Almost five million Australian jobs – around 40 per cent of the workforce – face the high probability of being replaced by computers in the next 10 to 15 years.
While we have seen automation replace some jobs in areas such as agriculture, mining and manufacturing, other areas where we are likely to see change are, for example, the health sector, which to date has remained largely untouched by technological change.
Our labour market will be fundamentally reshaped by the scope and breadth of technological change, and if we do not embrace economic reform and focus on incentivising innovation, we will simply be left behind in an increasingly competitive global marketplaceIts summary states
The next stage of the industrial revolution promises to continue this trend but in new challenging ways. The extension of computerisation into almost all aspects of human activity threatens to radically reshape the workforce of tomorrow. However, in the more globalised economy, it remains to be seen whether it will generate a net increase in employment and wealth within Australia or if the labour market benefits will be dispersed.
While increasing computational power has been reshaping the labour market for over 60 years, the capacity of machines to replicate aspects of human thought is set to most radically reshape the future of work. These advances mean that activities previously considered forever outside the scope of programming are increasingly being undertaken by computers. For instance, driving through traffic was thought to be a task that humans would always have an absolute advantage over computers; now Google has patented a driverless car.
Computers will reshape the labour market in two key ways. They will:
1. Directly substitute for labour, with a high probability that as much as 40 per cent of the jobs in Australia could be replaced by computers within a decade or two; and
2. Disrupt the way work is conducted, expanding competition and reducing the costs to consumers but also reducing the income of workers.
Modelling conducted for this report suggests almost five million jobs face a high probability of being replaced in the next decade or two while a further 18.4 per cent of the workforce has a medium probability of having their roles eliminated. Jobs that involve low levels of social interaction, low levels of creativity, or low levels of mobility and dexterity are more likely to be replaced by automation.
In the face of such modelling, it is vital that Australia rediscovers its ability to implement challenging economic reforms. As the stimulus from the mining boom fades, Australia’s prosperity will become increasingly subject to the pressures of the international marketplace. This will occur in an environment of heightened human and financial capital mobility and fast-paced technological advances that can rapidly undermine sources of traditional comparative advantage. Whether recent economic success fades into memory or continues will be substantially determined by the quality of policy implemented by government and business alike.
Australia’s future workforce? has brought together leading researchers, thinkers and practitioners to examine what major factors will influence Australia’s labour market over the decades to come. The key point is that while it is not possible to predict the future, it is possible to understand the major forces shaping it. Consequently, this report examines the major technological and demographic forces at work in the world today and puts forward the elements of a new social contract that can underpin continued economic prosperity for the nation and help maximise the benefits of the next wave of the industrial revolution for all Australians.The report goes on to state
In Reshaping work for the future, London Business School Professor Lynda Gratton describes the degree to which technology has already transformed business activity, particularly leading organisations operating in economies that are close to the technological frontier. It also details the implications of technology’s ongoing influence over work as people seek to develop skills in areas that cannot be made redundant by computers, and businesses try to engage the best talent both locally and globally. The implication is that careers are becoming a marathon, not a sprint, and that the relationship between the employer and the employee needs to radically alter to reflect the demographic changes being experienced and the increasing power of the individual.
In The impact of emerging technologies in the workforce of the future, Telstra Chief Scientist Professor Hugh Bradlow describes how a range of existing technologies, such as cloud services, Big Data, the Internet of Things, artificial intelligence and robotics are rapidly reaching the point where they will have widespread impact on the economy. This contribution expands on machine thinking and unpacks the ways in which a range of technological developments are all acting to transform human activity. On its own, each technology has the capacity to change business activity. Taken together, they have the potential to radically reshape society, the basis of a new wave of the industrial revolution.
In How next-gen computing is changing the way we work, IBM Watson Australia/ New Zealand leader Belinda Tee and IBM Workforce Science Practice organisational psychologist and management consultant Jessica Xu describe the technological advances underpinning advanced computing and how they are changing businesses. Cognitive computing allows machines to understand human language, making them capable of analysing vast amounts of information and interpreting it in challenging situations. This was demonstrated when the computer Watson was created that could process 200 million pages of data to return confidence-weighted responses to quiz show questions. This enabled Watson to beat humans in a domain they had previously had an absolute advantage over computers – game shows such as Jeopardy. This approach to processing information is being used in more serious applications, such as improving the ability of doctors to diagnose patients correctly, an area where almost 20 per cent of patients are misdiagnosed. This technology changes the way in which customers can engage with business, and the way in which businesses can be organised.
