Technology's rapid progress and expanding scope are having a significant impact on the nature of work. Steve Strongin, head of Goldman Sachs Research, and Sandra Lawson, director of the Global Markets Institute, explain why preparing for the jobs of the future is about more than STEM.
This podcast was recorded on September 7, 2016.
All price references and market forecasts correspond to the date of this recording.
This podcast should not be copied, distributed, published or reproduced, in whole or in part. The information contained in this podcast does not constitute research or a recommendation from any Goldman Sachs entity to the listener. Neither Goldman Sachs nor any of its affiliates makes any representation or warranty, as to the accuracy or completeness of the statements or any information contained in this podcast and any liability therefor (including in respect of direct, indirect or consequential loss or damage) is expressly disclaimed. The views expressed in this podcast are not necessarily those of Goldman Sachs, and Goldman Sachs is not providing any financial, economic, legal, accounting or tax advice or recommendations in this podcast. In addition, the receipt of this podcast by any listener is not to be taken as constituting the giving of investment advice by Goldman Sachs to that listener, nor to constitute such person a client of any Goldman Sachs entity.
Copyright 2016 Goldman Sachs. All rights reserved.
This is an unofficial transcript meant for reference. Accuracy is not guaranteed.
This is exchanges of Goldman Sachs, where people from our firm share their incites on developments currently shaping markets, industries and the global economy.
Jake Seaward Global, had of corporate communications here at the firm in a new report
The Goldman Sachs Global Markets Institute finds that a jobs gap exists today between the types of jobs people want and those that are actually available in no small part, they argue
has the onus of preparing oneself or new industry false disproportionately
on individual workers, who are not well placed to bear the costs involved.
Report goes on to say that quote. A new approach to risk sharing is needed to discuss that report on joint today by Steve, strong and head of Goldman Sachs Research and Sondra Lawson, director of the Bowl Markets Institute the authors of that Report Steve. So
Welcome to the problem of thanks take glad to be here Sondra, clearly idea, a technological change affects employment isn't knew. Why should become such a pressing issue today in right now
certainly isn't a new idea, new problem, and if you think about the last couple centuries, the american history
two hundred years ago. The farming
mandated the economy and the labour force. Almost everybody was involved in farming in some way today
about two percent. The labour force works in farming is a bigger population, there's more food, but people are doing different jobs, and so technology has
affecting employment for a very long time. What's different. Today, I think has set. The pace is faster thanks to events as in computing power, data processing, sensors jobs that were previously off limits to automation are now becoming susceptible to
nation and probably the best example. There is the self driving car, which was a dream and they're, not so this impasse and is now a reality and related that. Secondly, the scope is broader. People are seeing the effects of automation in jobs that work
seen a safe before and in their everyday lives, in a way that I think they didn't in the past,
in the past, though, innovation may have destroyed some jobs, but it certainly created new jobs as well. So is that happening.
They are the new industries producing jobs that will replace the old ones. New industries are
Eighty new jobs. The problem is that the people who are being displaced from the old jobs often aren't well suited for the new ones they ve been there.
A lot of time and energy in money in their existing careers. They built up a lot of social capital
suddenly there being told twenty or twenty five years into this career that they need to switch to something entirely new.
In an entirely new investment of money and time and effort that may affect be in a different place in the country, and this isn't just inconvenient for them is expensive and it's very hard to match up the needs of the new jobs with the people who are being displaced from the old ones, so technology
Changing the nature of work, how exactly that happening Steve and what are the types of jobs that are being created? This is part of an ongoing process. The sunrise article
about. This has been going on a very long time. We used to think about jobs is doing things, but computers and machinery,
keep getting better and they can do more and more things, but they always been a second part of the job which has the ability to supervise. You bleed, organise the factors of production, other people and guide them as to what they ought to be doing, and she had never been good at that. The core of this has always been. If you do a lot of it, it makes sense to invent a machine so that you can do more of it. More easily would have in its replica, but everything is replica, but if its new, if it's different, if it's the first time, the second time the third time, that's when you need people and so its new businesses, small businesses,
businesses were people get engaged, and it's the large super scale. Businesses where you see computers and machinery began to dominate. I think one of the
challenges as a result from public policy has always been. When you talk about jobs programs, you want to create a lot of them, but at heart,
If you create a lot of anything, you are
invited the machine in where
in its new entrepreneurial, inventive that
three humans really have the advantage and always will its coordinating
in dealing with all of those issues being
person who designs the system by which the forklift operates in the warehouse is going to be around for Olaf. That's actually right, but that makes its Ike you're getting more technical in some cases is less technical. You can think about food preparation. We are used to have to master chopping right now. You can use
processor. Any advantages has to go in coming up with a new cookie. It's got,
twenty ingredients that people want to buy as opposed to six. They don't want to buy
Oh, it's not really more stem more intellectual, more this
really more about the understanding what people want, understanding where things are going understanding. What makes things interesting as opposed to the technical
to doing something over and over and over again, so the forklift opera.
