The recent debate over the Trans-Pacific Partnership has given voice to emerging concerns about the impact of technology on job creation across the developed world (Reich, 2015). There appears to be an increasing consensus that just as automation and globalization hollowed out the manufacturing workforce in the developed economies during the 1980s and 1990s as China’s industrial might took wing, there is now an increasing concern that smart data will do the same to many more jobs in the services economy.
As a commentator on America’s National Public Radio recently observed, any job that contains elements of repetition, even if it is analytical, can now be done by a machine (NPR, Planet Money, 2015). Historically, better technology has destroyed some jobs while creating new ones. In the middle of the second decade of the new millennium, experts are no longer so sure that this pattern will hold.
At the same time as smart technology is replacing jobs in the middle of the employment pyramid, modern capital markets have radically increased global income inequality. It does not require a deeply dystopian world view to wonder how long the millions in Europe and North America whose purchasing power has been declining for decades will tolerate a world increasingly owned by the 0.001 per cent. Recent moves by mass employers such as McDonald’s, Wal-Mart and Ikea (Soergel, 2015) to increase their entry-level wages suggest that the implications of increasing inequality and employee earnings stagnation are becoming a growing concern for big companies.
Some recent commentators see the likely outcome of increased income inequality in very stark terms. “Now here’s a macro forecast that’s easy to make and that’s that the gap between the wealthiest and the poorest, it will get closed”, said legendary hedge fund manager Paul Tudor Jones II at a TED talk in Canada in March 2015 (Frank, 2015). “History always does it. It typically happens in one of three ways – either through revolution, higher taxes or wars. None of those are on my bucket list.” In response to this concern, Tudor is funding a not-for-profit called JUST Capital with a mission “to help companies by using the public’s input to find out the criteria that would define justice”.
Calls such as Tudor’s have arisen alongside a growing trend for financial service industry leaders to decry the short-termism of current executive management and its focus on profit margins. CEOs such as Fink (2015) of BlackRock Capital have created a campaign of dissent, flexing their muscles to indicate that corporate management teams need to start investing for the long-term rather than short-term benefit of shareholders.
“Throughout 2015”, Fink wrote in April, “BlackRock will continue to focus on these issues because we recognize that although much of the financial business community is in agreement on the need for a more long term atmosphere, more concrete steps must be taken to achieve it”.
All of these concerns are playing out against the backdrop of what many experts believe will be a long-term slow growth future. In a recent report, the McKinsey Global Institute (MGI) states that for a variety of reasons, including slowing workforce employment levels, the annual average growth rate in the G-19 countries (plus Nigeria) will only be 2.1 per cent – less than in the past five years – and even this number assumes a consistent productivity growth of 1.8 percent. In addition, the MGI estimates that because higher-income individuals generally save more than they spend, that rising income inequality will also depress demand (Manyika et al.,2015).
There are many differences of opinion and assumptions in the scenarios described, but they appear to all have one thing in common – well-paid jobs that can fuel generation-over-generation improvements in population wealth will continue to grow scarcer, even without another “Black Swan” event such as the Great Recession of 2008.
In light of this, we would expect to see a growing radicalization of the new proletariat, but there appear to be few examples, to steal a phrase from Grass (1966), of the plebeians rehearsing the uprising. Aside from the short-lived “Occupy X” movement in the USA and the reconstitution in some European countries of elements of the old Left parties into new organizations, Podemos in Spain and Syriza in Greece (Roman, 2015), we are not yet seeing a consistent set of new policy ideas to respond to the emergence of what many people view as “economic injustice”. At some point, we believe, large corporations will face a significantly more hostile public environment leading to newer and tougher regulations on executive salaries and workplace benefits.
From the perspective of mid-2015, it is impossible to predict how or whether a rebalancing of the distribution of economic goods might take place, but in a prudent management of reputation risk, we see three possible strategies for organizations seeking to protect the reputation of their brand as a net contributor to the well-being of society through the ways in which they treat their employees:
1. becoming a leader brand, consistently pursuing an employee benefits strategy at the cutting edge;
2. developing a distinctive employee investment strategy; and
3. creating a workplace focused on innovation from the bottom up.
Although these strategies are not mutually exclusive, they offer a range of ways in which individual corporations can create a positive profile even in a continuing environment of low growth and increasing inequality.
“The plebeians rehearse the uprising” appeared in The Journal of Business Strategy, Vol. 36 Issue: 5, pp.50 – 54, and is reprinted with permission from Emerald Publishing Group Ltd.