Here is my latest column the Globe and Mail. The subject is youth unemployment and underemployment…can the Bank of Canada (or any central bank) fix that problem?
Here is my latest column the Globe and Mail. The subject is youth unemployment and underemployment…can the Bank of Canada (or any central bank) fix that problem?
I am thrilled to now be writing a bi-weekly column for the Globe and Mail, Canada’s national newspaper. See my first here – it is a look at how the gig economy is in force but our social policies are woefully out of step with it.
Is there a better way to see the future of work than to follow the drama that is Uber? The ride-hailing service burst on to the scene in San Francisco just about six years ago and nothing has been the same ever since. From how to manage a gig workforce through to how technology is destroying some jobs and creating others (more on that in a minute) Uber is the maybe-not-that-reluctant poster child for the story of workforce change, the latest instalment of which takes place in London, England.
For those who have managed to miss it, last week London decided to revoke Uber’s license to operate in the city. As always, when it comes to Uber, emotions run high and the London decision apparently brought out the strongest of those. Some (led by traditional London cabbies) are jubilant at the decision, effectively calling Uber a not-fair upstart staffed by criminals. Others called the decision everything from Luddite-like to racist. Customers of the ride-hailing service are not thrilled.
There are lots of pieces to the drama, but for me one of the key parts is this: the jobs of London cabbies used to be protected by the fact that that they had a knowledge base that could not be easily replicated and now they are not. In fact, the test they take to be allowed to drive a cab is called ‘The Knowledge’, and it requires memorizing something like 25,000 London streets. Not surprisingly, preparing to take the test can take years and those who pass it are understandably proud to have done it. As a system it all worked fine until GPS technology and Uber came on the scene.
With the advent of GPS, it is as if robots have replaced the taxi drivers. That is, rather than being required to know every street by heart, every Uber driver checks directions by putting the street address into GPS, and every passenger can do the same on their phone anyway. There may be other ways in which taxi drivers have it over Uber drivers, but the argument that cab drivers can get you where you want to go better has effectively been destroyed. Technology has de-skilled the function of the cabbies, meaning that if the world operated in a true free-market sense, the taxi drivers would see their wages drop and their jobs disappear. As Uber has expanded, London taxi drivers have undoubtedly seen their incomes affected, but the majority have struggled on partly in the hopes that Uber would just go away.
And yes, regulation does exist and markets are not exactly free. That is why someone gets to decide whether Uber can operate at all, which in effect means deciding the relative fortunes of Uber drivers vs. cabbies. With the London decision, the cabbies have managed a win for now but they have to know it is a temporary one. Uber (as well as competitors such as Lyft) is rolling in in more and more cities, and is proving to be a hit with those who prefer to pay less rather than more for a ride and to hail it more conveniently to boot. For sure, there may be regulations needed to ensure that Uber drivers are thoroughly checked, but there is little to suggest that the majority would be better off if Uber did not exist at all, no matter what London has decided for the moment.
And so the impasse continues and right at the moment cab drivers and Uber drivers seem to hate each other, in London and in many other cities as well. Then again, they should maybe think about banding together to map out their joint futures. After all, Uber all has never made a secret of the fact that they want to have driverless cars ferrying passengers sooner rather than later. As they get closer to that reality, neither ‘knowledge’ nor ‘GPS’ may be enough to keep any kind of drivers in cabs.
As driver jobs are eliminated, others will be created although job functions will likely come and go over the years ahead. Rather than thinking just about specific knowledge, perhaps what workers need to develop are skills in things like ‘flexibility’ and ‘adaptability’. They may sound like buzz-words, but if Uber has taught us anything it is that the work world is turning on a dime and it might be best to be ready for the next instalment of the drama.
Walmart buying Modcloth? ‘Say it’s not so’ went the lament from Millennials and other assorted cool people earlier this year. After all, Modcloth is a cutting-edge, online retailer that offers funky clothes for those who consider themselves the opposite of everything the world’s biggest retailer stands for. Modcloth and Walmart could never be a fit – could they?
They may be profitable enough right now but Walmart apparently see the future of retail and they want to change so that they do not get left behind. Walmart wants to be hip. It wants to expand its customer base to include the well-heeled, and wants to convince people that it is a retailer with good values. Heady and varied goals to be sure, but the company has deep pockets and an aggressive business plan, which ironically may be what it takes to make their retail dreams come true.
The company has image problems to be sure. Perhaps with some justification, Walmart has come in for a lot of bashing in recent years. Ask people what they think of it, and inevitably some negative things will come up. ‘Walmart does not pay employees enough’, ‘Walmart is anti-union’, ‘Walmart sells poor quality goods from China’, ‘Walmart is for unattractive people who live in flyover and voted for Trump’ are some popular responses (the last one para-phrased a bit by me, but nevertheless one that reflects a prevailing sentiment). It is a big, low-priced retailer where you can typically get the lowest price on a variety of goods from Nintendo goods through to cucumbers. If you are buying on price, rather than style, Walmart is where you go. It is a philosophy that has served the company well-enough through the recession and post-recession years.
