The new age of automation

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Automation

As digitisation of the workplace gathers pace, business leaders must promote the learning of softer skills if employees are to thrive in the face of volatile markets and intensifying competition, writes Séamus Nevin…

A study by Bank of England chief economist Andy Haldane in which he assesses the impact of new technologies on the UK labour market has predicted that over the next 20 years 15 million jobs are at risk of being lost to automation.

The Bank’s study is just the latest in a long line of similarly harrowing forecasts by leading academics and institutions. Technological advances have always altered the nature of business and employment. As new forms of work are added, the skills of some workers are inevitably made obsolete. Throughout history, this process of creative destruction has generated enormous wealth, but it has also led to difficult disruptions.

While technological change has always occurred, two trends set recent innovations apart. First, previous job-replacing technological change has been confined to tasks that were predominantly physical and/or repetitive – the kinds of jobs that a machine with relatively simple software can easily replace. Recently, however, computers have begun substituting for complex cognitive skills. The set of human tasks machines can feasibly automate has extended beyond those routine ‘blue-collar’ clerical roles to include formerly secure, ‘white-collar’ professional jobs. In essence, the next wave of labour-saving technology looks to be replacing human brains rather than human brawn.

The second trend is the sheer speed of recent technological change. Moore’s Law, the observation made in 1965 by Intel co-founder Gordon Moore that the rate of growth in computer processing power will accelerate by around twice its speed every two years, has been markedly accurate, indicating that not only is this change happening fast but its pace is likely to increase exponentially for the foreseeable future.

Some economists have claimed such predictions as proof that the Luddites, who smashed machines during the Industrial Revolution, were right all along (see below). Yet despite centuries of creative destruction the concerns over technological unemployment have not materialised. Rather than destroying jobs as the Luddites predicted, technological advancement has proven to be a net creator of employment.

Since around 1750, each wave of new labour-saving technology has been met with public anxiety about the impact on jobs. Yet, in the long run, each bout of worry has proved misplaced. In every round of technological change, some jobs have been lost but ultimately more new jobs have been created. Efficiencies gained through new technologies reduce the cost and duration of production, which, when passed on to the consumer, increase spending power, stimulating demand and creating new jobs. Rather than making human workers redundant, technology has simply shifted work into other areas. Whereas in previous centuries the majority of people worked in agricultural or artisanal production, the Industrial Revolution saw a shift to factory-based manufacturing, while the era after the Second World War saw a move to service and management occupations.

Automation

Automation will alter jobs

Nevertheless, while it is unlikely that in the long run the net result of the ‘computer revolution’ will be a decline in the number of jobs, new technologies will result in significant changes to the nature of work as industries evolve and outdated job functions disappear.

The fact that 20 million jobs were lost in Britain between 1980 and 2000 shows that the Bank of England’s prediction of 15 million automated jobs would not be unprecedented. The lesson from the lay-offs of the 1980s and early-1990s is the importance of enabling those people who have lost their job to reskill in order to find alternate employment and fill the new jobs being created.

How economies incorporate and adapt to new and emerging technologies will therefore depend on employers’ and policymakers’ ability to facilitate retraining and life-long learning. The problem facing many major economies is not that robots will take all the jobs, it is that humans need to be trained and ready to work in parallel with those robots. This is one reason why university graduates enjoy greater sustained long-term growth in earnings than apprentices – they are better able to ride waves of technological change. If the pace of adoption of technology is accelerating as predicted, society and employers will need to prepare.

Supply-side policies will be crucial if workers are to navigate the era of automation. The way in which these changes increasingly reward particular skills suggests that education and training are of vital importance. Global labour markets are experiencing difficulties as the number of workers with the requisite skills struggles to keep pace with employers’ needs. This gap between supply and demand is evident among IoD members – 38 per cent of whom say their organisation is suffering from an inability to find the right person to fill vacancies.