there is now the one deciding what the fort left needs to do, what its creating
other than actually operating at himself or herself system, we talk about.
Nato work, not everyone is geared up to work at a start up or some
entrepreneurial activity, how could the work at more
to date, have jobs, be effected by technological change. I think that's exactly the right question and part of what makes it so pervasive is its affecting every kind of job everywhere, as saunter was talking about. We can now puts
Susan activities. We could warehouses can almost self guide, and so very basic jobs are the ones most subject to this. On the other hand,
of basic jobs, require human interaction. Were choir. Customizing to the moment, require understanding with the client just ass for there's a certain immediacy and small
the life that actually creates many many job opportunities. It's one of the reasons when you
some of the new US biggest internet start ups.
They're not about big tack processes there actually about helping you rent out your house to guess so that ability to deal with specific location. A specific issue for the individual is what sits at the heart of the modern job effort. That's what makes
work today, as opposed to the giant lines of everyone doing the same thing. So in some ways, the craft movement that we talk,
about is related to really to technological change, as technology replaces, the day to day work craft becomes more important. That's right! That's been the history of work in a very basic where we use deft, organised, large masses of people to do fairly simple tasks, as machines took that over the people were able to supervise those machines, they were able to coordinate greater activities, and so is that ability to reallocate
to those smaller task that really has created the wealth and prosperity we have one other way we thought about. This is that people have shifted from actually doing work, to supervising and coordinating the inputs into the work so
now people can do much more than they could in the past, and so a lot of jobs have changed quite fundamentally, even as their occupation titles,
in the same so think of a lawyer who used to have two sifter document after document and discovery, trying to find a few key words
That's done by a machine that person is still a lawyer, but the content of the job is very different, so the report describes
a conundrum which is that the individual who
would benefit from retraining.
Oftentime doesn't have the right incentives to do so or the risks are too high for that individual, too,
leave their job right
train. New skills
time when they might be earning money instead, so explain how that problem works and how we fix those incentives. Let's take one step away from the job decision and repose the as advice on your time. I think that it makes it easier to understand what going back to school
So you're at this point in your career, you now have to reinvest your retirement funds, you go to a stockbroker and they tell you. We have the perfect investment for you, we're going to have to put one hundred percent of your money into a single stock. It has a ten year lock up and you don't get to change your mind for the entire ten years. This is the perfect IRA for you,
People would take that advice bright, but when you go to put that same money into a new set of skills and education and a new location,
The forum on your retraining
retraining, the right kind of skulls. This right is exactly the same kind of financial decision.
and that's why, when you look at the institutional arrangements today, it so hard for individuals to take that step.
Because they have all the risk. They don't really have the resources
and it's not a one day or even six months month. It's a five to ten year decision, because very often you have to give up your current location. You have to go to school. You then have to rebuild up the network and other connections to create actual employ
and then in almost any employment you care to name. You then begin to build the income and client.
Seniority whatever the particular profession requires. So that's another five year process. Even in professions have quick start ups, it can be a ten year process and others, that's an incredibly big, concentrated disposition to ask an individual to take particularly somebody who's, forty, five or fifty. So in this paper you talk about
It is a classic investment problem. You also discuss the need for a new approach to risk sharing. What do you mean by this, and how would you redistribute those risks first, nowhere
We need to understand the size of that decision
an individual doing it on their own is probably not reasonable, so we
have to find ways of bringing corporations and the government into that.
