What implications for the World of Work? Can tomorrow’s organization of work be constructed to avoid the worst consequences of the « nightmare »?
The American Dream is relatively easy to define with two propositions:
-1 One will be better off later because he has all the opportunities to grow and develop and become richer via his hard work;
-2 A kid will be better off than one’s parent because the economy will grow and one will benefit from the assets accumulated by the earlier generations.
Well, but what if the mountain of public and private debts is what one generation leaves to the other? If the infrastructures (physical, like roads and bridges and railways, and social like pension schemes, health care systems, etc._) are crumbling? We may end up with the OECD nightmare where the premises are exactly the reverse from the American Dream:
-1 One cannot be sure to be much better off later because: opportunities to grow might be more limited, opportunities to save and accumulate assets will be limited by the amount of debts to be repaid on a personal base and on a public base via taxes, environment constraints might weight on one’s lifestyle;
-2 One cannot be sure to be better off than one’s parent, one cannot even be sure to retire as early and as wealthy as one ‘s parents. And although one can hope to be as healthy as one’s parents when in older age, even this is not guaranteed since diabetes, obesity and multiple illnesses due to bad eating habits, pollution and climate change’s implications, like the geographic dissemination of some illnesses, might well destroy some of these hopes.
And I don’t mention here the moral discouragement factor by which the relation between working hard and earning money may have been seriously undermined by the easy money made by some in the last 20years (see the outstanding article on that subject by Matt Miller (“You don’t deserve to be rich” February 2009, see www.mattmilleronline.com )
Unfortunately this is not a prediction but a part of today’s reality where not only generations in their 30s have already a high level of personal debts, but they also have in front of them all the current economic recovery plans to pay tomorrow with their taxes; as well as the pensions of their parents at a time where the “paying” generations are less and less numerous relative to the “receiving” older generations, etc. All this varies by countries but most of OECD is in such a situation.
Beside wishful thinking, what can make this prediction wrong? Let’s explore a few tracks.
A major inflation wave, say in 10 years that will wipe out the debt…. and the assets of those having saved in inflation sensitive assets? A bit brutal but it happened already in the mid 70s (and in the mid 30’s). It seems hard to imagine in today’s world. But I know for sure that some cynical minds already see this as a possibility.
A major growth in savings from developing countries that will continue financing the OECD debts via sovereign funds and private investments in OECD bonds and companies? Why not, it is the way most of the American debt and part of the rest of the OECD’s ones have been financed for the last decade. The flow of money is now clearly from emerging markets towards rich countries. But here again some limits may appear since investing in OECD economies will come with high expectations on returns and on currencies stability. How long will this be possible? How long will OECD countries be considered as a safe heaven for emerging market’s investments? The question is particularly acute when several OECD countries, including in the Euro zone are close to bankruptcy because of their debts.
These two solutions seem to lead nowhere. But fortunately they are not the only ones.
Nothing is clear in this OECD nightmare, however one things stands out as a potential solution. The OECD nightmare can only be alleviated if work performed by OECD workers creates super productive returns i.e. if workers in OECD generate enough value to allow again a major economic growth to happen. Is this possible, especially with an ageing workforce that one says to be less productive? Lets try a few hypotheses on other tracks:
Working longer in one’s life will reduce the burden of pensions and will create value (lets not forget that one more year of work creates a benefit of two years on economic value: one year because of the work provided, one year because of the pension cost not being supported). This hypothesis of working longer could also apply to the total number of hours worked per year (the benefit is triple, one part for the individual getting the value of his extra work, one for the incurred financing of social costs, one for those benefitting of his extra work). Sure it does not reflect a new American dream (because both propositions remain wrong) but it helps.
Working better could increase the productivity drastically, this implies more collaborative practices, more technologies supporting the workers, especially the knowledge and service workers, better infrastructure in order to reduce the social productivity lost in transportation and in dis-functioning infrastructures like trains or roads or slow telecoms. Any hour not lost in transport or in waiting for web pages to download is either a gain in productivity or a gain in free time one can devote to any other activity, productive or not.
Working higher will increase the per hour production of any worker. By working higher I mean with higher skills. This is obvious but requires large changes in education and training infrastructures all along one’s life. A revolution in continuous education is required of the magnitude of the ones performed at the end of the XIXth century in Europe with primary education: compulsory, free of charge, secular. What a program!
Working more integrated with the rest of the world will increase the interdependence of work at the task level and therefore will improve the work allocation by allowing any task to be performed where it is best performed economically, from a cost and quality point of view. This will mean improving offshoring of tasks as we know it partially today but at a larger scale and at a task level (e.g. currently some radiographies are analyzed in other places than where the patient and his doctor are). But it will mean also in particular improving the efficiency and effectiveness of the “Internet continent”, the one on which so many tasks can now be performed by anybody anywhere in the world, provided the basic skills for that task are available. It can go from being a call center operator from home, wherever this home is, to data entry, to IT programming, to advertizing creation, etc. This integration will displace some workers but we don’t know yet which ones. It will also create large opportunities for many workers to concentrate on what they do best. Being better integrated means also being able to attract and integrate properly more migrants within OECD, a daunting task in particular in Europe. Again, one challenge all along the global integration issue is clearly to be found in education for allowing workers present in OECD (wherever they originate) to keep themselves valuable in this global competition. The relative good news here is that most of the world jobs will be created outside of the OECD and therefore that the challenge for OECD countries is less to find jobs for more people but to secure good jobs for its residential active population and to help it also to access some jobs being needed in emerging markets but not being filled there (the “Internet Continent” works both ways, migrations work both ways too). By contrast China has to find ways to create about one million jobs a month between now and 2025 just to cope with the increase in its active population. Obviously this means being open to important elements of the world of work, from offshoring to immigration to work on the Internet continent. A far cry from any labor related protectionist measures.
Working focused on the fields to be the most dynamic in the future world economic growth and on which the OECD can have some competitive advantage. These fields are partially known; they range from new energy forms, high-end technologies, superior services to individuals, including tourism (a great industry since it helps create jobs that are not off-shorable, require middle skills and can surf for decades on the continuous and durable global middle class enrichment). Many more can be listed. But all of them will call, within the OECD, for perfectly functioning infrastructures, from education (from primary up to continuous education) to research capabilities, to telecommunications and roads, since they all rely on the capability to mobilize high quality resources in a fast and efficient way. This justifies major investment plans since these plans are really investments on the future competitivity of OECD workers.
At a time when the crisis hits the OECD, when unemployment is increasing very fast, when the end of the American Dream and the rise of the OECD nightmare is so obvious, but also at a time that, as we put together astronomically costly economic plans that will weight financially on our shoulders for generations, might be exactly the right time to ask ourselves the right questions on how to cope for the long term ability of OECD workforce to create value allowing to avoid for the OECD nightmare to enter into a real tragedy. At a time when some do debate the value of economic plans oriented towards pushing the consumption or helping the production side, this glimpse into the future is pushing strongly the argument of investing in infrastructures, social and physical, in order to ensure tomorrow’s competitivity and tomorrow’s jobs within the OECD.
Dominique Turcq
March 2nd, 20
