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Employment: Digitalisation set to change workplace of the future

Lars-Thorsten Sudmann
Mar 23, 2020 5:17:51 PM

“Does digitalisation kill jobs?”, German presenter Maybrit Illner asked in a recent edition of her political talk show. Change in the job market is in no doubt, but where will it lead us? In this update, we have summarised some pieces of research that are poised to answer three pressing questions.

A 1992 Harvard Business Manager article by economist Peter Drucker claimed that every few centuries, the Western world is subject to profound changes that reconstruct society at large within a few decades. “Fifty years later a new world exists. Moreover, the people born into that world cannot even imagine the world in which their grandparents lived and into which their parents were born”, he noted.

The challenges posed by digitalisation beg the question whether another such transformation is imminent. To paraphrase Peter F. Drucker, will our offspring experience work in such a way that they will not be able to imagine the workspace we currently inhabit? Some indicators hint at this: telecommuting is gaining in popularity, the freelancer community is growing, while regular jobs subject to social security contributions are declining. Thanks to smartphones and tablets, working remotely is possible anytime, anywhere. Employees are no longer tied to their desks.

Unsurprisingly, a number of studies examine changes of the kind in the world of work. We have looked at a handful of them more closely and summarised their findings on three fundamental questions.

 

University of Oxford: Will robots replace human employees?

Researchers at the University of Oxford sparked intense debate when they published their findings regarding the replaceability of 702 employment categories in the foreseeable future in a large-scale study. Experts call this the substitutability potential of jobs by machine. That robots can substitute humans in manufacturing is common knowledge since the introduction of industrial robotics. Presumably, these jobs are most likely to be endangered by digitalisation.

On this aspect, the researchers at Oxford arrived at a surprising additional conclusion: many jobs in the services sector are similarly affected. These jobs generally require creativity and strong social skills in addressing human beings and their problems, something humans were considered uniquely capable of. Not only are machines able, in the meantime, to handle screwdrivers accurately, but are also able to interact and communicate with human beings, exposing entire job profiles such as call centre representatives.

 

German research: What are the risks to the German job market?

The Oxford team evaluated the potential substitutability of job profiles worldwide. Inspired by their research, researchers of German retail bank ING DiBa specifically examined the German employment market in 2015. Their findings indicate a 59 per cent risk for German jobs to be automated by machines. The researchers trace this back to the density of manufacturing there.

Additional research, commissioned by the German federal ministry for labour and social affairs (BAMS) and conducted by the Centre for European Economic Research (ZEW) arrives at similar conclusions as for the ING DiBa team. They highlighted, however, that not all employees with similar job descriptions carried out related activities. For this reason, they evaluated the substitutability not of employment categories, but of clusters of activities and routines. From this vantage point, twelve per cent of all job profiles are highly likely automated. In the United States, this indicator is at nine per cent. By contrast, the IAB, a research institute of the Federal Agency of Labour has examined which job profiles can already be substituted at present. This concerns 15 per cent of all jobs subject to social security contributions, 70 per cent of whose activities and routines can be automated.

 

Which structural transformations will the German job market undergo in the future? A scenario analysis

The studies mentioned thus far merely establish that machines and computers can replace a certain proportion of jobs. Whether new job profiles will emerge or existing routines will adapt to the challenges of digitalisation remains unclear. Manufacturing clusters in the Ruhr Area, the Saarland, or in parts of Eastern Germany have demonstrated for decades that new job profiles spring up where previous ones have been sidelined. Digitalisation can reasonably be expected to affect the German job market in similar ways. Indeed, the prospects are nowhere near as dire as it may seem in the present doomsday scenario.

In this context, above-mentioned IAB developed five scenarios to assess the impact of greater investment in equipment and expansion of high-speed internet on the job market, concluding that it would accelerate structural change towards a more service-driven economy. On the one hand, they anticipate new workplace routines and activities will be added, while others will disappear. However, on balance, they believe, fewer jobs will be lost than gained. In the view of the authors of the study, the availability of comprehensive training is essential to the migration of jobs from the manufacturing to the services sector.

Similarly, the German-based Bertelsmann Foundation has joined forces with the Foundation for New Responsibilities (Stiftung Neue Verantwortung) to conduct proprietary forecasting. To this end, experts in tech and job market economics developed six scenarios, from which they deduced three cross-scenarios agendas, namely the reorganisation of labour, pressures on the job market, as well as retraining and upskilling.

As far as the reorganisation of labour is concerned, the research team predicts that the job market will continue to liberalise and that the number of permanent positions will retrograde. In the course of structural adjustments and concomitant increases in unemployment due to continued digitalisation, they further anticipate increased pressures upon the job market, raising questions about the equality of opportunity. In the author's view, a highly dynamic and digitalised society requires the workforce to train continuously. They also call for governmental training programs to meet the requirements of technological change and the continuous pressure to innovate.

What do trade unions think about this? Researchers at the European Trade Union Institute (ETUI) presume that digitalisation will destroy jobs, or dislocate them internationally. At the same time, they anticipate new products and services, and the simultaneous creation of related jobs. They nevertheless remain concerned about working conditions in the digital economy, not only with regard to health and safest but also to discriminatory and marginalising practices. As a consequence, they see the need for trade unions to enforce the rules of the digital economy in their respective countries.

It appears the job market seems to undergo precisely those metamorphoses as predicted by Peter F. Drucker to be recreating the world as we know. If we follow the conclusions of the studies introduced above, executives must prepare their organisations for future pressures to adapt, the most important driver of which is digitalisation.  As the findings demonstrate, however, digitalisation is no longer solely confined to technology. Instead, organisational of labour, culture, training, deceleration and many other intangibles require synchronisation with technological advances.

 

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