We do it as a matter of course, without even thinking with young people,
Student loans, placement decisions, apprenticeship programmes where other people bear part of risk, that's an even bigger problem, mid career. The risk is bigger than time to pay off is shorter. The ability switch decisions. A second time is low.
And yet. For that person try to seek a second career, we have none of the same assistance. We have to find ways were. Corporations can bear part of that risk.
to find ways where the individual get some income maintenance over? That period
probably gonna need real life assistance with the life problems when
twenty you worried about your own tuition, when you're forty five you're worried about your kids college tuition but
preparations dark necessarily today have the right incentives either, because the more advanced than tenure of that worker is to retrain them? Doesn't look like a great risk reward for the company to be invested, that person and retrain, but the risk is that the employer can come, be trained up, get skills and and walk across the street to a competitor and take me value of companies. Investment with the person company doesn't actually on the value of its investment in that case, so you have to create some incentives to make it more worthwhile for the company to make that investment, and these can range from things like greater tax. Cried
its and tax benefits for training programmes, a more structured apprenticeship programme, so that there is an easy way to slot. In older workers or the idea of a standardized labour contracts, where
the employee agrees to commit a certain amount of time in the job, in exchange for a certain amount of training and just to have this incident standardized format that people understand and recognise will probably make it easier for people to want to take these jobs are for companies to want to offer them. So what
Henshaws to finance those, the pools of money are pretty simpler at the individual can pay some level that companies can pay. It's a muddle, the private sector to pay or the government can pay as that system work today. What's the right mix of governments and from what would it look like in the future at a very high level, has a straightforward answer when you get down to the practical political implications, this it's not so easy. The broad general answer is this house
the thought of embedded in the same things that we now think of retirement. The funds that are really available are the things that we now
think of that, allow you to exist after your blood. We,
to think of those resources, something that can take you through redeployment, but that's gonna also require rethinking retires. We have five
nice help save for college. We have, I raise up a safer retirement, we don't have anything.
Similar that helps us think about.
long, learning or retraining over time. This right is such that we need to extend those programmes, so they cover the middle, but that's good
acquire rethinking them at the ends. Otherwise, you simply don't have enough money to make it work, but you could have tax advantaged savings accounts for this sort of mid career retraining. That could not only find the training itself, but also give you income,
this time when suddenly during chemists, dried up words today. Actually your penalized deepening
I very much if it's in attacks protected account and it doesn't make sense very punitive, because you're
investing today, so that you can have a longer career and postpone your retirement. Let's talk about the types of retraining you ve talked a lot about, rethinking educate,
Shan Re Education or build skills, people need the future, but you're not focused, as many commentators are on stem and a lot of people talk about the need for America, up its stem education and for people to dive deeper there. Why does the education? The future necessitate more broad base curriculum study? Some is important, but it doesnt future proof. Anybody
as those professions will evolve just as rapidly or if not more rapidly than the rest of the employment and the labour force, and so
people really need to learn is how to be adaptable had allowed
New skills later in life had working groups had to be creative because the process of working is much
more about managing organizing teams of people to put things together, then, a single person working on a single project in isolation, and so in a lot of ways. This is about
the way things are taught, rather than the actual subjects themselves, making them more interactive, more real life feel and more team oriented so that people have these adaptable.
These skills and their able twenty years on to go back and learn something else. So we used to study
I need to learn how to do this. Math table these days, amid a calculator can do the math for me
I need to learn to build work with others to solve a problem that has
he had math at its core, but requires teamwork and a multitude of insights raised here.
Such lies, the problem and the way to the solution, and are you pull all the inputs together to get the answer? It is also important to understand how broad base that notion ask, as is often too easy to think that's a description of a new business school curricula. We used to have assembly lines for cars. We now have teams that assemble cars. Those teams now put together multiple cars as opposed to a single model, because that flexibility has become inherent to a modern economy and so at its
or there's a notion of resiliency that sits at the base of education, not technical skills, because no matter how you train no matter what field you train it,
Probably within ten years, you're gonna need a new set of skills and a new set of training to do even the same job.
so that requires we can learn a computer code and five years later, it's obsolete. I started my career programming, computers
it. Unless you go to a museum, you can't find any committee.
Is that a run as computer programming languages, and even if you
back ten years, most of the computer land
just that area in the Jobs Board, top ten didn't exist ten years ago, so that sense of renewal is core to the modern job market, regardless of the profession you're talking about, and that requires an approach that all about
honey and resiliency and change not about
What we really need is carpenters, or what we really need is computer programs.
