Politicians must tailor public policies for the future of work. Prof. Dr Patrick Emmenegger points out what employees and businesses really need in order to flourish in the coming decades. Re-skilling and ‘uberisation’ are two major issues in the current agenda. With provocative views, the author debunks some myths and unveils the real concerns to focus on each topic. The challenges ahead cannot be underestimated.
Political Challenges for the New World of Work
Let us start by debunking a myth. The new world of work will not be the end of work. Journalists and academics often fret that machines, robots, and artificial intelligence are going to take away our jobs. That is just an urban legend. Today we are at the peak of technological progress. At no point in history did we have so much technology to enhance, or for those that think pessimistically, replace human productivity. Nevertheless, in the technologically most advanced countries, employment rates are at an all-time high. If history is any kind of teacher, technology will not simply replace us.
Admittedly, we might be working fewer hours. The availability of daylight and (numerous) religious holidays once regulated our working time. Since then, working hours first increased to over 60 hours a week, before they gradually declined to about 40 hours. Hence, in the future, we might be working between 30 and 40 hours. However, there is a large difference between de jure working hours and de facto working time. From several years of personal work experience in the country considered to have the world’s shortest work week, Denmark, I can assure you that the difference does not feel all that great. You might leave work at 4pm rather than 5pm, but you will answer more emails after dinner. In addition, if you want to move forward in your career, you still have to work 60 or more hours. Short formal working weeks might be nice, but they do not make that big a difference.
Instead, we must ask two different questions. First, what kind of work will we be doing in the future? What skills will we need? And second, what conditions will determine our work environment? Will the standard employment relationship (full-time, open-ended, regular working hours) still be the standard in the future?
Skilling and re-skilling
Regarding the kind of work, a few trends already appear on the horizon. We will definitively need different skills. By different, I do not mean programming skills. We will of course need (more) programming specialists, but I doubt that an average Joe will ever need these skills. We will certainly need more IT literacy, but all of us who teach or have children know that future generations will be doing just fine. Information technology is omnipresent in today’s world. We will be learning by doing. My son is not even two years old, but he has already figured out how to work with a tablet computer. I am not too concerned about this.
Rather than programming, transferable skills, the ability to adapt, and skills required for non-routine positions will be in high demand, because the kind of work we are going to do will change more rapidly in the future. Which kinds of skills are easily transferable to new work? The literature distinguishes between specific and general skills. Some skills are very specific and only relevant for a particular company. Think of firm-specific processes and infrastructure. Other skills might be specific to occupations. Carpenters are highly knowledgeable about work related to wood, but these skills are of limited use outside of carpentry. Finally, some skills are rather general. In technologically advanced countries, there is virtually no work, which does not presuppose some minimum levels of literacy or numeracy. These are thus very general skills.
The more general skills are, the easier it is for employees to transfer these skills to new jobs. Yet rich countries will not be able to compete successfully on world markets based on general skills alone. Wolfgang Streeck coined the term ‘diversified quality production’ to describe the production models of the most advanced economies. The term emphasizes that firms in these countries often compete on quality rather than price. However, such a production model requires employees to be able to constantly adapt and improve.
I am convinced that diversified quality production is also the model for the future in the most advanced economies. As the example of China shows, technological advances are easy to copy. Hence, we cannot solely rely on technological innovation, but also need a workforce with the right skills. Moreover, the popular resistance to austerity in Greece demonstrates the limits of internal devaluation. The possibility to increase competitiveness merely by increased public savings and deregulated markets is limited. Or can you imagine Switzerland competing on prices rather than quality?
General skills will therefore not be sufficient for a diversified quality production model. Rather, business will continue to need employees with highly specific skills to compete on the quality of their products. In addition, in the future, business will continue to rely on employees who are able to adapt to new technologies and optimize production processes.
This combination of specific yet transferable skills means to square the circle. Policy makers thus face a difficult task to ensure the right skill combination for the future. On the one hand, the future workforce must be equipped with the ability to transfer their skills to ever new forms of work and tasks. On the other hand, the future workforce must acquire specific skills in order to reach the levels of innovation and quality necessary to outrun cheaper competitors. To solely trust on technological progress in this situation would be hazardous. Or do you really think that it is going to be so difficult for other countries to copy new products and production processes?
Policy makers thus face a difficult task to ensure the right skill combination for the future.
At universities, we are trying to square this circle. Of course, part of what we do concerns specific skills. Students gain knowledge about accounting standards, statistics, about political processes, and many things more. However, students also learn to absorb a lot of new material in very little time, to develop and manage their own projects, to think analytically and critically, and to develop and communicate their ideas. All these are general skills that will allow them to be mobile and face the challenges in their future careers.
Hence, I am not all too concerned about students – certainly not the ones from St. Gallen. Instead, I am considerably more concerned about those who are academically less inclined. In Switzerland, the more practically gifted attend vocational education and training (VET), where they learn occupation-specific skills. In the Swiss VET system, firm involvement ensures that these skills are sought after in the labour market. In addition, state support, in particular nationally standardized exams and certification, guarantee the transferability of these skills within an occupation and possibly beyond.
Switzerland has been doing extremely well with this skill formation system. Wages are high, (youth) unemployment is low, and Swiss products are competitive (despite Swiss wages and the overvalued currency). Yet how can these employees be prepared for the working world of tomorrow? To expand the training of general at the expense of specific skills undermines the occupational character of these systems. It might also prompt employers to withdraw from the system because they are unlikely to be willing to invest in teaching more general skills that can be easily transferred to other jobs in different firms. The result could be a statist skill formation system: more detached from the labour market and also more expensive.