A key challenge for businesses will be how they engage with employees throughout the upheaval. The digitisation of labour will present strategic issues that will require strong leadership to overcome. A survey by the Economist Intelligence Unit (EIU) found that less than a quarter (23 per cent) of employers have devised and implemented a strategy to address the potential impact of new technologies on their workforce. Yet many of the challenges that companies face in making effective use of new technologies will require strategic directives to overcome. The types of work that businesses are able to offer human employees look likely to undergo a radical reinvention in the years ahead.

The EIU’s findings underscore the need for directors to investigate how automation within their organisation will affect their workforce and competitive performance, evaluating which jobs provide the best use of humans’ unique talents and abilities, as well as which will require human oversight and decision-making capacity. Business leaders need to consider what their workforces will look like five, 10, 20 years from now – assessing what skills they will need and how they might set about recruiting, developing and retaining suitable workers to reap the benefits and efficiencies of automation.

The talent pipeline

As this pace of change grows, preparing workers for the rapidly evolving employment landscape will become increasingly important. Many people today, particularly younger generations, will work in jobs that do not exist yet, in industries that haven’t been created. Most will change jobs multiple times and brief periods of unemployment, for people at all levels, will become more common. While education and training initiatives can help fill potential skills gaps, there is also a need to establish stronger links between the education system and
the labour market.

Graduates and school-leavers often struggle with the transition between education and the workplace partly because of poor career guidance in schools. A key issue is the long-term nature of the challenge. An individual starts to make choices in education that will affect the skills needed in their career as much as a decade before they enter the workplace – by which time technology and consumer preferences will have changed significantly. In the UK schools system, where learner choice plays an increasingly important role, it is ever more important for young people to access good information, advice and guidance on the likely skills needed by employers in the future.

Businesses can offer a solution. Encounters with employers, visits to workplaces, and education and training all help enlighten and inspire. The UKCES Employer Skills Survey found that 66 per cent of employers think work experience is critical or significant when hiring, but only 38 per cent offer it. This is not because schools and businesses do not think employer engagement matters. Half of IoD members engage directly in some form with schools or educational institutions. Instead the evidence points to the practical challenges of linking the worlds of work and education, given their different timetables, as well as the pressures schools face to prioritise exam results over what are seen as extra-curricular activities. The government’s new Careers & Enterprise Company will help, but with an annual budget of just £20m it will require significant buy-in from the business community and Local Enterprise Partnerships to be truly successful.

There is also a need to support in-work progression. Today’s record employment figures hide the fact that over recent decades it has taken many people longer to progress in their careers. Office for National Statistics figures indicate that about 30 per cent of graduates are still in entry-level positions five years after graduation. Poor in-work progression stifles employees’ careers and, as a result, they take longer to reach their earnings and productivity potential.

Companies need to foster not a career ladder but a career lattice where employees can grow by doing a range of different roles, gaining experience, developing new skills, and tapping into alternative networks. This will help them acquire a portfolio of transferable skills, benefiting both themselves and their employers.

Independent recruiters and career guidance councillors must develop a focus not simply on helping people into the world of work, but also begin offering post-employment support. Assistance should be offered to employees throughout their working lives via high-quality, tailored, in-work careers advice and job-matching services. Information about education and employment paths and a comprehensive understanding of the labour market, both as it exists today and is likely to look in the future, will allow people to take appropriate strategic steps during their career.

As the workplace changes, education and training must adapt so that talent can keep pace with market demands. Strategic relationships between employers and training providers will be vital to ensure that the right skills needed by business for a rapidly evolving environment are developed and delivered. This means enabling employers to take a greater degree of leadership and control of the education and training system.

Structural changes in the labour market are already making it difficult for young people to get into work and progress. Newly emerging business fields are only likely to make this worse by creating even bigger skills vacuums that arise at rapid speed, outpacing the ability of individual organisations to respond. Those businesses that can’t access new skills or fail to adapt those they do have face being left behind, assuming they survive at all. To ensure an effective response, businesses will need to collaborate, perhaps on an industry-wide scale. Government will therefore have an important role in facilitating and supporting these processes.