Thing is, although Walmart may be where you go to get things cheap, there is now a cadre of consumers who do not want to go anywhere at all to get the things they need. They like to buy online, and when they do they typically choose Amazon. As well, as a group they are a little different than the core Walmart shopper. A little younger, a little richer, a little more educated maybe. A lot more cool think some, and certainly too cool to be ordering from Walmart online.
Knowing what online customers want and knowing what those customers think of them, Walmart has now embarked on a strategy of buying up small, successful independent online retailers, with plans to allow them to operate under their own brand names, with Modcloth being the latest of these. Earlier this year they picked up outdoor specialty retailer Moosejaw and online shoe seller Shoebuy. Men’s retailer Bonobas is rumoured to be next on the acquisition block.
It is a risky strategy to be sure. The typical Modcloth customer, for example, is more or less the kind of person that hates Walmart and everything that it stands for. No surprise then the announcement of its sale is being met by virulence from many customers who vow to never buy from Modcloth again. Maybe they will not, but then again maybe other customers will. Maybe a little of the hipster sheen will rub off on Walmart, or maybe some customers will stick around to see what Walmart’s input brings to the party, especially since the company is retaining much of Modcloth’s marketing talent. After all, at the end of the day, Modcloth (a company that in the past has ruffle d feathers by offering wedding dresses for around $200), is just like Walmart in that both are retailers selling relatively inexpensive made-in-China clothing to a North American market, so that has to be some kind of a starting point.
Whether the experiment with this set of online retailers works or not, Walmart clearly realizes that its future growth has a lot to do with attracting and retaining a millennial clientele. To be sure that clientele wants good prices, but they also want to be thought of as having style–and they do not want to have a lot to do with bricks and mortar retailers. Buying up Modcloth shows a certain style in itself, which may be the first step in acquiring some stylish new customers.
North America is aging, and a lot of the rest of the world is aging as well. It is something to think about as we consider where we are going to get the labor we need to grow our economies in the years ahead. That is, for decades we in North America have been able to attract the cream of the crop in terms of workers if we so chose. The opportunities were here and a surplus of workers was elsewhere. So what will happen when that surplus dries up, and more and more countries are scrambling for young workers?
This article from the World Economic Forum (WEF) details the aging trends in Asia very clearly. The region has for years benefitted from a ‘demographic dividend’ where a a young, growing work force (aged 15-64) has helped drive growth. Now, as is the case so many places, fertility rates are falling and people are living longer. Already one-third of the population in Singapore and South Korea is over 50, and in Japan the ratio is closer to half. No surprise then that workforce growth is slowing. The most dramatic example of labor force contraction could well be in China, where the WEF figures there could be a decline of 170 million people in its working-age population over the next three decades.
If left unchecked, all other things being equal a declining labor force means strained public finances as well as lower economic growth. That is why the WEF suggests that the countries experiencing the decline in labor force growth look to the ones with younger populations as sources of labor. India, Indonesia and the Philippines fall into this category.
It could mean a shift for North America. Right now, there is no shortage of willing workers, at all skill levels, who want to be in Canada or the United States. The competition of those workers, particularly those in the highest skill categories could heat up in the years ahead if would-be workers have the choice of staying at home or heading to a nearby Asian country rather than going further afield. That could be a big deal, given that North America is also aging rapidly.
Does that mean that North America is headed for labor shortages? Probably not. What the article does not mention is something else the WEF has discussed at great length, which is the fact that we are in the midst of a ‘Fourth Industrial Revolution’ by which automation has the potential to replicate many job tasks. Right now we are still figuring out the costs and practicalities of using robots or other technology to get things done. If workers are in short supply, the incentive to figure it out faster will be ever higher.
Demographics drives a lot of things including Mergers and Acquisitions (M & A) activity. That is a lesson we are now learning from Japan, where there are apparently too few heirs to take over large companies as their boomer-aged Chief Executives head for retirement.
This piece from the Financial Times looks at what is going on, but the story is a simple one. Plenty of Japanese CEOs are baby boomers, meaning they are at retirement age or heading there soon. Whether they are company owners who do not have children at the ready to take over or simply in companies without a strong layer of younger managers, many do not have obvious successors. As a result, they are turning to advisory firms that can help them arrange mergers. The stocks of such advisory firms are on the rise and no wonder: Nomura Securities estimates that between now and 2040, there will be 40,000 companies per year in Japan facing succession and many of them will need help in arranging it.
