The future of jobs is a serious concern.
The most popular opinion I’ve seen is that the answer is more education. Consider, though, that we are in a period in which historically high levels of the population have some amount of postsecondary education. Yet, less than half the population (about 42%) has at least an associate’s degree, and only about a third of the population has at least a bachelor’s degree. How much higher is it realistic to think these levels can actually go? Not to mention that student debt has reached massively unsustainable levels ($1.3 trillion).
So then what about the other half of the population?
I recently did an analysis of changes in employment by firm size over the past few decades. My analysis showed that
- Increasing percentages of employees have been employed in large firms, at the expense of employees in small firms.
- New firm creation has increasingly come from openings of smaller firms, while consolidation has been rampant among the largest firms.
- The economy has become less dynamic than it was during the 1990s, with relatively greater decreases in job activity at smaller firms.
Taken overall, the data are consistent with economic/market conditions that
- Are less hospitable to firms overall, and
- Favor small firms for new innovations, but large firms for continued market success.
Factors consistent with this environment include
- More regulations, capture by special interests, and/or uncertainty over-all that inhibit business activity;
- Regulations, capture by special interests, and/or uncertainty that favor large firms over small firms (e.g., Obamacare, bank regulations that favor large and/or less risky loans over small/more risky loans, minimum wage laws, etc.);
- Bureaucracy in larger firms that prevents new ideas from developing and/or gaining traction; and
- Markets characterized by economies of scale, network effects, and/or winner-take-all effects.
I also did an analysis of changes in job counts by occupation between 2000 and 2015. That analysis provided the following results:
- The subcategories with the largest job gains are in the
- Food Services: Fast Food Workers, Food Servers, Cooks
- Personal Care Aides
- Medical/Health Services: Nurses and Health Workers
- Retail Sales and Customer Service
- The subcategories with the largest job losses are in the Production, Construction, and Business Services areas.
- Transportation Occupations are a large but shrinking category of employment.
- Education, Financial Services, and Computer Services and Support Occupations employ moderate, but growing numbers of employees
- Personal Services and Art & Entertainment Occupations employ small, but growing numbers of employees
This is consistent with everything else you’ve seen on how the economy has been shifting away from production and towards services.
What I found interesting, though, about my analysis of job changes is this. The analysis includes only those jobs captured by the Bureau of Labor Statistics (BLS), and there is reason to believe that there are a nontrivial number of private jobs that are not being captured in the BLS data. For example:
- According to one source, as of Oct 2015, Uber had “327,000 active drivers on the road in the U.S.” Considering that the BLS reports 180,960 Taxi Drivers and Chauffeurs in 2015, it is clear that the BLS is not capturing most Uber drivers. And there are many other gig jobs currently in the economy, most of which are probably also not being captured. See, for example, “Top 100 On Demand Jobs Like Uber And Sites Like Airbnb.”
- There are a lot of small producers (see, for example, Jeffrey Sparshott, “Big Growth in Tiny Businesses”) in the economy, many of whom are likely not captured by the BLS.
- The shadow economy (jobs not reported to the government to avoid taxes and/or regulations) has been growing. By definition, these jobs are not being captured by the BLS. See, for example, Brad Plumer, “The $2 trillion shadow economy is the recession’s big winner.”
Based on all this information, I think the future of employment lies in three basic forms.
1. Large Firms will continue to provide products and services at scale, especially those offerings that are characterized by economies of scale and winner-take-all effects.
2. Platforms and value networks will enable the distribution of
a. Mass-produced items by large firms, where technological advances will create increasingly efficient mass-produced products and services; and
b. Gig Economy products and services provided by small providers, where technological advances will enable these providers to create increasingly specialized and customized offerings.
3. Small Business, which will continue to create new firms and experience high churn, but that will serve as the seeds of growth for larger companies.
Now imagine what would happen if…
…Regulations making it oppressive for workers to participate in the formal economy were minimized
…Resources were made available to people who wanted to work
Basic Supplies, Tools, and Machinery
…People were enabled, encouraged, and set free to hack, jigger, experiment, explore, create
What would emerge?
I believe in the beauty of human ingenuity, the ability of people to make things happen, and the phenomenon of emergence.
I believe if we create the right environment and set people free to do what they can do, we will be amazed at what happens.