Brains over brawn

As technology alters the demand for skills, workers will need to reallocate to tasks that are not susceptible to automation. Various examinations of the tasks computers are unlikely to be able to perform suggest general behavioural and non-cognitive ‘soft’ skills necessary for collaboration, innovation, and problem-solving, such as resourcefulness, creativity, abstract reasoning and emotional intelligence, are the likely domains where humans will retain a comparative advantage.

That is not least because these are skills where computers complement our abilities rather than substitute for them. Even though today mobile devices, online social networks, and high-speed wireless broadband make communication over vast distances possible at almost zero cost, face-to-face interactions are still the key engine of innovation, collaboration and growth. Yet these soft skills are the abilities IoD members say school-leavers and graduates lack most.

In a Policy Voice survey last May the shortage of soft skills was the number one barrier to growth cited by members, ahead of things such as the state of the economy; taxes and regulations; and access to finance (see below). Two-thirds (68 per cent) were worried about poor communication skills, 35 per cent said team-working, 36 per cent listed resourcefulness as an issue, while 22 per cent cited a lack of creativity as a concern.

Today’s schools and universities are dominated by approaches to learning that are fundamentally individualistic and competitive in nature. Beyond the recent introduction of coding and computer programming to the schools curriculum, the education sector must be redesigned to focus on learning to learn and acquiring the skills and experience needed to collaborate with others. Too much emphasis on exam performance at the expense of other developmental activities has seen
the number of 16- to 17-year-olds with a Saturday job decline from almost half 20 years ago to less than 18 per cent today.

Uniquely human skills, such as being able to work in teams, manage relationships, and understand cultural sensitivities are vital for businesses across all sectors and must become a core component of future generations’ repertoire. It is clear that our education system will need to adapt by providing training that places more emphasis on developing these abilities in students, moving beyond the current rote-learning exam focus to more group-based projects, in-class presentations, and team-working exercises. Good grades will continue to be important, but we shouldn’t confuse qualifications with competencies and experience – particularly for future generations which are going into a world that is far more fluid and entrepreneurial.

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From Gutenberg to Google

Another factor altering the future of jobs is demography. British people are living longer than ever before and, consequently, many are choosing to remain in work until later in life. The number of people over 65 in employment stands at more than one million, meaning the UK now has the seventh-highest employment rate of people in their late sixties in the OECD.

Retiring abruptly rather than gradually is increasingly becoming a thing of the past. This shouldn’t come as a surprise. Recent studies in the BMJ and The Lancet have shown that the proportion of life spent in good mental and physical health is increasing in Britain, even as life expectancy continues to rise. Individuals will have to take ownership of their careers, but there is also an onus on employers to provide on-the-job training and apprenticeships to boost the skills of an older workforce. Workers nearing what would traditionally be seen as retirement age will increasingly seek to reduce their hours while still remaining engaged in the workplace. This will mean the skills of these workers are available to companies for longer, although businesses will have to adapt slightly to accommodate. Spearheaded by our chairman, Lady Barbara Judge, the IoD is exploring ways to make best use of the knowledge and skills of older workers, including the possibility of connecting retiring executives with start-ups, which may have a viable business proposition but could benefit from the advice of more experienced business people.

With government projections expecting one in three babies born today to live to 100, it is important that these people are able to pursue continuous education, retraining, and upskilling throughout their careers so that the option of working later in life remains a possibility. Worryingly, the Universities UK Patterns and Trends in Higher Education 2015 study shows how the number of part-time and mature university students – undergraduates and postgraduates – both fell by over a third in the last 10 years. Numerous surveys reveal that investment by businesses in in-work training for their staff has declined by between one-quarter and one-half since the 1990s.

