Stephen Hawking has warned that artificial intelligence could end the human race. The development of intelligent machines could pose a major threat to humanity. Sometime in the near future, machine intelligence is predicted to surpass human intelligence, a point in time known as “the singularity.” Whether the rise of the machines is an existential threat to mankind or not, there is a more mundane issue---robotics are being used to automate production. There are more than 300,000 industrial robots in operation in Japan and another 200,000 in North America. This is seen by some as a threat to jobs.
At the recent conference on skills organized by CEDEFOP, the EU agency that supports the development of vocational education and training policies, skills mismatch was the topic of the day. Richard Freeman argued that robots can be a substitute for workers, even highly skilled professionals. He also says that they may improve well-being by increasing our leisure time.
How these new technologies affect worker well-being and inequality depends on who owns them. As companies substitute machines and computers for human activity, workers need to own part of the capital stock that substitutes for them to benefit from these new “robot” technologies.
The returns to schooling are still high
Until the day robots take over, or policy catches up, what can workers to do to protect themselves against automation?
At present, the returns to schooling are high, providing sufficient rationale for people and governments to invest in schooling. The global average rate of return to investment in one extra year of schooling is 10 percent and there are high social returns to primary schooling.
High private returns, especially at the higher education level, suggest that the investment is worthwhile to the individual and that not so much public subsidy is needed. However, it is difficult to borrow for education and there are social benefits associate with higher education. Therefore, some level of public intervention may be justified.
Worldwide, the gap in earnings and returns between secondary and higher education has never been greater. Moreover, the high cost of vocational and technical secondary education puts the social returns to vocational schooling below the returns to academic secondary schooling. Given the ever-increasing demand for skills, what is going on?
Secondary schooling provides an “option value of secondary education” for graduates allowing them to continue their education. Therefore, many of the brightest high school graduates continue to university. But it could also be the case that the skills taught in typical vocational high schools are not the type that employers seek in today’s labor market.
Expand higher education – but don’t forget about equity
High returns suggest it makes sense to expand higher education opportunities – as long as the expansion is bighased on efficiency and equity. The best strategy for expanding higher education does not involve passing along the costs to the general taxpayer. It is much better to use future earnings to finance current education. Read more about that in my previous blog, here.
Skills needed to increase productivity and employability
Skills matter for increased productivity and national economic growth. It is sometimes argued that, despite expansion in access to schooling in recent decades, the effects on total factor productivity and growth is small. This could be a measurement problem, or it could be a supply issue – poor quality or irrelevant skills produced in schools and training institutions – or a demand constraint.
Despite high levels of unemployment in some countries, there is a growing skills premium, suggesting skill demand is growing. In some countries unemployment rates among skilled workers is high.
As economies develop, the type of skills demanded is changing. In the United States, it has already been demonstrated that the demand for manual and routine cognitive labor has been declining steadily since the 1980s – when the returns to schooling and earnings inequality started to climb; while the demand for non-routine analytic and interactive labor has grown. There is also a rapid increase in the number of jobs requiring social skills.
What do you think are the skills that are needed to increase productivity and employability? What might make workers immune to automation in the future?
Clearly, for many developing countries, the basics are key. Early reading fluency is paramount. After all, “learning begets learning” as James Heckman states, and the place to start is early childhood development.
Evidence is also clear that behavioral skills – such as teamwork, diligence, creativity, entrepreneurship – are essential to thrive in today’s rapidly evolving, technologically-driven globalized economies.
Automation is coming
So how to succeed in the labor market and the coming singularity? Invest early, and then invest in the relevant skills. It could be summarized that the relevant skills include:
Problem-solving skills, capacity to think critically and analyze;Learning skills, ability to acquire new knowledge;Communication skills, including reading and writing;Personal skills for self-management, making sound judgments, and managing risks; andSocial skills to collaborate with, motivate others in a team, manage client relations, exercise leadership, resolve conflicts, and develop social networks.
For countries, just having the right skills may not be enough—what also matters is having a labor market that fosters finding and using those skills.
For more information on this subject, look out for the upcoming World Bank’s World Development Report 2016: Digital Dividends, which explores the impact of digital technologies on economic growth, on social and economic opportunities, and on the efficiency of public service delivery.