In last week’s State of the Union address, U.S. President Barack Obama was quick to catalogue his economic successes.
But America’s young are strikingly absent from the celebrations. They were the biggest factor in Mr. Obama winning the presidency. Today many feel betrayed, with youth unemployment more than double that of the general population.
This is a key reason the gap between the rich and the poor in the modern economy of the United States has never been greater. The president acknowledged such, saying, “The cold, hard fact is that even in the midst of recovery, too many Americans are working more than ever just to get by, let alone get ahead. And too many still aren’t working at all.”
This growing rich-poor disconnect was a major theme at the World Economic Forum meeting in Davos, which took place the week prior to Mr. Obama’s speech. American chief executive officers attending Davos were ebullient about the economy, with Salesforce.com CEO Marc Benioff saying, “The economic crisis is over!”
But in the next breath, Mr. Benioff pointed out there are looming concerns that could be devastating for business and humanity. The most important: “Automation is sucking jobs out of the economy.”
In Davos, there was consensus that a new technology revolution is bringing some tectonic changes. We will go from two billion to six billion Internet users over the next decade, but that’s just the beginning. Cisco Systems Inc. chief executive John Chambers describes the next wave as “the Internet of Everything.” Soon there will be trillions of objects online as the physical world around us becomes smart and networked.
The downside is that we may be entering an era of permanent structural unemployment in which, for the first time, economic growth does not generate jobs.
Google Inc. CEO Eric Schmidt said that we’re into two or three decades in which jobs will be the dominant issue. Decades ago, a wave of computer-generated automation wiped out blue-collar jobs. This was followed by a wave of outsourcing that affected some white-collar workers. Now a new wave of robotics, networked-inspired automation and new business models are targeted at knowledge work.
Technology is convulsing entire industries and wiping out professional and management jobs along with less-skilled ones. Amazon.com Inc. turned book retailing on its head and is now transforming retailing itself, devastating big box stores like Best Buy (which recently laid off hundreds of Canadian employees). Parts of the magazine industry have been wiped out and newspapers are suffering. Bill Gates reported that he’s working on robots that can pick crops better than humans can.
“This is a new phenomenon that is coming on very fast,” Mr. Benioff said. Noting the epidemic of youth unemployment around the world, Cisco’s Mr. Chambers said, “We’re close to losing a generation of young people.”
One essential ingredient to help grapple with these new problems is education. During the industrial revolution people left the farms and the leaders of society understood that we needed public education. Today, there needs to be a similar revolution in education as we transition to the digital economy.
For starters, when most workers are knowledge workers, most people will need postsecondary education. We also need to realign the capabilities of youth with the needs of labour markets. The biggest demand is for graduates in the so-called STEM: science, technology, engineering and mathematics.
Others argued that a key to overcoming the problem is entrepreneurship. Studies show that 80 per cent of new jobs come from companies five years old or less. Given the right conditions to take root and flourish, “gazelles,” as Mr. Schmidt calls them, are the foundation of innovation, growth and prosperity.
For many young people, being entrepreneurial and creating their own job will be the surest path to employment. If they’ve learned anything from the past six years, it's that they shouldn’t rely on their elders.
Don Tapscott reported for The Globe and Mail from Davos. He is the Executive Director of the Global Solution Networks program at the Rotman School of Management, University of Toronto.