We really need is people who can adapt to today's needs. So Steve are stem jobs as vulnerable to disruption is other kinds of jobs. Today, in some ways there
Honourable the core of whether a job is vulnerable and not is how easily measured its output is, and how often it's done. How well structured it is.
What you need to automated job is data, so the more it's done,
were clearly defined, it is and the more data about it, the easier it is dynamite.
The new, where it is the more adapted it is. The more has to change a circumstance. The more you can't automated were people dominate, is new different adaptive, and that goes to the heart of why teaching people had a wherein is critical.
ass, a thing people do better. People can do something. It's never been done before. Women
means when these things that have been done five million times before his people, who think of the new needs of people didn't realize that they had so people. Think of needs. People create the ways to fill those needs over time,
The data things are done at scale, you can automated, but it's always that
multi that invention innovation, that comes from the person not for the machine. Five ten years ago
You know that I needed the ability to press a button on my phone. Have a car
Pierre s eyes. So this report proposes a number of additional policies that would help shift the burden of job retraining away from the individual and could help reduce the jobs gap. Explain how this policy's might work go back to the investment problem. There's a couple things you need to make it easier to invest in people first, which is perhaps the single most basic component of modern finance is diversification. One person investing in one person, as there
We investment is the toughest possible way to make this work so bringing the employer and tat equation brain government into that equation and creating a sort of insurance market become critical to making network. Now, when you're talking about people as opposed to events, those words all mean something slightly different than they do in finance. So it means a job training programme where the company is bearing a chunk of the tuition, it means a situation where, if it doesn't work soda, like no fault divorce, they can separate without a word
problem, but if it does work a certain amount of services do it means situations unwarily that happens, but is relatively small and its relatively but spoke in terms of firms
adding a little bit of money for someone to retrain themselves. But there's no.
Industry wide standard in that space, and in most cases, if you talk to the companies about those programmes there more retention tools than they are training programmes. There's an implicit assumption is a fair chance.
Completion of training the person may leave, but while it only right to someone you go to school for five years, the brightest stick with you for five years. One decided most often is the german apprenticeship programme, but that's in manufacturing and very classic sort of narrow jobs. We need a broader notion of that that works for the Modern Corporation Service Corporation. The only way to do is rethink retirement accounts so their draw both for these life moments. They need to be life accounts, as opposed to retirement accounts from both an points we as this
cider, having difficulty with the notion that retirement isn't what it meant in the nineteen sixes were learning the people actually need to stay active later in life, for
so beginning to realise that they need gaps in the middle. There lives to retrain and redeploy their skills, and so we need to rethink those programmes so their adaptable to life as opposed to end of life,
How might the answer the sharing economy or what you call in the report? The freelance economy, change the way we think about how people retrain for work, whether prevents economies extremely helpful as a source of income
Hide you over during these transition periods, supplemental income, it draws on assets of people already have
whether it's a spare room in their house or their driving skills. Are there cooking skills? It allows people to monetize things that couldn't be monetized before and from an income. Sandpoint, that's extremely helpful, but, as you say, it doesn't go to the benefits.
and so there needs to be some rethinking of this very strict line between employee and independent contractor, so that people have
the ability to develop their own passions pools that they have the ability to get health care, and you can have the flux,
ability to move between a full time, job or part time job, a freelance economy, job
Without these very rigid line, says, say some people have access to a lot of benefits, but other people dont have any. So a lot of our current employment, wise based on the idea of full time workers part time workers conch
workers had it all these legal divisions arise. What were they designed to do, and why did they need to change today? So the core of- and this is actually
the problem. The caravan was retention. This
the programme as it were, designed to make sure that people stayed with their employer and made it hard to leave.
And in an economy where transitions are a necessary component. Having your benefits tied in the things that are
Pension programmes is going to create an inherent conflict and it's actually
bigger change. You really need to think about words like portability. Much more. Clearly, if you look at the: U S, system, there's attend
to believe that the problem is that we Titus to employer. But if you take a look at Europe there, the problem as you tied it occupies szent nurses have a pension planet separate from manufacturing workers in a calm. You were people move across things. Neither needs to be tied to the individual, which may not be practical or it needs to be portable
I'm employer to employer and occupation to occupation and portability rules can be written, but that becomes the key,
are there any areas where we are seeing innovation. The space that seems to hold promise for the new economy are used.