In The impact of computerisation and automation on future employment, University of Sydney Professor and ARC Federation Fellow, Hugh Durrant-Whyte, and NICTA researchers Daniel Steinberg, Alistair Reid, Lachlan McCalman and Simon O’Callaghan estimate the potential job losses arising from computerisation. Recent technological breakthroughs mean that computers and robotics can potentially replace labour in routine operations in diverse settings, such as autonomous mining operations. Additionally, machine-learning algorithms will encroach on roles previously perceived as skilled jobs outside the domain of automation, while also increasing the productivity and decreasing employment requirements for many roles that were also previously untouched by information and communication technologies (ICT), such as in the health sector. The consequence of these changes is that almost 40 per cent of the jobs in Australia have a high probability of being substituted with computing in the next few decades. An additional 18 per cent has a medium probability, while the remaining jobs are safe from computing for now. This study does not attempt to predict what types of jobs may be created in the future.
In Case study: Automation and Australia’s future workforce, Rio Tinto Pilbara Mines Managing Director Michael Gollschewski explains how automation can improve the productivity of activity with the example of their activities in the Pilbara region. Rio Tinto’s Pilbara operations comprise 15 mines, four port terminals, and more than 1700 kilometres of rail network supporting a fleet of over 180 locomotives and 11,000 ore cars. The case study describes how automation improves the health and safety of workers, while also creating more interesting jobs, lowering operating costs by eliminating human error, and improving the quality and quantity of output. For instance, the autonomous drill systems, only used in select sites at the moment, have improved productivity by 15 per cent and eliminated injuries. In addition, Rio Tinto is using the process of automation, and the increased level of data being generated in all its activities, to develop Excellence Centres that use this information to generate continuous process improvements. Finally, operating complex activities remotely requires distinct skill sets from workers. The case study describes the characteristics of successful remote operators.
In Digital disruption – what, why and how, Reserve Bank of Australia Chief Information Officer Sarv Girn describes how technology is fundamentally changing industry and posits how this change may evolve in the future. Detailing a range of historic digital disruptors, it describes common characteristics of how technological developments have been used to fundamentally change the way in which consumers interact with a business, or in which businesses organise the supply of goods or services. The contribution also describes the recent global shift in innovative capacity to Asia, and discusses the opportunities and challenges of this for Australia. How organisations can best respond to the challenges and opportunities arising from digital disruption is also considered.
In Megatrends and Australia’s future: Older and wiser?, Australian Futures Project Policy Director Dr Fiona McKenzie describes the megatrends influencing Australia’s future. These include the shift in the economic gravity of the world, the geopolitics of a multipolar world, climate change, resource security, technological developments, the growth of virtual connectivity and demographic changes occurring in Australia and the world more broadly. In particular, the contribution examines the implications of global ageing and the projected growth of Australia’s cities. With an ageing and increasingly well educated workforce, Australian businesses will need to deal with very different labour market needs to engage the skill and talent they require to conduct their business.
In Australia’s shifting economy, Department of Industry and Science General Manager Tim Bradley charts the changing shape of Australia’s industrial landscape and the consequences for the labour market. This contribution describes how the Australian economy is neither an accident nor a product of design. Rather, it reflects more than a century of economic and demographic pressures and the subsequent response by business, workers, investors and governments. Australia’s economy is highly dynamic, with many businesses entering and exiting the marketplace, and large numbers of workers changing jobs, industries and professions. The consequence is a highly productive economy with a large capacity to absorb change. The contribution also examines the potential growth industries of the future.
In Technological and structural change in the Australian labour market, University of Canberra Professor Phil Lewis describes labour market responses to structural, technological and skills demand changes. The recent history of the labour market is one of constant change, and it is clear that these changes have largely been successfully absorbed by the Australian labour market. However, there have been distinct losers in recent economic adjustments, particularly unskilled youth and workers unable to develop skills in demand, such as older males made redundant from traditional manufacturing roles. These cohorts make the level of underemployment considerably higher in the Australian labour market than the unemployment rate may suggest. For these workers there is a vicious circle associated with their inability to re-engage with the labour market and specific policy interventions are necessary to enable them to find employment.
In Information technology and the Australian labour market, University of Melbourne Professor Jeff Borland and Senior Lecturer Dr Michael Coelli assess the influence that information technology has had on the skill composition of the Australian labour market. Over the last 50 years, there have been large changes in the skill composition of employment, with consistent growth in employment of high-skill workers, a large decline in the share of middle-skill workers and a smaller decline in low-skill workers. The job polarisation experienced in Australia is similar to the trend in Europe. They also find evidence that the change in skill composition is due to the introduction of information and communication technologies that have steadily reduced the demand for labour to complete routine tasks.
In the Stability of education earnings gaps in Australia, Dr Michael Coelli examines the winners and losers in the race of education and the machine. Technological change, particularly computerisation, has been a major influence on Australia’s labour market over the last 40 years. This contribution examines how technology has changed the lifetime earnings for people with different levels of educational attainment. Australia has unique characteristics that differentiate it from the experience in the United States, which are explained in the contribution.
