The east, not the west, will shape the labour market of the future
It is a numbers game, and the big numbers are in the emerging world, not the waning west
It is a strange paradox. More people are at work in the world than ever before, and inequality between countries is falling fast. Yet according to a new flagship report by the International Labour Organisation (ILO), there are half a billion people with insufficient work, and within countries, inequality is rising.
We catch a feeling for this within the developed world. For example in the UK, employment is at a record high; not just in absolute terms of the number of people in the labour market. but as a proportion of the population, too. Unemployment is its lowest since the 1970s. Yet pay differentials are stuck at high levels. They have fallen slightly over the past decade, but are still close to the highest since the 1950s. Data varies from country to country, but a broadly similar pattern in evident in the US and continental Europe: unemployment levels have fallen, but pay differentials in most countries have risen.
But what is happening in the emerging world is more dramatic. Rapid growth across most of Asia has lifted overall living standards. McKinsey calculates that half of the world’s middle-class population will this year be in Asia; Brookings that half of the world’s population was middle-class or wealthier. By the end of this decade China will be the world’s largest economy, while India number three after the US.
You can accept this that is an astounding achievement yet still be concerned, as the ILO is, by the inadequacy of jobs on offer. The world economy is not doing too badly – bearing in mind that humankind’s environmental footprint must be contained – but it needs to do better.
Indeed it needs to do much better, for labour markets face a string of challenges. For a start, there is the advance of artificial intelligence. AI will create jobs, but also destroy them. In a sense, this is nothing new; every new technology does this. We have not needed many people to look after horses since motor vehicles were invented, but we do need mechanics (though not so many once electric cars become mainstream).
But new technologies have displaced jobs many times before, the transition is painful. No one should wish that more than a million Britons should still be working in the coal mines, as they did 100 years ago; but the decline of mining jobs has left scars on communities that still remain.
If AI looks like becoming the principal labour market challenge in the old developed world, the sheer number of young people hitting the job market seems the great challenge for much of the emerging world, particularly the Indian subcontinent and Africa.
The median age in Nigeria is 17.9 years. If half your population is under 18, you don’t need to be a genius to work out that the population is going to rise very rapidly. Indeed the UN expects Nigeria’s population to double to about 400 million by 2050. India will grow by another 273 million, reaching more than 1.7 billion. These people will need jobs, and better ones than are available now.
So what needs to happen?
There are, as so often, two views. One holds that the present capitalist economic system – more correctly a mixed-market system, because governments want to play a big role everywhere – has failed. It is not matching skills to opportunities, and it is not developing skills sufficiently swiftly. The result is that a lot of human talent is wasted. Meanwhile, a group of wealthy individuals and large corporations siphon off a disproportionate amount of the wealth being created.
The other view is that the increasing wealth of the emerging world – and not just China and India, which attract the attention – is an astounding achievement. Letting market freedoms embed themselves in the Chinese economy has utterly transformed the opportunities for hundreds of millions of people. A similar process has begun in India, which is now growing faster than China; and in sub-Saharan Africa, for all its challenges, has become the fastest-growing continent of all.
There are elements of truth in both views, and many people would make their judgement on ideological grounds. I would focus on the second, while acknowledging the massive imperfections of the capitalist/mixed-market system, and adding that neither system has paid proper regard to the environment. But what is surely beyond dispute is that the views of those of us in the west don’t matter much to China and India. As the years go by and the balance of the world economy shifts, it is Asia that will lead the charge against the challenges identified by the ILO. It is a numbers game, and the big numbers are in the emerging world, not the waning west.
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