Education is expensive and at a time when the desire to tackle deficits is so prominent, government and businesses are understandably keen to cut costs. Nevertheless, we need to find new ways of providing training in the relevant ‘hard’ skills at much lower cost. Thankfully, this is an area where automation offers not a problem but a solution. Recent innovations in online technology, such as the creation of Massive Open Online Courses – freely accessible short courses delivered through computer-based teaching applications – enable independent learning more cheaply than ever before. By offering flexible ‘anywhere, anytime’ education, e-learning platforms offer invaluable new spaces for developing skills beyond the classroom and in a way that can be adjusted to meet the student’s individual needs, interests, and abilities.

These bite-sized training opportunities can be easily integrated into corporate processes. As we progress, conventional formal learning environments will likely become less significant, complemented by the flexibility and availability of information through technology. Computer-based forms of education provision have their problems, not least that qualifications acquired through these avenues have yet to be widely recognised by employers. Nevertheless, the cost savings and flexibility they afford mean online learning has the potential to revolutionise education provision, but only if businesses and the education sector work together to capitalise on the potential of computer-based teaching applications to support employees through lifelong learning.

In this self-guided environment, the student becomes central in regulating their learning and in determining the development of their own skills. One of the core functions of 21st-century schools will therefore be teaching students how to learn for themselves. Information on its own is not the same as knowledge. The latter pre-supposes an element of interpretation. In a world of autonomous online learning – where the internet can become an echo chamber of one’s existing opinions and consequently closing our minds off to new ideas and perspectives – digital literacy will need to be enhanced by the development of critical analysis, evaluation skills, and self-regulation. In essence, this means teaching people to think critically by ingraining practices that enable them to be inquisitorial, breaking down the barriers between subjects so that children learn skills, rather than narrow facts.

Motivation is crucial for effective self-guided learning. From an employer perspective, this form of learning helps inculcate the soft skills of resourcefulness, resilience, reflectiveness, and responsibility that employers value highly. A future based on learning to learn implies a qualitative shift of emphasis in the type of education we provide.

Rather than thinking of progress as a linear measure through the curriculum, the breadth of development will also be important. This would represent a step-change in what we consider to be achievement in education, from progress as speed to the idea of progress as mastering a topic, albeit at your own pace. It is essential that learning to learn becomes a key feature in future education to encourage the participation of all citizens in a changing labour market and enable people to fulfil their full potential.

Employers need to show leadership and take responsibility for developing the skills employees will need to compete in the face of intensifying competition and market volatility. Automation will place a premium on businesses and staff developing new approaches and behaviours, based on flexibility, resilience, collaboration, entrepreneurialism and creativity.

Managing this transition will require a significant shift in our approach to education and a renewed focus on the importance of soft skills including good communication, team-working and emotional intelligence. Above all, the ability to learn in itself and the capacity to respond to continuous change will be critical if employees and the economy are to succeed in the age of automation.

Snapshot

As new forms of work are added, the skills of some workers are inevitably made obsolete.

How economies incorporate and adapt to new technologies will depend
on employers’ and policymakers’ ability to facilitate retraining and
life-long learning.

Employers need to take responsibility for developing the skills employees will need to compete in the future.

The digitisation of labour will present strategic issues that will require strong leadership to overcome.

As the pace of change grows, preparing workers for the rapidly evolving employment landscape will become increasingly important.

Graduates and school-leavers often struggle with the transition between education and the workplace partly because of poor career guidance.

Companies need to foster not a career ladder but a career lattice.

As the workplace changes, education and training must adapt so that talent can keep pace with market demands.

Schools and universities are dominated by approaches to learning that are fundamentally competitive in nature.

We shouldn’t confuse qualifications with competencies and experience, particularly for future generations.

British people are living longer than ever before and many are choosing to remain in work until later in life.

Online learning has the potential to revolutionise education provision.

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About author

Seamus Nevin

Seamus Nevin

Seamus is Head of Employment and Skills Policy at the IoD. He is also a member of the government’s National Living Wage advisory group, and the MiSoC Policy Advisory Group at the Institute for Social and Economic Research (ISER).

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