White Paper

Technological advances are generating fears of a jobless future. At the same time, major economies are seeing historically low unemployment rates and wage growth is puzzlingly low. Find out how technology is changing the nature of work, not eliminating it. This is the third report in Barclays' Impact Series, in which we analyse the wide-ranging impacts of technological advancement on how people work today, and possibly will work in the future.

Recent debates about the future of jobs have mainly focused on whether or not they are at risk of automation (Arntz et. Al., 2016; Frey and Osborne, 2017; McKinsey, 2017; PwC, 2017). Studies have generally minimised the potential effects of automation on job creation, and have tended to ignore other relevant trends, including globalisation, population ageing, urbanisation, and the rise of the green economy. In this study we use a novel and comprehensive method to map out how employment is likely to change, and the implications for skills. We show both what we can expect, and where we should be uncertain. We also show likely dynamics in different parts of the labour market - from sectors like food and health to manufacturing. We find that education, health care, and wider public sector occupations are likely to grow. We also explain why some low-skilled jobs, in fields like construction and agriculture, are less likely to suffer poor labour market outcomes than has been assumed in the past. More generally, we shine a light on the skills that are likely to be in greater demand, including interpersonal skills, higher-order cognitive skills, and systems skills. Unlike other recent studies, the method also makes it possible to predict with some confidence what kinds of new jobs may come into existence. The study challenges the false alarmism that contributes to a culture of risk aversion and holds back technology adoption, innovation, and growth; this matters particularly to countries like the US and the UK, which already face structural productivity problems (Atkinson and Wu, 2017; Shiller, 2017). Crucially, through the report, we point to the actions that educators, policymakers and individuals can take to better prepare themselves for the future.

This publication reports the findings from a combined quantitative and qualitative study of Australian working women, aged under 40. It draws together four separate data sources: a nationally representative online survey of (n=2,109) working women under 40; a smaller comparative survey of (n=502) working men under 40; additional boosted survey sample among (n=53) Aboriginal and Torres Strait Islander working women aged under 40; and the findings from five focus groups of (n=41) working women under 40. Quantitative fieldwork was conducted between September and October, while qualitative fieldwork was conducted in November 2017. At the time of being surveyed: over half of the women in the sample (55%) were working full-time or part-time for an employer, a fifth (19%) were working on a casual, freelance or short-term contract basis and 6% were self-employed. Half of the women (55%) were working in the private sector, 28% in the public sector and 6% for not-for-profit organisations. Over half (56%) were working in four industry sectors: retail trade, healthcare and social assistance, education and training, and accommodation and food services.

The news that companies in OECD economies are increasingly bringing manufacturing activities back home has attracted a lot of attention in recent years. Headline cases of a number of large multinational companies have given increased visibility to the phenomenon of reshoring in the economic press, academic research and policy discussions. The debate on re-shoring (often also called “backshoring”, “nearshoring”, “onshoring”) is very lively with some even arguing that the time of offshoring has come to an end. But considerable disagreement exists about how important this trend actually is for economies in particular the number of jobs that reshoring is supposed to bring back. While policy makers in OECD economies hope that reshoring might help to revitalise their slumping manufacturing industries, the rationale for policy measures around reshoring is not clear-cut.

Over recent decades, the global economy has experienced a profound transformation, mostly as a result of the joint forces of trade integration and technological progress, accompanied by important political changes. Increased trade integration has helped to drive economic growth in both high- and low-income economies, lifting millions out of poverty in emerging and developing countries. Since the global financial crisis of 2007–08, however, trade, productivity and income growth have decelerated. At the same time, trade is increasingly perceived as leaving too many individuals and communities behind. Reaping the benefits from global trade and effective integration into global markets goes hand in hand with the adoption of new technologies, improved forms of work organization and productivity increases. Given the role of skills in trade, it is vital to put a strong emphasis on skills development. Human capital is one of the principal enablers of trade growth and economic diversification and is also an important “buffer” facilitating the adjustment to more open trade. Appropriate skills development policies are key to helping firms expand their export activities; they are also key to helping workers who lose their jobs make a smooth and rapid transition to new jobs with equal or higher wages. These two effects reinforce each other. For trade to grow, it needs to be more inclusive; and more exports offer more employment opportunities. Skills development policies constitute one among many policy instruments available to governments to make trade inclusive by enabling firms and workers to participate in trade, by lowering adjustment costs and by distributing more evenly the benefits of trade and technological progress. Other active labour market policies (ALMPs), such as job-search assistance or activation strategies, passive labour market policies such as unemployment insurance, and social policies, as well as complementary policies such as housing or credit market policies, can also be used to lower adjustment costs, while various instruments are available to redistribute the gains from trade or technology to those whose skills are less in demand because of those changes.

