The world is in the grips of a crippling jobs crisis, a new report has warned.
Nearly half of all workers may be victims of an extraordinary employment shortage, either thrown out of the labour market entirely, barred from ever entering or forced to live on dwindling pay, according to a US think tank.
“Some 30 to 45 per cent of the working-age population around the world is underutilised – that is, unemployed, inactive or underemployed,” McKinsey Global Institute director James Manyika wrote this week.
The astounding figure translates to about 850 million people in just seven of the world’s biggest economies alone (the USA, UK, Germany, Japan, Brazil and China).
The labour market emerged from the global crisis of 2008 tattered and broken, a shadow of its former self, even as many economies technically returned to GDP growth.
As the McKinsey institute noted, many workers are ‘underemployed’, forced to accept fewer hours and take home less pay. They are often stuck in low-paid, insecure work, and cannot find the extra hours they desperately want.
Underemployment, often described as a ‘hidden’ problem, could be the reason the world has managed to stave off even more disastrous unemployment. But it came at a price: falling real wages and greater insecurity.
Huge amounts of central bank stimulus, meant to drive jobs, growth and spending, has not solved the problem. And on the horizon is perhaps an even bigger threat: the rise of robots, which could choke the recovery before it has even begun.
The young are suffering the most, in Australia and overseas. Almost 75 million youths across the world are officially classified as unemployed, the institute found. They are graduates who cannot get into the market, or high school leavers who find they lack the skills bosses want.
In just five pages, the McKinsey institute outlines many of these issues. It prepared the briefing note for a recent two-day talk fest at the Vatican, where academics, religious leaders, business leaders and unionists gathered to discuss the global economic malaise.
‘Skills shortage worse than robots’
Unlike many reports that blame automation, the McKinsey institute seemed more concerned with failings in education that have caused widespread skills shortages.
Technology will destroy many jobs, but also create entirely new industries that offset these losses. For this reason, the institute’s prediction of the speed at which robots will steal jobs was lower than many other sources … but no less scary.
Half of all the jobs we do today could disappear by 2036, replaced by automation, it forecast. Even if new forms of work take their place, it will be a massive cultural shock.
Even so, the institute was more concerned with helping workers adapt, rather than trying to beat back technology.
It urged the governments of the world to change the way students and graduates are educated, especially by boosting basic science, maths and critical thinking skills.
RMIT labour market expert Dr Alan Montague, who described the briefing note as “compelling” reading, said the failure of recent governments to protect the vocational training sector was one of the unique problems facing Australia.
“The way they went about destroying TAFE and casting a shadow over the VET pathway and really scaring people away from taking it up, that’s resulted in people shying away from education when we need people that are trained to go to work to earn the taxes to pay for the growing number of retirees.”
The Trump backlash
In addition to the jobs shortage, the institute attempted to explain the worldwide backlash against the establishment by pointing to the eroding share of national income going to workers.
“The decline is due in part to the growth of corporate profits as a share of national income, rising capital returns to technology investments, lower returns to labour from increased trade, rising rent incomes from home ownership, and increased depreciation on capital,” McKinsey director James Manyika wrote.
“Middle-income households have been the most affected, and young and less educated people are especially vulnerable. Across all age groups, medium- and low-skill workers have done worse than those with a college education.”
RMIT’s Dr Montague warned that the election of Donald Trump in the US, intended by workers as a protest, could actually worsen the problem.
“I don’t think [the global economy] has recovered, and it’s not going to take much to lift unemployment and now we’re in very uncertain times with the election of Trump. Goodness knows what that man is going to do.”
If automation does cause massive upheaval, radical welfare ideas like a universal basic income may need to be tested, and dole payments made more generous, the McKinsey institute argued.
Governments should also provide tax cuts and other incentives for companies to train their workers, rather than just complaining about the lack of skills.
And they should partner with the private sector to build more public infrastructure, especially internet coverage, according to the institute.