There is no skills crisis, now or in the near future, TD Economics tells us in a new report, Jobs in Canada: Where, What and For Whom? — although it acknowledges that there are some mismatches between Canadians seeking jobs and what employers want.
But the basic message is reassuring — with some improvements by policymakers, employers and educators, we should have no real problem in matching people and jobs in the future.
While there is much useful research in their report, there is a big risk that the TD Economics group could be terribly wrong, because they largely dismiss the implications of the fast-changing digital economy and the risks for middle-class jobs and growing inequality.
Brian Arthur, an American economist specializing in complex systems, argued in a 2011 essay, The second economy, that rapid advances in information and communications technologies are radically transforming society and creating a second economy that is eliminating large numbers of middle class jobs.
In the essay, published in the McKinsey Quarterly, he argued that “something deep is going on with information technology.”
What is happening is that “business processes that once took place among human beings are now being executed electronically. They are taking place in an unseen domain that is strictly digital.”
And this, he argued, is creating a digital economy where computers and sensors talk to each other without human intervention. What is happening now “may well be the biggest change ever in the economy.”
As Arthur stresses, the second or digital economy isn’t producing anything physical.
“It’s not making my bed in a hotel, or bringing me orange juice in the morning. But it is running an awful lot of the economy,” he says.
“It’s helping architects design buildings, it’s tracking sales and inventory, getting goods from here to there, executing trades and banking operations, controlling manufacturing equipment, making design calculations, billing clients, navigating aircraft, helping diagnose patients, and guiding laparoscopic surgeries.”
Arthur’s concerns are reinforced in a 2011 book, Race Against the Machine, by Erik Brynjolfsson and Andrew McAfee at the Massachusetts Institute of Technology.
In it, they note that economists have come up with three explanations for persistent unemployment or underemployment: Cyclicality, which says the problem is an economy that is growing too slowly; stagnation, which means that the capacity to innovate and boost productivity has been lost; and end of work, which means that rapid technological progress, especially in digital technology, is eliminating many jobs.
The two MIT economists agree with the end-of-work thesis.
“Digital technologies are one of the most important driving forces in the economy today” and “computers are now doing many things that used to be the domain of people only,” they say.
As continuing exponential increases in computing power yield far greater capacities, “we expect that economic disruptions will only grow as well.”
A recent report from Oxford University’s Programme on the Impact of Future Technology argues that 45 per cent of occupations in the U.S. could be automated over the next two decades.
Computers are replacing people in administrative tasks, production and logistics and distribution, as well in sales and service.
Next, with advances in artificial intelligence, jobs in management, science, and engineering could be threatened.
And in a new book, Average is Over, economist Tyler Cowen contends that advances in the digital economy will bring about a much deeper divide in society, with some 10 to 15 per cent of the population enjoying an extraordinary level of affluence, much of the middle-class disappearing, and a growing underclass with much diminished prospects. As he puts it, a large number of Americans will have to live “like Mexicans.”
Not all economists agree with these gloomy prognostications.
But what if the fears are right?
For their part, the TD economists reject fears of a new technological revolution.
“While it is true that technology has taken off particularly over the past decade, it is debatable whether the impacts on labour supply from technological advances are any more significant than in prior decades,” they say.
But the issue is good jobs.
Complacency is not an option. We need a much better understanding of the transformative changes that new technologies could bring and what these would mean for what we teach young people, how we retrain people, how we ensure we have the right environment and incentives for the industries and tasks of the future, and how we address income inequality and the risks to the middle class.
Economist David Crane is a syndicated Toronto Star columnist. He can be reached at crane@interlog.com.