In the absence of such successful VET systems, countries have often encouraged more pupils to enter universities. Among the OECD countries, over 40 percent of all 25- to 34-year olds have now tertiary degrees. Some countries have already crossed the 60 percent mark. But this alternative strategy has proven increasingly unviable. In the countries with the highest enrolment rates, returns on additional years of education are approximating zero. In addition, those without university diplomas increasingly struggle to find jobs – including jobs that do not require university diplomas. I do not think that this strategy will solve our problems.
In many ways, a system emphasizing vocational skills seems superior to an unlimited expansion of universities. But how can vocational education and training ensure high quality training and provide employees with the ability to constantly adapt to new worlds of work? Research offers a few suggestions.
First, successful VET systems build on the mutually advantageous cooperation between employers and the state. Employers ensure that training content reflects labour market needs. In addition, their involvement leads to a sense of ownership over the process because employers actively participate in the shaping of their future employees. The state financially supports and monitors these training activities. Through publicly recognized certificates, the public authorities guarantee that the trained have indeed the expected skills.
Second, training content has to stay in tune with economic developments. In Switzerland, associations responsible for occupations are legally obliged to regularly assess the extent to which training content must be adapted to new labour market needs. This mechanism generates a permanent discussion about the validity and usefulness of skills trained in each occupation and takes into account the direction into which the economy is moving.
Finally, retraining and further training opportunities are of critical importance. In recent years, Switzerland has spent considerable time and resources in developing and expanding post-secondary and tertiary vocational education and training. These pathways allow employees to learn new skills and change occupations. In this way, occupational mobility has been increased and employees with a vocational education are given the opportunity to further develop their skills. Of course, these policies are not for free, but I think this is money well spent.
Uberisation and the gig economy
The second question of relevance concerns the future working conditions. There is a lot of talk about the ‘uberisation’ of employment relationships. The concept is not clearly defined and means different things in various contexts. Often, and this is the understanding used here, it refers to the end of the standard employment relationship. The standard employment relationship is characterized by dependent employment, the provision of a physical workplace by the employer, regular working hours, full-time work, and an open-ended contract. The ‘uberisation’ of employment relationships calls these features into question.
When journalists or academics write about these ‘new’ employment relationships, they typically highlight two points. First, they describe the ‘old’ system as outdated and claim that it will be inevitably replaced. Second, this change is represented as a positive development, because these ‘new’ employment relationships are more in tune with the modern economy. Newspaper articles often provide positive examples: a highly educated person working from home, developing programs or designs, typically on an on-demand basis, which is no problem, because she is highly entrepreneurial. In her spare time, she is working on a book manuscript. And of course, flexible working hours help her reconcile work and family life.
These stories sound almost too good to be true. And they typically are. There are two good reasons why we should be reluctant to abandon the standard employment relationship. First, the great majority of employees benefits from the standard employment relationship. Not all of us have a PhD in information technology and can design websites from home. Most people are happy to have a job and hope it pays well (enough). A working world in which we all have to be entrepreneurial in order to be successful sounds great for a minority, but most other labour market participants will be hopelessly out of their depth. Honestly, who would like to switch jobs with an Uber driver? Most of the people working as self-employed do so because they have no other choice. Hence, ‘false’ self-employment is not booming because (former) employees look for more flexibility, but rather because employers are looking to decrease the cost of employment.
This is not to say that we should reject all forms of labour market flexibility. Flexibility is key to a well-functioning labour market, as the Swiss case demonstrates. Rather the goal is to find the right balance between flexibility and security. The ‘uberisation’ of employment relationships, with its almost exclusive focus on flexibility, might be beneficial for certain employers, but it is certainly not desirable for society as a whole.
‘false’ self-employment is not booming because (former) employees look for more flexibility, but rather because employers are looking to decrease the cost of employment
Second, the ‘uberisation’ of employment relationships will not go unchallenged. Karl Polanyi has argued that economic reforms are always characterized by a ‘double movement.’ In this dialectical process, an attempt to disembed (to free) the economy is typically met by a counter movement, which tries to re-embed the economy. History provides multiple examples of such double movements.
For instance, precarious employment relationships and the resulting lack of social security played an important role in triggering the creation of the organized labour movement, which fought for the institutionalization of the standard employment relationship. Because individual workers are usually structurally disadvantaged in negotiations with employers, the state eventually learnt to accept that workers have the right to form associations (i.e. labour unions) and fight for their rights collectively. This discrepancy in power resources is the main reason, why labour unions are not considered to be in restraint of trade, although they – technically speaking – clearly undermine the play of market forces.
It is often forgotten that employment relationships in the late 19th and early 20th century were usually characterized by fixed-term contracts, on-demand employment relationships, and insufficient social protection. Rather than a model for the future, the ‘uberisation’ of employment relationships is thus in fact a case of revisiting the past.
If we really want to turn back the wheel of time, we will soon notice that today’s losers from ‘uberisation’ processes will equally fight the change ahead. They might no longer join labour unions, and thus lack the collective resources necessary to bargain for better working conditions. But they could vote for populist and extremist parties, which will try to channel their protest and discontent into authoritarian, anti-pluralist policies. First signs of these processes are already more than palpable. In any case, the losers of such economic processes will not simply disappear. We better be prepared for a Polanyi-style counter movement if we continue to move in this direction.
If we really want to turn back the wheel of time, we will soon notice that today’s losers from ‘uberisation’ processes will equally fight the change ahead.
In sum, there will be plenty of jobs in the future, but how these jobs will look like and how we can train people for this new world of work is less obvious. I have suggested that we need to find promising ways to train people also outside of academia. Vocational education and training systems as used in Switzerland are a good starting point, but there are certainly alternatives. In addition, we should ensure that all labour market participants benefit from some minimum level of job quality and social security. In his inaugural address, F.D. Roosevelt, the creator of the U.S. welfare state noted: “The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have too little.” We should set our minds to this task.