The future worker
In Developing the capacity to adapt to industry transformation, Australian Workforce and Productivity Agency (AWPA) former Head of Secretariat, Sue Beitz, reports on how the major global economic trends will shape the future of skill requirements in Australia. The contribution describes macro trends to inform the skills that workers will increasingly need in the future, and to identify gaps in the way these skills are currently being developed. In particular, there are significant shortages in digital skills, which will become a new basic skillset in the way reading and writing are today. Australia needs to re-examine the regulatory frameworks governing education to help workers develop the required skillsets and to ensure that public resources are being invested appropriately.
In Closing the gender gap in labour supply, University of Sydney Professor Patricia Apps examines the implications of the population’s ageing and the counterbalancing influence of increasing female participation. In particular, the contribution examines the reforms that would allow the reallocation of resources from the household, looking after young children, to the labour market. It also describes how the current gap in participation between men and women is closer to 40 per cent, rather than the headline 12 per cent, due to high part-time employment of women. Women have almost equal workplace outcomes to men until children are born, when they transition to part-time work. This is a significant social loss since they do not revert to working to the same degree ever again. The contribution makes a series of recommendations to rectify the participation gap.
In Your future employer – yourself, Independent Contractors Australia Co-Founder and Executive Director Ken Phillips details the growth in self-employed workers across the world. Despite the stereotype that these workers are relatively low skilled and in vulnerable positions because of the tenuous nature of their work, an increasing percentage of self-employed workers are older, highly skilled professionals. This is a global trend, with the numbers of self-employed people growing most notably by 45 per cent in the past decade in Europe. Technological developments will make it increasingly easy for workers to be self employed, and for agile workers to sell their skills to wider markets. Given the very high reported figures that self employment is an aspirational goal of over half the workforce, it is probable this type of work will become more of a norm in the future. This will potentially create challenges for organisations, particularly for big businesses.
In Where the jobs are, IBISWorld Chairman Phil Ruthven AM provides a long-term perspective on human labour. He observes that the quantum of work performed has not changed, but as human life expectancy has increased, the workload has been spread. People now work for much longer but less intensely. The focus of work has shifted from brawn to more durable brains. As wealth has increased, businesses and households have increasingly outsourced activities to others, reflecting increased specialisation. Examining the areas of business and household activities that can be outsourced suggests areas of future growth in employment. Additionally, Australia as a nation will increasingly outsource activities to other nations while being a recipient of other nations’ outsourcing.
In The strategic imperative: Australia’s place in the global labour market, Stanford University Professor Steven Callander describes the challenge that the next wave of industrialisation will pose for a small open economy like Australia. The contribution identifies two key economic consequences of the new, highly integrated global economy. The first is that the share of income going to labour, as opposed to physical or intellectual capital, has been in steady decline for decades. The other is that those individuals or nations that do not innovate are condemned to be commoditised. The world is increasingly moving towards ‘winner takes all’ outcomes where those that create something unique or special command increased returns on their efforts while the rest get lower and lower returns. Australia’s relatively small size means it has historically been an early adopter rather than a developer of ideas. Australia needs to build on those areas of the economy operating at the technological frontier to create wealth and jobs in the future.
In Future skills, industry policy and a new social contract, UTS Business School Dean Professor Roy Green and University of Technology, Sydney, Professors Christos Pitelis and Ian Marsh provide a review of industry policy and its implications for skills development. The contribution also describes the new industrial revolution’s implications for Australia. It discusses the roles of services, particularly manufacturing, in these global value chains, and makes a series of observations as to the importance of the latter in sustained wealth creation for a nation. The contribution makes recommendations as to how Australia can attempt to become a substantial contributor to emerging global value chains
In A brave new world of higher education, Deakin University Vice-Chancellor Professor Jane den Hollander, examines how well positioned Australia’s university sector is for the disruption arising from technological progress. Operating virtually unchanged for over 500 years, universities around the world are potentially going to experience one of the most radical shakeups of their operations ever. While the result, such as massive open online courses, could threaten the business performance of Australia’s higher education sector, it also has the potential to spread knowledge and insight more broadly into the community than in the past. To be successful, universities need to adjust to a world where human knowledge increases dramatically faster than ever before and where people will be educated for jobs that do not yet exist. They need to teach the ability to analyse data and not simply recite facts and figures.
