Community Impacts of the “Great Jobs Collision”

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Reposted with permission by: Dr. John Plodinec of CARRI

I am a regular reader of John Mauldin’s Thoughts from the Frontline. He makes me look at things I wouldn’t normally see, even – especially – when I disagree with him. In a recent column, he gave an overview of work by Karen Harris and co-workers at Bain and Company on the economic and social impacts of automation. Everyone who cares about their community’s future should read this study. While it is written from a financial perspective, its predictions imply huge impacts on communities. If anticipation of coming change is one of the fundamentals of community resilience, then every community should determine the impacts of these global trends and trajectories we’re already seeing on the community’s future.

In the report – Labor 2030: The Collision of Demographics, Automation and Inequality the Bain group concludes that by 2030,

  • “Global Greying” will mean both the end of a period in which labor was plentiful and a large reduction in demand for “stuff.”
  • Automation will potentially increase the supply of stuff while eliminating 25% of jobs (~40 M in the US), especially those held by the lower and middle class.
  • Inequality will continue to climb.

For communities, this means that our already messy world gets even messier over the next decade. As I’ve written before, among other things, Global Greying means less tax revenue for local governments even while their pension obligations and the public’s demands for services increase. Still recovering from the Great Recession, communities will continue to be financially squeezed until the 2030’s when we seniors “shuffle off this mortal coil” in increasing numbers.

To me, this implies that many local governments will outsource at least some of the services they provide to NGOs and the private sector, and reduce services in other areas. Some of this will be via contracts, but much will be by default – they’ll just send out a notice announcing a change. For example, my city’s government recently decided to pick up recycling every other week instead of every week.

Public sector pensions and retiree medical plans are currently more heavily tilted toward defined benefit plans (e.g., for a nominal fee a retiree from state government can have his health care insurance coverage through the same plan as non-retirees). However, we are already seeing rapid conversion of these to 401k and defined contribution plans (i.e., instead of the retiree now buying in to the state’s plan, she will receive a stipend to buy her own). While the idea of now having choices is not a bad thing it also means that the old, the poorly educated and those with cognitive or physical disabilities have to make choices which they have never had to make before. Especially in a world in which the default mode for making those choices is electronic and most of them either don’t have computers or smartphones, or can’t use them (think of Grandma’s arthritic fingers).

I do think that the report underestimates the growth of the service economy; this may mitigate some of these impacts. For example, just today my local newspaper ran a story about a new venture catering to seniors. However, ventures like this one can only flourish if the community has the infrastructure to support it. For example, for the new venture in my town that means transportation able to deal with those with mobility challenges, workers trained to handle the myriad challenges involved in working with seniors, and the availability of medical care. This kind of venture most likely would not be viable in a rural community – the lack of specialized transportation services, or trained caregivers or nearby health care would make its existence tenuous at best.

The real kicker, though, is the projected increase in inequality. Part of that is reflective of demographics. Those on fixed incomes, well, they’re in a fix. If you were 60 in 1990 and had a pension of $1100 per month and Social Security you felt pretty good about your lifestyle. Not lavish but OK. Now, things don’t look nearly as good – especially with the rising costs of your health care.

However, the bigger impacts will come from the working poor and the middle class who simply won’t have jobs anymore. This has already resulted in a drop in life expectancy and increased isolation and alienation from their communities (This isolation also contributes to the opioid epidemic). The Bain group projects that increases in the average life expectancy in the developed world will thus slow and perhaps stop. Further, the present wave of social discord is likely to increase. With decreasing opportunities for social mobility, intergenerational poverty will become much more prevalent.

You may not agree with some or all of the Bain group’s predictions – I certainly don’t agree with all of them. After all, they are based on trends and trajectories woven together. But even if the predictions are accurate, trends aren’t destinies unless we let them be. If we do not look at how these trends will impact our own communities and begin taking appropriate actions, our destiny may be the fulfillment of their dire predictions. Resilient communities anticipate and act, to survive and thrive. They try to determine where the future is going and then get in front of it so that, like a surfer riding a wave, they will come to shore safely.

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