The future of work, backwards and forwards

Another route into the fifteen year future. Richard Freeman, professor of economics at Harvard (and with a visiting post at LSE, so perhaps we should get him over for a chat), thinks about trends in the global labour market:

In 1980, the global workforce consisted of workers in the advanced countries, 
parts of Africa and most of Latin America. Approximately 960 million persons worked in these economies.

Population growth — largely in poorer countries — increased the
  number employed in these economies to about 1.46 billion workers by 2000.

But in the 1980s and 1990s, workers from China, India and the former Soviet bloc entered the global labor pool. Of course, these workers had existed before then. The difference, though, was that their economies suddenly joined the global system of production and consumption.

In 2000, those countries contributed 1.47 billion workers to the global labor
pool — effectively doubling the size of the world’s now connected workforce.

But the amount of capital hasn’t increased at nearly the same rate, so

Having twice as many workers and nearly the same amount of capital places great pressure on labor markets throughout the world. This pressure will affect workers in the developing countries who had traditionally participated in the global economy, as well as workers in advanced countries. Countries that had hoped to grow through exports of low-wage goods must look for new sectors in which to advance — if they are to make it in the global economy.


But the advent of 1.47 billion new workers also pressures labor in advanced countries. The traditional trade story has been that most workers in advanced countries benefit from trade with developing countries because advanced country workers are skilled, while developing country workers are unskilled.

But this analysis has become increasingly obsolete due to the massive investments that the large populous developing countries are making in human capital. China and India are producing millions of college graduates capable of doing the same work as the college graduates of the United States, Japan or Europe — at much lower pay.

Freeman’s conclusion is that there needs to be a shift in emphasis from the emphasis on capital in development to an emphasis on the implications for labour.

More parochially, some interesting implications for the welfare system, and therefore for DWP, of 2020.