Jobs of the future? Get set to create them for yourselves
Linda Lim and Benjamin Goh For The Straits Times JAN 25, 2017
Singapore needs to steer clear of Trump's way of saving jobs
and focus instead on home-grown enterprise and the region's growth. US President Donald Trump has focused on the need to
"bring jobs back to America", and some US multinationals (Carrier,
Ford, Sprint) claim they are doing just that. But are jobs really being
created, and are they jobs of the future, or of the past?
"Reshoring", or returning offshore production to
the intended final market, has already been happening in response to market
forces of globalisation and technological change, and as more local governments
lure corporate investment with competitive tax breaks and infrastructure
subsidies (as the state of Indiana did to retain Carrier).
But such non-market "job creation" also causes job
loss, as higher costs to taxpayers and consumers, or reductions in other
beneficial public expenditures due to lost tax revenues, reduce real incomes
and thus demand and job creation in other sectors.
Higher costs due to reshoring would also encourage
technological upgrading, chiefly automation substituting machinery for labour.
As President Barack Obama noted in his farewell speech in Chicago: "The
next wave of economic dislocations won't come from overseas. It will come from
the relentless pace of automation." Any new jobs are likely to require
scarce higher skills, necessitating an increase in immigration, which Trump
voters oppose - "jobs for whom" matters more than just jobs per se.
Then there is the very real risk that the jobs "brought
back to America" are jobs of the past, not of the future, and will not
last long anyway.
The prime example here is the car industry, which Mr Trump
criticises for manufacturing in Mexico to export to the US. As comparative
advantage dictates, car parts and models made in Mexico are more
labour-intensive and less profitable than those made in the US. Taxing American
consumers by imposing punitive tariffs on imports from Mexico, or "returning"
production to the higher-cost US, would simply raise prices to US car buyers,
disproportionately hurting lower-income consumers who are more price-sensitive.
Consumers will have less income to spend on other domestically produced goods
and services - for example, haircuts, restaurant meals or gym memberships - or
will buy fewer cars. In either case, jobs will be lost (or not created).
Besides increasing automation to reduce costs, car companies
would accelerate investment in new technologies like self-driving cars, just as
they have invested in the ride-sharing companies Uber and Lyft. Fewer cars
would be produced, each with fewer workers, and jobs would be lost not only in
the factory, but also among drivers.
RELEVANCE TO SINGAPORE
Why does this matter to Singapore?
Why does this matter to Singapore?
Like the US, we are a high-income, high-cost country facing
competition from lower-cost neighbouring countries in labour-intensive,
lower-tech tradable goods like manufactures. Unlike the US, we do not have a
large domestic market that would spur innovation and incentivise domestic
production. We also do not have local companies that are large global players
in particular market segments that could locate the high-skill, high-wage parts
of their global supply chains in Singapore.
Rather, we have prospered by shaping ourselves to fit
particular occupational niches in the ever-changing global supply chains and
product portfolios of foreign multinationals, as in manufacturing and finance.
To do this we have relied on selective tax incentives and corporate subsidies
that are increasingly imitated by others or disallowed by international trade
and tax rules, and on liberal immigration policies enabling the hiring of
foreigners with the locally-scarce skills required by these investors.
Now, the anti-globalisation threats of a Trump
administration and others across the Western world responding to populist
anti-globalism may limit our ability to continue with this
follow-the-multinational strategy. At the same time, the collapsing timelines
of disruptive technological change make it impossible for markets to predict,
and for governments to anticipate, the jobs of the future and the skills they
will require. It may well be, for example, that the job of Uber driver,
unpredicted and unheard of just five years ago, lasts only for 10 years before
being overtaken by self-driving vehicles, while artificial intelligence first
swells and then depletes the ranks of computer programmers and software
developers.
But absolute job creation is not the whole story. Record US
job creation and full employment under President Obama did not mollify Mr Trump
or his supporters, for whom jobs (and immigration) remain the biggest concern.
The reasons for their dissatisfaction are many: many of the jobs created are
part-time, temporary, low-wage or insecure, and the unemployment rate is low
partly because labour force participation has dropped as "discouraged
workers" stop looking for work.
