turmoil and transition

One of the greatest issues that will face Canada, and many developed countries in the next decade will be wealth distribution. While it does not currently appear to be a major problem, the disparity between rich and poor will increase. The main reason will be the emergence of a post-job economy. The ‘job’ was the way we redistributed wealth, making capitalists pay for the means of production and in return creating a middle class that could pay for mass produced goods. That period is almost over. From self-driving vehicles to algorithms replacing knowledge workers, employment is not keeping up with production. Value in the network era is accruing to the owners of the platforms, with companies such as Instagram reaching $1 billion valuations with only 13 employees.

We have connected the world so that data and information can flow in the  blink of an eye. There are fewer information asymmetries, as companies like Amazon bust down one industry after another. Interconnectedness and increasing computational power will continue to automate work and outsource any job that can be standardized. New businesses are employing fewer employees, while manufacturing is moving to an increased use of robots.

We are entering the platform capital economy, where a common internet exchange medium (the platform) can enable easier commercial transactions. Buyers of services get convenience, while sellers get a larger market. The spoils go to the owner of the platform, receiving a percentage of revenues. Most of these platforms are created when regulations and oligopolies make these transactions difficult by traditional means. Platform capitalism initially disrupts a sector that is poorly served.

PayPal is an example of facilitating small financial transactions between parties in different countries because the banks were terrible at it. PayPal facilitates small businesses to engage in  e-commerce. Uber is disrupting taxi monopolies. Uber enables car owners to make some extra money and eases payment for passengers. AirBNB is taking on the hotel industry and its practices. Airbnb provides an easy way to rent out extra space in your home by connecting you to a global market.

At some point, network effects kick in. This is the hope of the investors in these platform companies. Once they dominate a sector, it is almost impossible for a competitor to compete directly. Facebook has achieved this for social networking; Amazon is getting there for online retail sales; and Google controls online advertising. The wealth that is created for the users pales in comparison to the value for the platform owners. Once the platform capitalists achieve dominance, they act like any old-fashioned monopolist.

The emerging economy of platform capitalism includes companies like Amazon, Facebook, Google, and Apple. These giants combined do not employ as many people as General Motors did.  But the money accrued by them is enormous and remains in a few hands. The rest of the labour market has to find ways to cobble together a living income. Hence we see many people willing to drive for a company like Uber in order to increase cash-flow. But drivers for Uber have no career track. The platform owners get richer, but the drivers are limited by finite time. They can only drive so many hours per day, and without benefits. At the same time, those self-driving cars are poised to replace all Uber drivers in the near future. Standardized work, like driving a vehicle, has little future in a world of nano-bio-cogno-techno progress.

For the past century, the job was the way we redistributed wealth and protected workers from the negative aspects of early capitalism. As the knowledge economy disappears, we need to re-think our concepts of work, income, employment, and most importantly education. If we do not find ways to help citizens lead productive lives, our society will face increasing destabilization. This is a challenge for government, as our institutions are premised on many assumptions that are no longer valid. Changing the worldview of politicians, public servants, and citizens will be a key part of addressing the issue of wealth redistribution. Old mental models will not help us much.

Consider that almost all of our institutions and many of our laws are based on the notion of the job as the normal mode of working life. Schools prepare us for jobs. Politicians campaign on job creation. Labour laws are based on the employer-employee relationship. What happens when having a job is not the norm? In the USA today, half of all jobs are at a high risk of automation. But no society can afford to leave half of the workforce behind as it shifts to a creative economy. We have not had to deal with a problem of this scale before.

For example, when farm hands left their fields at the turn of the last century, replaced by tractors, they found better paying jobs in the factories clustered around cities. Later, as manufacturing moved offshore or became automated, those without work might find jobs in information processing in the knowledge economy. But as we move into the network era, there is no visible sector that will employ millions of people whose jobs are getting automated by software and robots. These people include lawyers and other white collar workers.

The job is a social construct that has outlived its usefulness. Freelancing may be a replacement but often lacks a safety net, and many of the self-employed become the pawns of the platform capitalists. In the next five years, many professionals will have to change not only who they work for, but what they do. Are they prepared? We are entering a post-job economy. Our careers will be shorter as our lives get longer. Companies and institutions are no longer the stable source of employment they once were. The structures we create now to shift society to a post-job economy will determine how much turmoil the transition will create. Now is the time to construct better ways to distribute the wealth of the network era.

labourersNote: This is an update of a previous post.

2 Responses to “turmoil and transition”

  1. tyelmene

    Its very good that well-reasoned people are surfacing this issue now in a spirit and forum of others who can also reason/dialogue/argue dispassionately. It’s outcome is too important to allow corporate or political lobbying types to hyjack that responsibility away from the rest of us.

    Reply

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