Japan is an example of population aging gone crazy. In 2016, births fell below 1 million for the first time since births began to be recorded in 1899. It has become a vicious circle. Births have been low for years, which means there are few young women to have babies. Those that could are discouraged from doing so by a society where childcare for working mothers is very expensive. As a result, the fertility rate in Japan (the number of children the average woman has over her lifetime) was 1.45 in 2015, as compared to 1.86 in Canada and about 1.89 in the United States, and the number of births keep declining.
As in Japan, the fertility rates for Canada and the U.S. are below the ‘replacement level’ of two 2.0, but unlike Japan those countries rely on immigration to fill some of the gaps as do many industrialized countries. Japan frowns on immigration, however, meaning that the foreign born population in the country is less than 2 percent, compared to about 13 percent in the U.S. and over 20 percent in Canada. The end result is that the entire population is aging quickly, and the age of executives is as well.
Whether Japan is a unique case or there are lessons for North America here remain to be seen. Certainly there are huge differences in culture that suggest an-aging-CEO led M & A boom is not as likely in the U.S. or Canada. For one thing, Japan values having family-run companies more than most companies do, with many in that country boasting that they have been ‘family run’ for generations. The importance of being able to make that boast, however, makes that in many cases Japanese CEOs have gone as far as adopting an adult male. In fact, an astounding 90 percent of adoptees in Japan are apparently actually males between the ages of 25 and 30. Since being family-run does not matter as much in North America, there is no need for mergers to make it happen. As well, there are few large companies within North America that do not have a clutch of in-house candidates vying for any stray CEO openings.
Although North American companies may not merge between themselves immediately because of population aging, they may find themselves merging with Japanese ones. Given that the market within Japan for any products is also shrinking due to population aging, mergers with non-Japanese companies are also increasingly on the table. We saw a huge hint of things to come with the purchase of premium-spirits company Jim Beam by Japanese company Suntory holdings in 2014, but there may be much more to follow.
The way that aging affects North American companies may be different than the way that it does Japanese ones, but there are lessons to be learned from Japan just the same. Fewer people joining the workforce means the options for how to conduct business have to change. Mergers may be one unexpected thing to come out of population aging, but there will certainly be more – and more business opportunities – as boomers age in every country.
There are a lot of things robots can do, but they cannot make societies any younger.
Canada and the U.S. are aging – there is little debate about that. What exactly that will mean for the labor force and the economy is a bit more up for grabs, but to get an idea of how it may all play out we have the examples of those areas that have already gotten old ahead of us. One such area is East Germany, a town from which is profiled in this article from The Economist.
East Germany, if it was an actual separate country from West Germany, would apparently be the oldest country in the world. That is, at present Germany and Japan each have a median age of close to 47, but East Germany is indisputably older still. Following the installation of the Berlin Wall in 1989, young people headed for the west, leaving a smaller population to have families. The Economist quotes an official from a German think tank who puts what is going on rather succinctly: ‘kids not born in the ‘90s, also didn’t have kids in the 2010s. It’s the echo of the echo’. With deaths far out-pacing births, Germany as a whole is headed to having 40 percent of its population aged over 60 by 2050, with East Germany getting there first.
In the town profiled in the article, one apartment building in five is empty, and where two-thirds of kindergartens and over half of all schools have closed since 1990. There is a dearth of workers, particularly young workers, in the area. Not surprisingly, the biggest shortage is of those who are available to work in health care. particularly as it relates to the old. Immigration has filled some gaps, although refugees are not necessarily taking the available jobs, and tend to leave anyway. As one inventive solution, a local training school is arranging to have young people study German in Vietnam and then head into apprenticeship positions in the area. Were it not for measures such as that, small towns would potentially shrink even further and possibly be abandoned all together.
Are there lessons for North America here? Certainly there is a potential warning of how things might play out if more workers are not found. In Canada’s Atlantic provinces, for example, aging is happening more quickly than it is elsewhere, especially in non-metropolitan areas. That is already straining government budgets which are facing the reality of fewer tax-paying workers and stronger draws on health care services. In Canada and in many countries things may well get worse. After all, it is an old equation: you grow an economy through population growth, and through productivity. If population growth is not there, all things being equal that means you grow less quickly. If East Germany does end up short of 5 to 7 million workers by 2030, as some experts predict, then economic growth is certainly going to suffer.
