Research, education and infrastructure: How governments should spend to avoid tech obsolescence?

World Economic Forum research suggests more jobs will be created than destroyed through technological disruption

Governments around the world concerned about the impact that technological change can have on jobs creation need to invest in research, education and infrastructure, according to a leading academic.

Speaking at a press conference held on the sidelines of the World Economic Forum’s Global Future Council event in Dubai on Sunday, Andrew McAfee, a principal research scientist at Massachusetts Institute of Technology (MIT), and a co-founder of the MIT Initiative on the Digital Economy, argued that there is a “pretty good playbook” for governments looking to create the climate for the creation of high-value jobs, but argued that it was not being followed well in some cases.

“We need a robust educational system to deliver the skills that people need… we need excellent infrastructure, and in too much of the world infrastructure is crumbling, and we need governments to support basic research because, left to its own, the market tends to under-invest in those kinds of things,” McAfee said.

Apart from these, he argued that “rule number one is let the innovators do what they do”.

“They are the job creation engine, and even in countries with a very, very high percentage of employment by the government, France is one of the highest among wealthy countries, that’s only 25 percent of jobs. Even in the biggest state economies, the huge majority of jobs come from the private sector.”

Saadia Zahidi, managing director and head of social and economic agendas for the World Economic Forum, said that it had conducted a survey among some of the world’s biggest companies in 20 countries about the near-term effects of technology on the future of jobs, which found that “they are expecting a net gain overall” in the next four years.

She said the survey suggested that within the 20 countries analysed, some 75 million jobs could be lost over the next four years as a result of new technologies, but around 133 million additional jobs could be created.

Zahidi said that although “there will be a need for a lot more skills that relate to technology, but what we got from a lot of HRs, at least from these largest firms in the world, was that there’s a need for much more human skills – so analytical skills, critical thinking skills, collaboration with others, active listening… those are the skills that are going to rise to the surface,” Zahidi said.

Mariana Mazzucato, professor of economics of innovation and public value at University College London, argued that although new technologies can lead to creative destruction, this generally only occurs when the profits made are reinvested.

However, she said that when profits are hoarded, which she argues has been the case since the 1980s when the maximisation of shareholder value has been the primary feature of corporate governance, “that reinvestment cycle starts to stop”.

“When you have $2 trillion being hoarded in the US, a similar amount in Europe, when you have $3 trillion in the last 10 years just being used to buy back shares and stock options…. that hurts jobs, that hurts skills. Because skills don’t only come from government training programmes, as important as they are, they have historically also come out of an endogenous result of business investment,” she said.

“If we don’t talk about corporate governance at the same time that we are talking about jobs and innovation, we are missing a trick,” Mazzucato argued.

McAfee disagreed, arguing that he had “been hearing about chronic corporate short-termism for my entire career”, but said that he had trouble identifying how this has caused harm.

“For example, we do not have a job creation problem in the United States. We have created jobs without fail for more than 110 months in a row. If the short-termism were harming jobs, I think we would have seen a different pattern.”

Mazzucato argued that the profit share of gross domestic product (GDP) worldwide “is currently at record levels”, with the amount of profit created per unit of labour being higher than ever.

“That is a result of financialisation,” she said.

She argued that the appropriation of wealth among company leaders does not take into account the fact that many of the technologies that firms have exploited – from the internet itself, to GPS systems and touchscreen technology, were developed through taxpayer resources and that the benefits of this “should be shared collectively”.

“Not through some sort of socialist agenda, but a capitalist agenda that admits where that wealth came from. It shouldn’t just be seen as some sort of redistribution policy, UBI (Universal Basic Income), a handout, but actually a citizen’s share.

“If we want governments to continue investing in some of these high risk and some of these long-term areas that VCs have not been willing to fund…. then we should actually be really rethinking the distribution of risks and rewards,” she said.

When asked about low-skilled jobs such as driving, McAfee said that there were three million professional drivers in the United States and that although not all of those jobs would be automated, the country could cope with that scale of job losses, given that 1.5 million people are laid off every month in the country.

“The problem is that the kinds of people doing those jobs right now are the ones where we know they are having the most trouble re-entering the jobs market after automation comes for them. In my country, there are specific demographic pockets and geographic pockets that are having real trouble with this adjustment,” McAfee said.

“This presents a problem. We don’t know what the right playbook is to get those people and communities back into the workforce. I think that’s a really important area for research and for thinking about smart interventions.”