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Tech and the future of work: The 4 scenarios to prepare for

Tech and the future of work: The 4 scenarios to prepare for

The Productivity Commission wants the public to submit feedback on how Kiwis can tackle the changes ahead

How can NZ chart its own course through the development and use of new technologies?

The Government has asked the Productivity Commission to conduct an inquiry into technological change and the future of work. 

The result is an issues paper that presents four scenarios for considering the future impacts of technological change. 

Each scenario is described relative to average conditions in the present day in New Zealand. 

The paper, released last week, seeks views on these scenarios and poses questions about the fitness of current labour market policies and the acquisition of skills needed to succeed in New Zealand’s workforce.

Some of them are: 

  • What is the impact of technological change on the future of work?

  • What changes might be needed under each scenario?

  • What changes might be required for mid-career training?

  • How can NZ chart its own course through the development and use of new technologies? 

Submissions may be lodged at www.productivity.govt.nz/make-a-submission or emailed to info@productivity.govt.nz on or before June 5.

A look at the four scenarios: 

First: More tech and more jobs 

Technology adoption accelerates in this scenario, and the technologies adopted create more jobs than they replace. Both capital and labour productivity rise in this scenario, perhaps substantially. 

Capital productivity rises because the quality-adjusted price of technology falls (which is what drives accelerating adoption), and because firms only adopt those technologies that they expect will improve their productivity. Labour productivity rises because to extract those productivity improvements firms also need skilled and specialised labour. Such an economy will tend towards high levels of employment. 

A concern is that disparities in wage incomes may increase, according to the paper. 

Low-skilled labour may attract low or stagnant wages while the wages of those with skills in demand may soar. 

On the plus side, in such an economy there are more resources, in total, to enable redistribution of the benefits. Higher levels of job churn are likely in such a labour market. This might lead to increased demand for mid-career retraining. 

There is no doubt that new technologies are creating new opportunities and new jobs...the challenge will be ensuring these opportunities are shared across our society

Graeme Muller NZTech

Jobs likely to be lost are those that are routine, and thus more amenable to automation. Job gains will be those that are more complex, deal with unusual or unpredictable situations, or require essentially human elements such as judgement and compassion. 

There will likely be greater demand for education and training, including from displaced workers and those in employment, and a greater need for flexible delivery options for training. More frequent and widespread displacement may create financial pressure for affected households, increasing calls for wider income support measures, including for those undertaking retraining. 

Second: More tech and fewer jobs 

This scenario, in common with the first one, is driven by accelerating technology adoption. 

However, it differs in that the technology adopted is, overall, labour replacing. Capital productivity rises substantially in this scenario, as firms increasingly adopt productivity enhancing technologies. Labour productivity might also rise, as lower-skilled roles are increasingly automated. An expected consequence of this combination of drivers is widespread unemployment. 

While workers losing jobs would contribute to job churn, overall job scarcity might encourage those with jobs to hold onto them for longer. 

Average wages might fall over time as labour supply would exceed available jobs. Wage inequality for those still in employment might fall as a consequence. However, income differences between the employed and unemployed could drive an increase in overall rates of inequality. 

Third: Stagnation

In this scenario, the pace of technological adoption slows. This could be due to declining innovation, as technological bottlenecks prove harder to overcome than expected. Alternatively, slower change could occur as technology adoption by firms slows – perhaps because newer technologies are less productivity enhancing for firms than those of the past. 

In this scenario, there will be less change in the volume, churn and nature of work, and income and productivity growth will slow. There could be reduced opportunities for people to find jobs that are well matched with their skills, preferences and circumstances. Slower technological change may prompt calls for more government intervention to encourage firms to undertake research and development (R&D) and innovate. 

Fourth: Steady as 

In this scenario, the technological drivers of labour market change over the next one-to-two decades stay within the bounds of New Zealand experience over the past one-to-two decades. 

This future offers ongoing change, according to the paper, but the rate of that change is roughly that which New Zealanders are familiar with. 