The fall of labor's share of GDP in the United States and many other countries in recent decades is well documented but its causes remain uncertain. Existing empirical assessments of trends in labor's share typically have relied on industry or macro data, obscuring heterogeneity among firms. In this paper, we analyze micro panel data from the U.S. Economic Census since 1982 and international sources and document empirical patterns to assess a new interpretation of the fall in the labor share based on the rise of “superstar firms.” If globalization or technological changes advantage the most productive firms in each industry, product market concentration will rise as industries become increasingly dominated by superstar firms with high profits and a low share of labor in firm value-added and sales. As the importance of superstar firms increases, the aggregate labor share will tend to fall. Our hypothesis offers several testable predictions: industry sales will increasingly concentrate in a small number of firms; industries where concentration rises most will have the largest declines in the labor share; the fall in the labor share will be driven largely by between-firm reallocation rather than (primarily) a fall in the unweighted mean labor share within firms; the between-firm reallocation component of the fall in the labor share will be greatest in the sectors with the largest increases in market concentration; and finally, such patterns will be observed not only in U.S. firms, but also internationally. We find support for all of these predictions.

Is automation a labor-displacing force? This possibility is both an age-old concern and at the heart of a new theoretical literature considering how labor immiseration may result from a wave of ‘brilliant machines,’ which is in part motivated by declining labor shares in many developed countries. Comprehensive evidence on this labor-displacing channel is at present limited. Using the recent model of Acemoglu and Restrepo (2018b) as an analytical frame, we first outline the various channels through which automation impacts labor´s share of output. We then turn to empirically estimating the employment and labor share impacts of productivity growth—an omnibus measure of technological change—using data on 28 industries for 18 OECD countries since 1970. Our main findings are that although automation—whether measured by Total Factor Productivity growth or instrumented by foreign patent flows or robot adoption—has not been employment-displacing, it has reduced labor’s share in value-added. We disentangle the channels through which these impacts occur, including own-industry effects, cross-industry input-output linkages, and final demand effects accruing through the contribution of each industry’s productivity growth to aggregate incomes. Our estimates indicate that the labor share-displacing effects of productivity growth, which were essentially absent in the 1970s, have become more pronounced over time, and are most substantial in the 2000s. This finding is consistent with automation having become in recent decades less labor-augmenting and more labor-displacing.

Labor markets in U.S. cities today are vastly more educated and skill-intensive than they were five decades ago. Yet, urban non-college workers perform substantially less skilled work than decades earlier. This deskilling reflects the joint effects of automation and international trade, which have eliminated the bulk of non-college production, administrative support, and clerical jobs, yielding a disproportionate polarization of urban labor markets. The unwinding of the urban non-college occupational skill gradient has, I argue, abetted a secular fall in real non-college wages by: (1) shunting non-college workers out of specialized middle-skill occupations into low-wage occupations that require only generic skills; (2) diminishing the set of non-college workers that hold middle-skill jobs in high-wage cities; and (3) attenuating, to a startling degree, the steep urban wage premium for non-college workers that prevailed in earlier decades. Changes in the nature of work—many of which are technological in origin—have been more disruptive and less beneficial for non-college than college workers.

This paper analyzes the state of the U.S. labor market over the past three decades to inform policymaking on two fronts. The first is to rigorously document and place in historical and international context the trajectory of the U.S. labor market, focusing on the evolving earnings, employment rates, and labor market opportunities for workers with low, moderate, and high levels of education. The second is to illuminate the key forces shaping this trajectory, including: The slowing rate of four-year college degree attainment among young adults, particularly males; Shifts in the gender and racial composition of the workforce; Changes in technology, international trade, and the international offshoring of jobs, which affect job opportunities and skill demands; Changes in U.S. labor market institutions affecting wage setting, including labor unions and minimum wage legislation