Narrowing the Jobs Gap: Overcoming Impediments to Investing in People
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Narrowing the Jobs Gap: Key Points
Although technological change is good for the economy over the long run, it isn’t necessarily good for everyone, particularly in the short term. The economy as a whole benefits from the higher living standards that technological innovation generates. But for the people whose jobs are displaced by technology, the macro benefits are of little comfort.
Occupations and industries follow a natural evolution. Early on, new job opportunities are plentiful and the work is often well-compensated. Over time, jobs become vulnerable to automation, outsourcing or falling wages (or some combination of the three). This process reflects the normal course of economic demand, not any changes in policy. As automation becomes cost-effective, people’s economic role shifts from ‘doing’ the work to ‘organizing, coordinating and supervising’ the increasingly complex resources and activities behind it. Today, the pace of this evolution is accelerating as measurement technologies and data-collection capabilities improve, putting more jobs at risk.
The broader economy benefits if more people who are at risk of job displacement retrain and shift to new industries where their competitive advantages over machines offer better long-term economic prospects. But an investment analysis shows that while changing careers makes sense at the macro level, the decision is more complex from an individual’s perspective, particularly since she must shoulder the burden of investing in human capital on her own. Often, waiting for even an unlikely job opening in her current occupation can be a superior choice to switching careers, because of the uncertainty involved.
This dynamic has helped create a ‘jobs gap’ – the gap that often exists between the types of jobs that people want and the types of jobs that are available. Closing the jobs gap requires a new approach to risk-sharing, one that spreads the burden of investing in human capital more broadly. This risk-sharing approach should include a greater educational focus on social skills, creativity and judgment, not only STEM subjects; expanded incentives for corporate job training; standardized labor contracts; innovative financing structures to support investments in human capital and career transitions; lower barriers to entry into certain professions; increased support for small-business creation; and regulation that supports the growth of the ‘freelance economy.’