Rapid technological advances are transforming the global workplace. But fears that automation will permanently destroy American jobs are misplaced, according to Joe Davis. Instead, the jobs that require “uniquely human” skills will proliferate, Davis said.
Davis was the keynote speaker at the Morningstar ETF conference in Chicago on September 6. He is a principal and Vanguard's global chief economist. He is also head of Vanguard Investment Strategy Group, whose research team is responsible for helping to oversee the firm's investment methodologies and asset allocation strategies for both institutional and individual investors. In addition, he is a member of the senior portfolio management team for Vanguard Fixed Income Group, which oversees more than $500 billion in assets under management.
Davis began by identifying three paradoxes that characterize the U.S. economy:
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- Low inflation but full employment
- Low growth but high equity valuations – the “new normal” is news to the financial markets, Davis quipped
- Low volatility but uncertainty surrounding fiscal and monetary policies and ongoing geopolitical risks
Some view those paradoxes as isolated or unrelated, Davis said. But he claimed they are “touchstones of a larger force that will fundamentally alter the lives of millions of people on this planet.”
Indeed, he said, we are not in a period of stagnation, but in a period of disruption.
“Humans are remarkable at adapting to change,” he said. “Hugely disruptive technologies” will accelerate growth and create new jobs.
To understand this, Davis said we need to pivot from GDP and productivity as the dominant metrics of growth. Instead, we should focus on the standard of living.
Davis said that the standard of living has improved rapidly for Americans over the last five years. This can be seen, for example, in variety and quality food we eat and in the choices we have for education. Yet productivity growth has been zero and GDP growth has been meager over that period.
What will be the trend that will define our lifetime?
Davis said that a lot of attention is paid to monetary policy; yet it has been shown that it matters to market but does not affect economic growth. Likewise, demographics have a very weak relationship to inflation; Davis said that older societies are wealthier and more productive.
“If population and demographics mattered,” Davis said, “China and India would be the wealthiest nations.”
What explains improvements in the standard of living, he said, are education, human capital and technology.
Davis said we are at an inflexion point, a structural change in the nature of work – and it will be the trend that defines our lifetime.
Those changes can be seen in developments in artificial intelligence, driverless cars and robotics.
Yet, he said, technology experts are evenly divided about whether there will be more jobs in the next 10 years. The “techno-optimists” claim that automation produces jobs; but the “techno-pessimists” expect all routine jobs being “coded away” and millions of jobs lost.
Davis cited studies showing that by 2022, 47% of jobs in U.S. (70 million workers) will be automated away, and the numbers are 69% for India 77% for China.
He said that the biggest issue for the market is what the future of work will be.
Jobs do not get automated away; tasks do
Davis cited three false assumptions in most technology studies:
- Technology only threatens labor and never compliments it
- Jobs are made up of only one task
- The tasks within jobs don’t change over time
By Robert Huebscher, read the full article here.
