Editorial: A transition agenda for a Future that Works for all

The times they are a-changin’. Labour markets are under pressure from the combined effects of several megatrends. Technological progress and greater integration of our economies along global supply chains have been a bonus for many workers equipped with high skills and in expanding occupations, but a challenge for others with low or outdated skills in declining areas of employment. Digitalised business models often employ workers as self-employed rather than as standard employees. People are living and working longer but facing more frequent job changes and the risk of skills obsolescence. Inequalities in earnings and job quality have been widening in many countries. The global financial crisis of 2008-09 led to serious job losses, leaving deep wounds that have not fully healed even a decade after its onset. Turning to the future, the projected slowdown in the global economy over the next two years casts a shadow over short-term job prospects. Beyond that, it is clear that deep and rapid structural changes are on the horizon, bringing with them major new opportunities but also greater uncertainty among those who are not well equipped to grasp them. The pace and depth of the digital transformation is likely to be startling. Orders of industrial robots have increased threefold in just over a decade and are projected to double by 2020, while the amount of private equity invested in artificial intelligence has doubled over the past year. Connecting those at risk of being left behind with better job prospects should be the policy compass to a more inclusive, fairer and sustainable economy and society.

More people of working age are at work than in past decades. The good news is that so far the megatrends have not led to structural unemployment – quite the contrary. The overall employment rate has been rising in most OECD countries, driven by a substantial rise in the share of women at work. The employment rate of older men and women has also increased, partly reflecting a rise in effective retirement ages. The quality of jobs has also improved in some aspects. The share of high-skilled jobs has grown by 25% in OECD countries over the past two decades. And several emerging economies have made some progress in reducing informal employment.

Technological change and globalisation hold great promise for further improvements in labour market performance. Looking ahead, new technologies can give people greater freedom to decide where, when and how they work, which can improve work-life balance and create new opportunities for previously under-represented groups to participate in the labour market. Tedious and dangerous tasks can be automated, health and safety can be improved, and productivity boosted. Further globalisation can also have beneficial effects: it has spurred technological adoption and innovation, and contributed to productivity growth. Greater integration along global supply chains can also boost employment overall by expanding consumer demand. In short, these megatrends could contribute to more and better jobs in the future.

But people should brace for change. A process of creative destruction is under way, whereby certain tasks are either taken over by robots or offshored, and other, new ones, are created. Employment in the manufacturing sector has declined by 20% over the past two decades, while employment in services grew by 27%. This has contributed to labour market polarisation: the shares of low-skilled and (particularly) high-skilled jobs have increased, while there has been a hollowing out of middle-skilled jobs. This trend has also been driven by skill-biased technological change, a process in which technological change mainly benefits workers with higher skills. At the same time, we are observing a widening divide between “super star firms” innovating and adopting digital technologies and those, more numerous, that struggle to keep at pace with digitalisation. This is creating a large divide between those working for super star firms and the others, in terms of employment quality and wages. All this has been a source of widening earnings inequality and put the middle class under pressure. Looking ahead, 14% of existing jobs could disappear as a result of automation in the next 15-20 years, but another 32% are likely to change radically as individual tasks are automated. Together with changes in preferences, business models and contract types, this means that individuals will face deep and rapid changes: many will have to change not only their job but even their occupation, and most will have to modernise their skills and working practices. These transitions towards new jobs and occupations might be difficult and costly for a number of workers. Yet, participation in training by low-skilled adults – those most likely to be affected by the changes ahead – is 40 percentage points below that of high-skilled adults on average across OECD countries. But even for those who do have access to training, the learning options are often closely linked with their current job and may not prepare them for the transition to a new job, let alone a new career.

