Blog 2: The Need for Employees

McKinsey’s “The global forces inspiring a new narrative of progress” calls for a new societal deal, to put external engagement at the forefront of business strategies. Factoring socioeconomic trends into business strategies will be crucial to not only drive revenue but for employment. McKinsey mentioned this subject but explained how current trends affect an individual’s bottom line, not how they will affect businesses' needs for employees.

This reminded me of Francois Bourguignon’s The Globalization of Inequality, where he explains that innovation and automation have resulted in a “barbell-shaped” job market with strong demand for high and low skilled workers, but a hollowing out of middle-skilled workers, i.e., manufacturing jobs. Further, Erik Bryjolfsson, Director of the MIT Initiative on the Digital Economy, sees a “winner-take-all” effect in today’s economy; conventional capital has shifted from physical resources to the ideas behind innovative new products and successful business models. This has created an employment market that is subject to a skills premium where growing demand outweighs the supply of highly skilled workers.

My point here is that the people in the middle of the “barbell” will be worse off, while companies will pay hefty premiums for highly skilled workers, affecting their margins. Yes, job automation will play a role in this, but I am still unconvinced that there will be massive job automation over an extended period. Coming from a process improvement role where job automation was one of my core functions, automating jobs away is extremely difficult. People are resilient and will not hand over the knowledge you need to automate their function, or will only allow slight tweaks to reduce measured work hours. However, this was in an investment bank, which is much different than automation within physical product delivery. Regardless, McKinsey’s “Jobs Lost, Jobs Gained” claims that we may see an increase in net jobs as consumption rises.

My take away is that business strategy must factor in employment and weigh the risks and rewards of hiring at a premium, employee development programs, and automation costs vs. human capital costs. Without understanding factors like these, businesses will not be able to use external engagement to their advantage, missing an opportunity to expand.

References:

1. Rotman, David. “Technology and Inequality.” MIT Technology Review. Oct 21, 2014. https://www.technologyreview.com/s/531726/technology-and-inequality/.
2. Bourguignon, Francois. The Globalization of Inequality. Princeton, New Jersey.: Princeton University Press, 2015.