Lots of innovation in financial programmes in last period,
The end of the old defined benefits plan, which was a classic retention and having replaced by defined contribution, which has clear portability, is a great example of how you
we think programmes and so take your pension, lithium economic rationality. So we can do that it now. You ended up with a different kind of pension and the interesting thing about that, and this goes to this life plan as opposed to retirement plan. The defined
contribution. Plan works live better when you go to generalise it to life circumstance and beyond, just retired, as opposed to the old retention programme.
We need ways of thinking about how to do help, plans in the same way and the other key benefits, so they also become portable in some reasonable fashion and there's gap programmes and work for people with extended gaps while they re, invest so mean this paper. I struck by its optimistic shown a lot of times. We hear about displace workers and skills
it seems that a zero sum game why're you optimist about how individuals can surmount and meet the challenges of these new technologies and economy. I did wonder, is about
Tourism is what we talked about in the very beginning why people are so focus on this issue right now. I gotta technological
Change innovation affects everybody across the political spectrum. The social spectrum means that there is a lot of focus on finding new approaches to bear the risk and to help people adapt. It can't just be isolated one segment of society, and so you have a lot of effort really focused on coming up with solutions in a way that you probably didn't in
one of the other aspects of taste, public debate, is the labour markets were having this moment of fear and crystallization because of the onslaught of technology
and the macro economic productivity discussion we
will argue and is no longer any technological progress and that's the reason is no productivity gains. What is actually happening is that technology is becoming so pervasive and is changing so rapidly that this is moving from sort of block changes that are clearly defined to a process of continuous evolution where anyone
job is going to evolve. That commonality makes it easier to generate political action and the fact that it's a series of steps, as opposed to one or two giant steps, also makes it much easier to make adjustments to. I think the other thing that.
Makes us optimistic, is a new understanding of the power of that technology. As we get to watch this real time, it becomes clear and clearer. This is actually
then about the enabling people to do new and interesting thanks
that it really is a process of where the old repetitive data driven gets put in the back seat and driven by the machines
and the front seat is all about the new and the interesting, and that's true whether you're talking about farms, factories, service, jobs or profession,
jobs. All of them are going through. That same process
we're individuals are getting to focus on more interesting things. New things accomplish more
the day in an hour than they used to do
skills are more transferable from topic to top it there's an incredible influx of new activities and new things to do, but that creates an incredible challenge to reallocate redeploy people too.
New functions, and we need to evolve our institutions and our systems to allow them to make those transition early in the paper. We make the point that when you look at society, you sometimes think this is technology, sort of filling up all available space, a displacing people. But in truth, when you look at a more closely
What it is a situation where, relative to the amount of machines and software technology and capital we have fewer and fewer people available to coordinating control.
Combat where more short labour than long labour to use the financial terms. We need people its interest
in thing right, we're always short jobs and we're always sure people for the jobs. Those are to constant refrain in the economy and we're we're saying: oh yes, they are
Austin, refrains and where we need to do is change the system. So there were better at matching the people who don't have the jobs to the jobs. I don't have people so Sondra, just a close it out
We talk about your optimism. I am optimistic that we get our hands on this as a society as government in companies and individuals can sort this out in Rome.
In short order, or we gotta be finding our way through this for a long time. I am optimistic, but I think it's a process and it won't miss
Thirdly, all be resolved in a short while it's going to go on for a long time as new challenges come up, but the focus, the political and social focus on the need to rethink the systems need to rethink the
petitions and come up with creative ways of helping people adapted,
very different labour force than one they started out in. That gives me optimism, because it's not a problem to be shunted decide is something that people are really working on now, Steve saunter. Thank you for joining us today, great conversation. Thank you.
That concludes this episode of exchanges of Goldman Sachs objects. Seaward.
four lessons. This spot gas was recorded on September. Seventh, two thousand sixty all price references and market forecasts correspond to the date of this recording. This podcast should not be copied, distributed, published or reproduced in whole or in part. The information contained in this package does not constitute research or recommendation from any golden.
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