A better world of work is not guaranteed – much will depend on having the right policies and institutions in place. Some groups are already falling behind and labour market disparities are increasing in many countries. This has been especially marked for many young people and, particularly, the low-skilled in many countries. They face an increased risk of low-paid employment when in work, and have experienced a rise in underemployment. Their risk of being neither in employment nor in education or training has also risen or remains high. Many of these changes appear structural and go beyond the effects of the recent crisis. And they may well exacerbate already high levels of labour market inequality, fostering further social and economic tensions. They also indicate that existing policies and institutions have been inadequate and need to be overhauled.

One thing is clear: action on the margin will not do. Change is required in the well-ingrained behaviour of individual workers, companies, social partners and, above all, in policies. In line with the recommendations of the new OECD Jobs Strategy and Skills Strategy, we should move away from a model of front-loaded education – whereby recognised skills are mainly developed in schools and universities and subsequently used at work – to a system in which skills are continuously updated during the working life to match changing skills needs. We should revise labour market and social protection systems so that they focus on risk prevention as much as on helping people cope with problems when they materialise. And we need to anticipate changes and adapt policies accordingly, in order to better target disadvantaged groups.

Countries should assess how well current policies match priorities and prevent the most vulnerable workers from being left behind. The labour market risks faced by different workers – job loss, accidents at work, skills obsolescence etc. – are evolving and so should policies to help prevent and address them. The risks faced by some workers and the lack of support for them are at least partly related to the misclassification of some employment relationships. Some workers who should be entitled to employee rights and protections are falsely labelled as self-employed in an attempt to avoid taxes and regulations. But there is an urgent need to close the significant gaps in social and labour protections more generally, as well as in access to employment services. For example, due to statutory and practical barriers limiting access to social protection, non-standard workers are, in some countries, 40-50% less likely to receive any form of income support during an out-of-work spell than standard employees. Both access to collective bargaining and coverage of many labour law protections are often limited to employees, so they do not cover the self-employed and those in the “grey zone” between dependent and self-employment, who have much less power in the working relationship than their employer. Similarly, training guarantees often apply only to employees and rights depend on job tenure, and therefore exclude many non-standard workers.

Shaping a future of work that is more inclusive and rewarding calls for a Transition Agenda for a Future that Works for All – a whole-of-government approach that targets interventions on those who need it most. Such an agenda would need to adopt a life course approach, covering education and skills, public employment services and social protection, but also labour market regulation, taxation and even housing, transport, competition law and industrial policy. This approach would combine coping mechanisms, on the one hand, with preventive measures on the other. This holistic approach has been the objective of the OECD “Going Digital” project.

A Transition Agenda for a Future that Works for All requires adequate funding. Scaling up adult learning and extending and improving social protection can be costly, but public budgets in many countries are already under pressure. Countries should start by assessing how well current policies match priorities and whether the most vulnerable are being left behind. Much can be done to enhance the effectiveness and targeting of key policies – e.g. education, adult learning and social protection – by undertaking a comprehensive spending review and deepening the whole-of-government approach to public policy objectives and solutions. But there may also be a need to improve revenue sources. In the area of taxation, we have seen a number of recent initiatives, such as the adoption of the automatic exchange of taxpayer financial account information (AEOI) to reduce tax evasion; and the OECD/G20 Base Erosion and Profit Shifting (BEPS) project to address the tax avoidance of multinational enterprises. Both of these initiatives have provided governments with the tools necessary to broaden their tax bases and strengthen their tax systems against abuse. In the case of other non-tax revenues, the issuing of permits or certificates for automated production or operations, such as driverless trucks, may open the possibility of creating new sources of government revenue. Additional revenues raised from these initiatives would increase the capacity of governments to support the Transition Agenda for a Future that Works for All and help reconnect the many who feel left behind by the digital transformation and globalisation. But governments’ interventions, while essential, will likely not be enough by themselves. All stakeholders should participate, including businesses who badly need workers with the appropriate skills and a conducive social and economic environment, ushering in the creation of new public-private partnerships to help achieve this goal.

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Stefano Scarpetta

OECD Director for Employment, Labour and Social Affairs

Editorial: A transition agenda for a Future that Works for all