September 5, 2021
The Evolving Nature of Work
This Labor Day weekend comes in the wake of a turbulent pandemic, accompanied by record high unemployment followed abruptly by concerns about a labor shortage. These facts occasion some introspection about the future of work in America. To do so means recognizing the current and likely future state of labor markets, as well as an acknowledgement of a deeper, more complex role that work plays in our lives and wellbeing.
Humans were made to work, and the celebration of labor a key part of every successful modern society, nowhere more so than in the United States. Alexis de Tocqueville, the great chronicler of early America noted, “Among a Democratic people, where there is no hereditary wealth, every man works to earn a living, or is born of parents who have worked. The notion of labor is presented to the mind, on every side, as the necessary, natural and honest condition.” Even today, Americans work almost a full week more per year than the average developed nation.
Work has the potential to provide meaning and satisfaction, unconnected to the economic importance of the task at hand. Work gives us sense of accomplishment, social interaction and the opportunity to earn respect for what we do, not who we are. These are human traits brought to fullest fruition in a market economy like ours. I like to tell my European friends that what differentiates us is that in America we judge someone not by who their parents were, but by what they create for their children.
These are powerful ideas that animate many, if not most Americans who go to work happily, if not joyfully. Even when the work is hard, dirty and filled drudgery it allows a worker to earn money, provide for a family or get skills for a better job. This last part touches on the economics of work.
Wages are roughly connected to the value a worker brings to their employer in markets. This value is called worker productivity. While most of us value the work we do implicitly along many dimensions, labor markets are far more explicit. So, understanding what labor market changes are occurring, tells us a great deal about the future of work.
Automation looms large in this discussion, and automation may be very disruptive to work. Of course, machines won’t replace work. Humans are just too intellectually nimble to be replaced by machines, but many of the tasks humans perform can be automated. Increasingly, workers are separated by how they respond to the elimination of tasks by machines. Better-educated workers do much better than less-educated workers, even when the task loss is greater for them.
Formal education, particularly at the margin of attending college, is a meaningful discriminator between the risk of automation adding or subtracting for the demand for labor. Over the past 30 years ending in 2019, the U.S. economy produced 28.8 million new jobs for college grads and 11.3 million for those who had attended some college. That’s a whopping 40 million jobs for the kids who went to college. For those who did not, the economy lost 3.5 million jobs. So, a full 79 percent of jobs created in the U.S. since the first Bush Administration went to the 26.9 percent of adults who had finished college.
This sharp differentiation of job growth has been accompanied by meaningful wage growth only for the college graduates. The growing wage premium for college graduates shatters the hypothesis that college grads are increasingly underemployed, taking jobs from less well-educated workers. The increasing demand for college graduates is very real, and I think there are three durable reasons for it.
The first is that we grow richer, changing consumption away from the demand for good towards services. These new services, from education and healthcare to recreation, face market-driven demand for more educated workers. Some of this could be improved by less rigorous occupational licensing, but even in occupations without license requirements, there appears significant demand for more, not less education.
The second reason is that we live and work longer, making the financial return to education higher for both workers and businesses. This is especially true at higher levels of education, where both the individual costs and benefits are highest.
Third, the type of job complexity has changed substantially over the past half century or longer. I don’t think this means that jobs are more complex today than in the past. Agriculture, carpentry, medicine and business management have always been complex human ventures, but much of the complex nature of these jobs in the past has been learned ‘on the job,’ or at least outside formal education. Today, all these occupations have their foundation in formal schooling. One-and-a-half centuries ago, few business managers were college graduates, and medical school was no more than a four-year degree. A negligible number of farmers or carpenters had formal education beyond eighth grade. That has changed radically.
The growth of formal education is liberating to both workers and business, offering a far more concentrated educational experience. So, formal schooling makes it easier to change occupations later in life, but there’s more than that. Formal education in these occupations include a lot of ‘general’ skills. These skills permit workers to more readily adjust to technology changes within their own occupation. This likely explains why college-educated workers are far less susceptible to automation-related job losses.
Looking into the distant future of work, it is clear that formal education, particularly a four-year college degree, will play a growing role in successful workers. The middle-class worker of 1930 had only an eighth-grade education. The middle-class worker of 1970 had a high school education, and in 2020 the middle-class worker had attended college. By 2040, the middle-class American worker will have a four-year college degree.
This turn of events will make the nation as a whole more prosperous and our labor markets more stable. However, we should always be conscious of the risk that places with few college graduates will be less prosperous and will face more volatile labor markets.
About the Author
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