribution to the US Doesn’t, Yale University Press. economy’, Nature Biotechnology 34 pp. 247–255.
Becker, S. and M. Muendler (2015), ‘Trade and tasks: An Exploration Caselli, Francesco (1999) ‘Technological Revolutions,’ American Economic over Three Decades in Germany’, Economic Policy, 30(84): 589-641. Review, 89(1): 78–102.
Beaudry, P., Green, D and B. Sand (2016) ‘The Great Reversal in the Comin, D. and B. Hobijn (2009) ‘Lobbies and technology diffusion, The Demand for Skill and Cognitive Tasks,’ Journal of Labor Economics Review of Economics and Statistics’, 91(2): 229-244. Vol.34, no.1 pp.199-247. Comin, D. and M. Mestieri (2013) ‘Technology Diffusion: Measurement, Berg, M. (1980) The Machinery Question and the Making of Political Causes and Consequences’ NBER Working Paper No. 19052. Economy, 1815–1848, Cambridge University Press
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Technological change References Globalisation Technological change Demographic change DARPA (2016) ‘Fun LoL to Teach Machines How to Learn More Efficiently’. Government Office of Science (2014) ‘The Internet of Things: Making Environmental David, P. and G. Wright (2003) ‘General Purpose Technologies and the Most of the Second Digital Revolution: A report by the UK sustainability Productivity Surges: Historical Reflections on the Future of the ICT Government Chief Scientific Adviser’. Revolution’ in The Economic Future in Historical Perspective, eds. Paul A. David and Mark Thomas, Oxford University Press. Graetz, G. and G. Michaels (2015) ‘Robots at Work’, CEPR Discussion Urbanisation Paper 10477. Davis, E, and G. Marcus (2015) ‘Commonsense Reasoning and Increasing inequality Commonsense Knowledge in Artificial Intelligence’,Communications of Gregory, T., A. Salomons, and U. Zierahn (2016) ‘Technological Change the ACM, Vol. 58 No. 9, Pages 92-103. and Regional Labor Market Disparities in Europe’, Centre for European Political uncertainty Economic Research. Deming, D. (2015) ‘The Growing Importance of Social Skills in the Labor References Market’, NBER Working Paper No. 21473. Haldane, A. (2017) ‘Productivity puzzles’, Speech given at the London School of Economics. Technological change Doucouliagos, H. and P. Laroche (2012) ‘Unions, Innovation, and Technology Adoption: New Insights from the Cross-Country Evidence’, Haltiwanger, J. (2012) ‘Job Creation and Firm Dynamics in the United Globalisation Working Paper. States’ chapter in Lerner, J and S. Stern, eds. Innovation Policy and the Economy, Volume 12, NBER. Demographic change Farrell, D. and Greig, F. (2016) ‘Paychecks, Paydays, and the Online Environmental sustainability Platform Economy: Big Data on Income Volatility’ JP Morgan Chase & Handel, Michael (2012) ‘Trends in Job Skill Demands in OECD Countries, Co. Institute. OECD Social, Employment and Migration Working Papers. Urbanisation Fernald, J. (2014). Productivity and Potential Output Before, During, and Harris, S. and A. Krueger (2015) ‘A Proposal for Modernizing Labor Increasing inequality After the Great Recession, NBER Working Paper No. 20248. Laws for Twenty-First-Century Work: The ‘Independent Worker’’, The Hamilton Project. Political uncertainty Frey, C.B. and M.A. Osborne (2013), The Future of Employment: How Susceptible are Jobs to Computerization?, Oxford Martin School Hendel, Igal and Yossi Spiegel (2014) ‘Small Steps for Workers, a Giant Working Paper. Leap for Productivity’, American Economic Journal: Applied Economics, Vol. 6 No.1 pp. 73-90. Goldin, Claudia and Lawrence F. Katz (2008) The Race between Education and Technology, Harvard University Press: Cambridge. Hoffman, W., and L. Furcht (2014)The Biologist’s Imagination: Innovation in the Biosciences, Oxford University Press. Goldman Sachs (2016) ‘Data is Everywhere’, Fortnightly Thoughts, Issue 111. Holzer, H. (2015) ‘Job Market Polarization and U.S. Worker Skills: A Tale Goos, M., Konings, J. and M. Vandeweyer (2015), ‘Employment growth of Two Middles’ Brookings Institution Economic Studies. in Europe: The roles of innovation, local job multipliers and institutions’, Utrecht School of Economics Discussion Paper Series, Vol. 15/10, Inanc, Hande, Felstead, Alan, Gallie, Duncan and Francis Green (2012) Utrecht. ‘Job Control in Britain First Findings from the Skills and Employment Survey 2012’. Gordon, R. (2016) The Rise and Fall of American Growth: The U.S. Standard of Living since the Civil War, Princeton University Press.Volume 12, NBER.
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