When Alexis de Tocqueville published Democracy in America in two volumes in 1835 and 1840, it touched off a debate among Americans and Europeans alike about the institution of democracy and its future. Some of the work's most controversial assessments remain under debate today, but one of Tocqueville’s assertions stands unchallenged: that local government is fundamentally critical to the functioning of democracy and its contributions to jobs and prosperity.
This commentary was originally published on IowaBiz.com on November 15, 2016.
Tocqueville’s contention that decisions made at the most local level possible are most desirable -- a version of the principle of subsidiarity, which suggests that social and political issues should be dealt with at the most immediate level -- offers a framework for the way we should be thinking about the future of jobs in a period of seismic and unprecedented change in the way we all will work in the future.
By now, it’s baked into the discourse about the future of advanced economies that automation will continue to absorb market share of dangerous and redundant jobs, forcing more and more low- and middle-skilled workers to invest in retraining, in many cases several times over the course of a career.
From 1991 to 2001, the number of secretaries in the U.S. declined by about 35 percent. The number of textile and apparel workers fell 37 percent in the same period. But it isn’t just low- and middle-skill jobs that are undergoing enormous and uncertain change. It’s your high-skilled, knowledge-based job, too.
Today, industries with jobs requiring higher cognitive capabilities including computer programming, engineering, even medicine, face a hollowing out, thanks to automation and communications technology. McKinsey & Co. estimates that in coming years as much as $2 trillion worth of human economic activity could be automated away using existing technologies available today. That’s 45 percent of the activities humans are currently paid to perform.
Even those jobs that continue to demand human-level cognition and dexterity face tremendous upheaval, thanks both to advances in technology and emerging new models of work. Take surgery. The Narayana Hrudayalaya Cardiac Hospital in Bangalore today employs a fleet of junior medical staff and technicians who handle routine tasks like preparing the patient for surgery and immediate postoperative work previously reserved for highly skilled surgeons. The approachhelps the hospital provide care at dramatically lower costs than U.S. providers while maintaining mortality and infection rates on level with U.S. peers.
Or take the legal profession. Fewer and fewer companies are willing to pay high hourly fees for routine legal work that can be done by junior or even contract employees making far less than high-fee attorneys. Law firms today are sending discovery-related and other client tasks to third-party contractors as the traditional full-service lawyer model of lawyers charging $400 an hour for their time regardless of task undergoes disruption back at the office.
Or insurance. Tyche Risk, a 2015 graduate of Des Moines-based Global Insurance Accelerator, uses legal, financial and social data to build predictive models of legal risk. The insights help insurance companies "understand and adapt to changing tort liability environments." If you’re an insurance company and have a disputed claim from a rainy day in Austin, Texas, Tyche’s product will search every piece of relevant case law and develop an actionable recommendation on whether to litigate or settle. This product exists today.
Competing forces shaping the future of work
As economic developers around the world debate what the future holds for the jobs and accompanying wealth and prosperity that they will be pursuing for their communities in the future, questions about how technology will shape not just individual jobs but the institutions that produce them abound. The attraction and growth of technology companies in regions around the country continue to represent the pinnacle of accomplishment for local economic developers, but there are serious questions about the disproportion between market share and job numbers the sector maintains today and is projected to in the future.
Profits do not translate into jobs as they once did. Consider:
- In 1990, the top three car manufacturers in the U.S. had a market capitalization of $36 billion and employed 1.2 million people. In 2014, the top three U.S. tech firms (Apple, Alphabet and Facebook) had a market cap of over $1 trillion. They employed 137,000 people.
- In 2014, employee compensation in computer and electronic-parts making was equal to 49 percent of the value of the industry's output, according to the Commerce Department (link; paywall). That’s down 30 points from 79 percent in 1999.
- WhatsApp had about 450 million users when it sold itself to Facebook in 2014 for $19 billion. It had 55 employees.
Of course, technology is also a force for good. In his new book Homo Deus: A Brief History of Tomorrow, author Yuval Noah Harari offers this electrifying proclamation about the conquering of famine and war: “For the first time in history, more people die today from eating too much than from eating too little; more people die from old age than from infectious diseases; and more people commit suicide than are killed by soldiers, terrorists and criminals combined.” The future, Harari argues, will be about how to achieve some version of immortality as we learn to balance coming enhancements of our physical and cognitive abilities beyond the biological norm.
If living forever isn’t good enough news for you, in the more proximate -- and relatable -- future, there’s this: While technology may pose a longer-term threat to jobs, today the problem is of knowledge worker shortage, not surplus. McKinsey Global Institute predicts that by 2020 the worldwide shortage of highly skilled, college-educated workers could reach 40 million. That’s a whopping 13 percent of demand. And this: According to The Economist, technology and service companies are today providing Americans and Europeans with an estimated $280 billion worth of "free" services -- such as search and directions -- a year.
Don't call it a comeback: The return of geography
What will economic development professionals do to adapt to a new reality of accelerating change in what the definition of a job is and how to compete for them? Amid a robustly global economy, we return to Tocqueville’s interest in the importance of local governance and decision-making. While geography in one sense was perhaps the first casualty of globalization, location still matters, which is good news for the vast majority of economic developers who still represent a specific geographic area -- at least for those willing to embrace a new site location decision-making reality.
Companies today are supplementing traditional footprinting -- operating in a specific community for better or for worse -- with what Jeffrey Joerres, former CEO and chairman of ManpowerGroup, calls "micro footprinting." That's a nomadic approach to corporate site location that chases resources, primarily labor, and operates until they’re depleted or saturated, and leaves. More and more, Joerres argues, "companies will need to take a dual approach, establishing large locations and more-temporary, smaller operations at the same time."
The economic developer who understands the industries for which his or her community’s labor pool offers the highest value -- not the other way around -- will prosper. Joerres’ new age of micro footprinting offers exciting prospects for smaller, rural markets to compete for the site location assets of global corporations. If nothing else, the movement promises a new era of placing high value of local assets and leadership.
The definition of what work is has been evolving since the dawn of man, and the evolution has always resulted in generally improved welfare for the human condition. From hunter/gatherers planting row crops to the advent of the cotton gin to the ubiquity of email communication, technology has made work easier, more productive and more valuable with each advancement. There is no question that as we enter a new age of quantum computing, artificial intelligence and augmented reality, this premise will be rigorously tested as the jobs of millions of people are automated or eliminated. What is certain is that effective economic developers the world over will play a critical role in aiding and informing this transition -- they will be watching their jobs change as dramatically as the people and the institutions they are helping adapt.