The past two decades introduced technology including smartphones, e-commerce and social media. 

No doubt, the report states, the near future will offer further innovations. This scenario includes the continuation of slow productivity growth and generally slow technology adoption by New Zealand firms (though consumer technology adoption may stay high). 

A future with more automation and more work - should be actively targeted by government and industry...but this will need the correct public policy settings in place which accelerates the diffusion of these technologies throughout the economy

Ben Reid, AI Forum

This scenario is compatible with full employment and stable levels of income inequality. Actual outcomes will vary, as other drivers of labour market change such as variation in the business cycle and demographic change are likely to predominate.

The report also points out the rise of the ‘gig' economy and its impact on the reallocation of labour. 

The ‘gig’ economy Internet-based platforms such as Uber, Freelancer and Airtasker enable firms to break some jobs down into specific tasks and buy in these services from on-demand labour.

The rapid emergence of these platforms has led to concerns that they will undermine the standard model of full-time, permanent employment, with its associated entitlements and legal protections, the report states.

Information on the extent of ‘gig’ work is limited, and current research, it states, tends to find that ‘gig’ work has grown over the past two decades, but still remains a relatively small part of the overall labour force.

The industry view

NZTech chief executive Graeme Muller says the future of work and the impact of tech changes are complex issues, and thus welcomes the  Productivity Commission;s detailed analysis of the potential opportunities and challenges. 

“It is impossible to predict the future impacts of so much technological change so the scenario approach that the Productivity Commission is taking is a great way to consider different possible futures,” says Muller.

“There is no doubt that new technologies are creating new opportunities and new jobs,” he states. “However, the challenge will be ensuring these opportunities are shared across our society.”

“Education and re-education will be critical and NZTech and other members of the Digital Skills Forum, including the Ministry of Education and TEC are working together to help the system evolve and give as many people the skills that future work may need. 

He says tech and digital skills have been the fastest growing and most in-demand skills across the economy for several years now. 

The tech sector already employs 120,000 people with another 72,000 IT workers employed in other sectors.

“Hopefully the Productivity Commission work will help the many organisations and government agencies already engaged in future of work initiatives and policy work to focus our energies together, and with much more urgency, on what will make the most impact.”

Ben Reid, executive director, AI Forum NZ, says he is encouraged to see deep thinking starting to happen in government about the impact of tech change on New Zealand’s society and economy. 

“Overall, we feel there has been a lack of public policy work to date which anticipates the potential effects of exponential technologies. Yet, when we look around the globe, accelerating tech change is one of the major, if not the biggest, trends which is shaping the future world we will live in,” says Reid. 

Reid notes that the most optimistic scenario in the report explores how technological advances could create more tasks and jobs. “In our view, this outcome - a future with more automation and more work - should be actively targeted by government and industry." 

“But this will need the correct public policy settings in place which accelerates the diffusion of these technologies throughout the economy. It also needs forward thinking about opportunities for supporting workers to reskill as the nature of work tasks continues to change. 

“We are constantly seeing symptoms that tech-change actually creates more work, not less," he says. "When was the last time any of us had an empty email inbox? But we need to use new technologies which enable us to work smarter, not harder. 

Credit: Supplied

We need forward thinking about opportunities for supporting workers to reskill as the nature of work tasks continues to change

Ben Reid, AI Forum

“Around the world the two AI superpowers the US and China, along with Canada, Singapore, UK, Germany, France and Australia are putting significant public funding into coordinated national development strategies for artificial intelligence research, skills development and industrialisation. The scale of international investment is huge. 

“Historically, New Zealand has been more of a tech taker than a tech leader,” he observers. 

“We are also suffering from an extended period of low productivity growth. The AI Forum NZ sees that increasing and accelerating the uptake of technologies within our economy is a key policy lever to improving productivity and remaining competitive on the international stage.” 

He says the AI Forum will release in the middle of this year its report on how AI and machine learning technologies can be applied within New Zealand’s wider economy including financial services, health, agriculture, tourism, transport as well as in government. 

Credit: dreamstime


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