The 200 plus page CEDA report on
Australia’s future workforce? comments
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 marketplace
Its 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
Global trends
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.
Australian stocktake
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.
Policy response
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.
Reform agenda
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.
Education
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.
Capital cities
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.