Or is it? To me, the wildcard in all of this is the impact of technology, something that is not really mentioned in the article. After all, apprentice humans will not be needed if ready-out-of-the-box robots actually replace the need for many job functions. That is a concept that is not as far in the future that many of us may like to consider. According to one study from the University of Oxford, about half of all jobs are vulnerable to being replaced by automation. Analyses from the Bank of England and the World Economic Federation (WEF) have reached similar conclusions. No one knows exactly the final figure or the pace of how it will happen in different countries, but it is certain that some job functions will not be needed in future, although in previous industrial revolutions (this one, according to the WEF is the fourth) other jobs have sprung up to replace them. Regardless, the absolute shortages of workers in East Germany or in North America may turn out to be less severe than sometimes predicted. That may not help individual workers keep up their standard of living, but it will keep industries running and promote overall growth.
Then again, even if technology replaces the need for some workers, it will not make up for the fact that societies will be populated by old, and getting older, people. Whatever happens in terms of technology, the reality is that many schools will indeed need to be turned into care homes sooner rather than later. Even if robots are able to staff some of those homes, they will not change the fact our societies will have a different overall vibe.
Robots will not judge whether the vibe from an older society is better or worse than the one we have today, and perhaps no one else should either.
The inside itself is still a work in progress, but here is the (provisional) cover of my upcoming book Work Is Not a Place: Reimagining Our Lives and Our Organizations in the Post-Jobs Economy. I am at work on it and the plan is to have it out early in 2018.
As with my last book, Work Is Not a Place was inspired by a topic that is popular with my speaking clients. I have been speaking a lot about the future or work, and especially about the way that technology and evolving economy are going to impact on lives and communities and everything else. It is a fascinating (if a little scary) topic.
Having learned a ton about the self-publishing process last time I have elected to go that route again and to that end have engaged a crackerjack editor (herself happily a gig worker having previously occupied a big-deal job with a Canadian publisher). I will also be using other freelancers and online services as required to get the book into production. In fact, the cover actually was commissioned online using one of my favorite services, Fiverr.
Lots more to come, and in the meantime you can read more about the book here.
What if you built a wall to keep people out, and it turned out that no one really wanted to get in anyway? Okay, some people might still want to enter the U.S. from Mexico and other countries which have typically supplied low skill labor, but it looks like their numbers are dwindling. In fact, thanks to some demographic trends that are getting lost amidst the general hubbub, it may be that the numbers of migrants are headed down anyway, no wall required.
Demographics explain a lot, or at least that is my bias. They certainly explain a lot of the reasons why there was such a rush to countries like the U.S. from Mexico and Latin America in the past decades. The U.S., like much of the world, had a baby boom that lasted until the mid-1960s. That meant the supply of domestic-born, young, labor grew rapidly until the 1980s and then grew less rapidly thereafter. In other parts of the world, including Mexico, the baby boom went on longer which meant that young, low-skilled workers jostled with each other to get jobs in their home countries. Inevitably, some headed for the U.S., some illegally. That’s the part of the story we know, and it is that rush to reduce the number of illegal immigrants that is behind the idea of putting up a wall between the U.S. and Mexico. Except, maybe those who want that wall should maybe be considering whether it is worth the trouble.
The situation is outlined in this paper by economists Gordon H. Hanson, Chen Liu and Craig McIntosh of the Brookings Institution. As they see it, between the early 1980 and the mid-2000s, there were lots of reasons for migration from Mexico and elsewhere in Latin America to the U.S.. The U.S. economy was strong, and for those seeking relatively low-paying work, there was not a huge amount of competition from the U.S. born population, a situation at odds with their circumstances at home. Around the time that the last recession hit the U.S., however, the undocumented population in the U.S. declined by an annual average of 160,000 for the years from 2007 to 2014. Economics, the authors believed, just hastened a story that was going to happen anyway as a result of demographics.
So what does come next? Well, again you need to look at the demographics to understand it. The authors did that and came up with a very dramatic profile of what they expect migration to the U.S. to be over the next decades. Using population projections from the United Nations as well as historical migration data, they modelled the likely inflows into the U.S. through 2050. The picture they came up with for the next thirty years looks almost like the inverse of the last thirty. And keep in mind that is not assuming any kind of wall, merely a continuation of demographic shifts that are already taking place.
The dwindling supply of young labor post-baby boom is one that is being mirrored in many countries including China. Think about it: Mexico provided cheap labor for Americans while China provided cheap goods made by cheap labor. When all of these countries age, what happens to the cost of living in the U.S. and elsewhere? It is an economic problem that does not get discussed as much as it should, but the reality will hit soon enough.
In the meantime, plans for a wall continue. No doubt once constructed the numbers of migrants from Mexico will fall, but analysts looking at the future numbers might want to consider the actual cause of that decline.
So I see it as kind of too little too late, but Canada’s 2017/18 Federal Budget (presented yesterday) did kind of address some of the big labour market issues to come. Skills Development and Innovation were kind of themes, but identifying the issues is really just a starting point.
Here is the piece I wrote on the topic for the Globe and Mail.