In Future skills in information technology, Hugh Durrant-Whyte examines what types of ICT skills Australia needs to develop to successfully adapt to the technological forces reshaping business. The contribution describes how ICT will affect the Australian economy: through the development of new technology companies and products, typically only in a few sectors such as resources and agriculture where there is a critical mass of activity; or through the adoption of technologies developed elsewhere, which will be the dominant influence. As a consequence, Australia needs to embrace the ICT skills that will allow businesses to rapidly adopt technological developments if they are not to fall behind international business best practice. Additionally, a broad appreciation for technology needs to be developed across the population so that it is understood and used in a similar way to how the written word is today. However, this does not mean greater numbers of science, technology, engineering and mathematics (STEM) students. Rather than teaching basic skillsets, the focus needs to be on deeper technical skill development of architecting, designing and analysing. These areas will generate jobs in the future for Australia as the major role of ICT in Australia is to transform existing companies and existing ways of doing business
In Northern lights, Deakin University Associate Professor Dr Andrew Scott examines how countries have successfully retrained workers from industries facing imminent collapse. In particular, the contribution undertakes a detailed examination of the approach adopted by Denmark when facing the collapse of its shipbuilding industry. What is clear is that successfully retraining mature workers requires a specific policy approach, one that Australia is lacking. This has significant ramifications for workers in the automobile sector, let alone any restructuring that might occur as a result of computerisation or contestability.
Australia is well positioned to respond to the emerging workforce challenges with its highly educated workforce, prosperous and stable society, and geographic proximity to the emerging economic powerhouses of Asia. However, the world economy is increasingly becoming one in which the ‘winner takes all’ as technological developments allow the widespread dispersion of successful innovations. Australia has historically been a swift adopter of technological developments, but this strategy is going to be less and less useful in the future as more of the gains will accrue to the developer of innovation.
To succeed in this global environment:
• Australia needs a new social contract, one that recognises the role of government in developing the enabling environment for industry to flourish, which maximises the application of the nation’s human capital and incentivises innovation;
• The strategy of creating growth centres should be funded to a level commensurate with international best practice and to meet the massive challenges confronting the economy as it transitions from dependence on mining and resources. Australia has currently allocated only $190 million over a four-year period, while the United Kingdom’s Catapult Centres, on which the Australian growth centres are modelled, has $3 billion allocated over the same period.
The rapid pace of technological change driving the next stage of the industrial revolution requires new approaches from government, rather than the historic top-down siloed approach. The Federal Government should use the White Paper on the reform of the Federation as an opportunity to:
• Bring all parts of the Australian Commonwealth to the table as equals to develop information and learning systems that support accountability and continuous performance improvement.
To enable Australia to optimise its prosperity, it needs to undertake reforms addressing areas of economic rigidity in the economy and incentivising innovation. The nation needs to:
• Establish a National Productivity Policy addressing a comprehensive review of regulation, pricing and licencing arrangements while phasing out industry subsidies, among other important microeconomic reforms, so that Australia can operate on the policy frontier.
A relatively highly educated workforce has been a traditional source of advantage for Australia. However, the rapid rise in global education means this historic strength is being eroded. Further, the increasing ability of computers to substitute human thinking means Australia needs to ensure that the education system is providing students with valuable skills for their future employability.
To position Australia’s workers with the skills to adjust to emerging technologies and to maximise the nation’s human capital, the nation needs:
• A unified, overarching policy framework to guide the allocation of investment in edu - cation and training from early childhood to further education and training and tertiary education. This is currently lacking in the debate about various forms of education reform;
• To ensure all stages of the education process focus on instilling competencies rather than the retention of specific knowledge. With public funds being invested, it is important that the skills being taught are not firm specific, but instil broad competencies that represent a valuable public investment;
• The Commonwealth Government to examine extending the formal education system to include a public learning-focused childcare and preschool system in an affordable part of the early education package;
• Digital competency to be a basic competency for all workers in the future as Australia does not need larger numbers of computer programmers. Outside a few core areas, Australia lacks the size to become an ICT powerhouse. However, Australia will require ICT students with capabilities in architecting, designing and analysing to adopt international ICT developments if its industries are to stay globally relevant.
An important complement to Australia’s innovation policy is to ensure the country has liveable cities. The highly skilled employees who increasingly drive prosperity are able to work globally and are highly mobile. City liveability is a strong predictor of economic activity and wage growth because such areas are able to attract the innovative class of people who drive this activity.
To fully realise the advantages of Australia’s favourable environment:
• The nation should create discrete city-wide entities with the responsibility for whole- of-urban planning in its urban centres. These entities should preferably be vested with hypothecated funds from sources that generate it within the jurisdiction, such as the fuel excise and appropriate congestion pricing, to ensure adequate investment so that these cities remain liveable.
Labour force adjustments
Australia’s labour market is robust and relatively efficient for the most part. However, historically workers in industries experiencing substantial numbers of redundancies have frequently experienced challenges in re-engaging with the labour market in large numbers. The social and economic cost is substantial.
As the new wave of the industrial revolution makes more and more roles redundant, it is important that proactive steps be taken to ensure workers develop the skills needed to remain in the workforce.
• Australia should seek to emulate other countries’ success in transitioning workers out of declining industries. This will require a concerted effort to reskill workers prior to retrenchment.