Man, not machine, will win job war
Labour shortages mean companies will have to pay up, says economist
WASHINGTON American workers may be on the cusp of grabbing a bigger bite of the economic pie after decades of getting fewer and fewer crumbs.
A significant slowdown in labourforce growth in the United States, China and elsewhere will put a premium on finding workers in the years ahead. Companies will have to pay up to get the people they want with the skills they need to keep expanding their businesses.
“We’re going from a world of generally too much labour to a world of labour shortages,” said Mark Zandi, chief economist at Moody’s Analytics Inc. in West Chester, Pa.
Workers’ gain will be employers’ pain, as company profits are pinched by rising salaries. Stockmarket investors also may lose out as they’re forced to adjust to a weaker earnings outlook, said Gad Levanon, a managing director at the Conference Board in New York. Income inequality might even be curbed, as the rich reap less in the way of capital gains while employees earn more in wages, he added.
That vision stands in sharp contrast to the scenario sketched out by technophobes and technophiles alike — and popularized by such magazines as The Atlantic — that sees increasingly sophisticated robots pushing workers out.
“Technology will soon erase millions of jobs,” reads the cover of The Atlantic’s July-August issue, promoting an article inside headlined: A World Without Work.
In the world of the future as seen by Zandi, demographics rather than technology will be the driving force, and man, not machine, will come out on top.
In perhaps an early sign of workers’ resurgence, labour’s share of income of U.S. non-farm businesses — paid out in salaries and other employee compensation — rose to 56.7 per cent last year from a post-Second World War low of 56.4 per cent in 2013, based on data from the Labor Department in Washington.
Since 2000, that measure shows workers have seen their slice of the economic pie shrink by more than six percentage points as they found themselves increasingly competing with lower-cost labour from China and other poorer countries.
That is about to change due to simple demographics.
With declining birthrates in much of the world, the global pool of workers aged 15 to 24 is contracting by about four million per year, according to the Geneva-based International Labor Organization.
“We will see a massive slowdown in labour supply in the coming years,” said Ekkehard Ernst, senior economist at the ILO. “Wage growth will have to accelerate, especially in those high-skill occupations where there is high demand.”
Technology workers are obvious beneficiaries. In occupations requiring computer or mathematics proficiency, there were five times as many U.S. jobs posted in 2014 as there were unemployed people with the skills to fill them, according to calculations by the McKinsey Global Institute.
It’s not only those in glamorous Silicon Valley fields who are making out. Other, more nittygritty industries are experienc- ing shortages. What’s happening in those trades is a microcosm of what’s to come in the job market as a whole: an aging, slower-growing labour force with fewer and fewer new workers.
For the U.S. as a whole, the labour force has grown just 1.6 per cent since the recession ended six years ago, as Baby Boomers born between 1946 and 1964 retire.
Not everyone is convinced workers’ fortunes are about to turn around. While demographics will aid workers by constraining the supply of labour, it won’t be enough to offset pressures from globalization and technological advance, said Alan Blinder, a Princeton University professor and former Federal Reserve vice-chairman.
In their 2011 book Race Against the Machine, Erik Brynjolfsson and Andrew McAfee of the Massachusetts Institute of Technology argued many people will be left behind as increasing innovation makes jobs obsolete.
Technology allows even smaller companies to look worldwide for the workers and skills they need, said Jonas Prising, chief executive of ManpowerGroup Inc., the Milwaukee-based staffing company. “Wage inflation will go up, but you are not going to see runaway” increases, he said.
The role of globalization is limited, though, because it’s not only the U.S. where the job market is tightening. Countries including Japan and Germany have seen their workforces top out. Even China faces what Feng Wang, a professor at the University of California in Irvine, calls an “aging tsunami” that eventually will lead to a contraction of its labour supply.
“The global labour market situation is changing quite a lot,” said David Lam, research professor at the University of Michigan’s Population Studies Center in Ann Arbor. “People haven’t quite picked up what’s happening.”
That ebbing competition from abroad is good news for American workers, according to Lam.
“The intense downward pressure on wages that’s come from the rest of the world is going to ease off a bit,” he said.
What’s not clear is whether the gains will go mostly to the higherskilled or be more broadly shared.