A recent study by professors Lawrence Katz (Harvard) and
Alan Krueger (Princeton) found that 94 per cent of the 10 million net new jobs
created from 2005 to 2015 were in the "alternative work" category,
which jumped from 10.7 per cent to 15.8 per cent of American workers. This
reflects the rise of independent contractors, freelancers, contract company and
temporary agency workers, who another study estimates could reach 40 per cent
of the US labour force by 2020. The number of one-person businesses (the
"self-employed" or "entrepreneurs") has also soared, even
in manufacturing.
At the same time, conventional full-time salaried corporate
jobs have decreased. Today's tech giants like Google and Facebook employ only a
fraction of workers per dollar of revenue or market capitalisation, compared
with traditional industrial firms like General Motors and Boeing, which
themselves employ far fewer workers per dollar of revenue than previously.
These labour market shifts have been enabled by technology.
The emergence of online platforms enable individuals to raise capital, sell goods
and services, and share assets like homes and cars, online, while 3D printing
has contributed to the rise of the "maker revolution".
Deriving from social and cultural as well as market and
technological shifts, these trends are likely to continue in the US and other
developed countries. The shift towards locally provided custom goods and
personal services rather than globally provided mass manufactures suggests a
limit to, if not a reversal of, global production networks, even without newly
protectionist policies. It also contributes to the low productivity and GDP
growth that developed countries have experienced since the early 2000s.
THE REGION TO THE RESCUE
Fortunately, Singapore is located in a geographical region whose economies will grow much faster in the next 50 years than the Americas, Europe, Japan or China, for demographic and catch-up reasons. Our location gives us an advantage over more distant competitors in servicing the regional market, while our superior infrastructure and education give us competitive advantages over our neighbours. But leveraging these advantages to ensure good incomes and occupations for Singaporeans will require nothing less than a post-industrial transformation of many of the institutions that served us well in the late industrial age, and the mindsets and expectations that go with them.
Fortunately, Singapore is located in a geographical region whose economies will grow much faster in the next 50 years than the Americas, Europe, Japan or China, for demographic and catch-up reasons. Our location gives us an advantage over more distant competitors in servicing the regional market, while our superior infrastructure and education give us competitive advantages over our neighbours. But leveraging these advantages to ensure good incomes and occupations for Singaporeans will require nothing less than a post-industrial transformation of many of the institutions that served us well in the late industrial age, and the mindsets and expectations that go with them.
First, we can no longer rely on foreign multinationals,
government-linked companies and other large local enterprises to "create
jobs" and "raise wages" for us. Instead, we need to create jobs
for ourselves, through entrepreneurial ventures, self-employment and, yes,
"alternative work" arrangements (many of which can be well-paid).
Second, we can no longer rely on "job creation"
through linkages with the slow-growing final markets of distant developed
countries. Instead we need to expand our role in the faster growth of
developing countries, with which we have complementary comparative advantages,
particularly our neighbours. This may mean providing a different portfolio of
products at different price points than we have been used to with rich
customers and clients (for example, in medical services and tourism).
Third, our social safety net needs to be reconfigured to
provide better security for citizens in more flexible but also more volatile
"alternative work" arrangements (for example, provision for
self-employment contributions to a revamped Central Provident Fund, perhaps a
minimal basic income guarantee), and to avoid discouraging inherently risky
entrepreneurial efforts.
Fourth, our education system needs to be more flexible and
diverse, not only to allow students of different abilities, interests and
backgrounds to maximise their individual potential, but also to encourage
curiosity, different thinking, self-learning, action-based learning, and
learning of other cultures and languages. Rather than academic credentialling
to fit into particular occupational slots that are already disappearing in
other people's enterprises, we should encourage the creation of our own
enterprises fulfilling local and regional market needs.
At this juncture of our national and world history,
"more of the same" development strategies that were effective in an
earlier era will not work. Given how developed we already are, there are
diminishing returns to yet more costly top-down state-directed investments in
infra- structure, education and corporate subsidies. It is time to return to
the bottom-up, market-driven, locally and regionally focused, small-scale
individual entrepreneurship that made us successful in the past, and can do so
again. This is where the jobs of the future lie.
- Linda
Lim is Professor of Strategy at the Stephen M. Ross School of Business,
University of Michigan.
- Benjamin
Goh is a Master in Public Policy candidate at the John F. Kennedy School
of Government, Harvard University.
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