The past, present and future of work

“My life, and by extension everyone else's, is meaningless.” (Bender, Futurama)

Pain… 

Many etymologists suggest that the word for ‘work’ in most continental European languages derives from the Latin word Tripalium, thought to describe a rather unpleasant Roman era torture device. For many centuries this rung true for the majority of the world’s population. Today such conditions thankfully tend to be the exception not the rule in the developed world. However, on some measures the lot of the average worker is again deteriorating. Previously valuable skills are being marginalised by the steady ascension of robotics, artificial intelligence and other emerging technologies. In this context, many are arguing for major changes to how we think about the relationship between employer and employee. This week we explore how this contract has evolved in the past and where it might head in the future.

Past

In order to understand where we are today, we need to go back to the emergence of large companies in the middle of the 19th century. Previous to that, almost all businesses everywhere were small, and managed by members of the families that owned them. There were some famous exceptions, particularly instruments of empire such as the British East India, Dutch East India and Hudson Bay companies(1). However, with the industrial revolutions of the 18th and 19th centuries came two key changes. First, improvements in transportation and communications made it easier for a manufacturer to serve a large market. Second, the introduction of new special purpose manufacturing machines(2) allowed for goods to be mass produced much more cheaply and efficiently. 

Bonsack’s cigarette machine, for example, was soon capable of producing 120,000 cigarettes a day, replacing a room full of people rolling cigarettes producing a fraction of that number. However, the machine didn’t run and maintain itself. It also needed inputs and of course a load of extra output for which demand needed to be created. Procurement, distribution, marketing, and a range of other increasingly specialised roles proliferated in place of the original hand rolling jobs. As the fixed costs associated with these increasingly productive machines grew, so did the advantages of massive scale and so on. In keeping with the insights of the legendary 18th century Scottish economist and philosopher Adam Smith, jobs became increasingly specialised. Dividing up occupations into smaller, more repetitive chunks dramatically increased productivity, even if it made for a less fulfilling day. Nonetheless, following contributions from all sorts of pioneers past and present, we move to the mass production era best characterised by Henry Ford.  

Present

Fordism essentially involved a trade-off for the worker. Workers were offered a bundle of benefits, chief among them a degree of economic security. This came in exchange for repetitive, subjugated roles in the Ford factories. However, the proof of solvency and promise of future enrichment that came with these jobs allowed workers to access credit. Houses, cars and other goods followed. Suddenly we had the potential for the growth in mass consumption needed to meet our increasing capabilities in mass production. 

However, this long standing contract has been crumbling at the edges for some time. Job security has long since evaporated and real wages (wages adjusted for inflation) for the average worker have gone nowhere for decades in much of the developed world (Figure 1). Across the developed world, unemployment is at its lowest in decades (Figure 2). And yet, the quality of jobs has likely declined materially in some sectors. A study of how occupations have evolved since the end of 1970’s based on income cohorts, illustrates that it is the medium skilled occupations that seem to have suffered the worst hit(3). This is surely set to continue if technology continues to advance up the same path. Previously it was routine tasks that have been under threat from automation – try and spot the human in one of Amazon’s delivery centres for example. However, increasingly non-routine tasks are in scope too as artificial intelligence climbs the skills ladder.  

Future

Here again, history provides some context on how to interpret such trends. Even in the First Industrial Revolution, the benefits of technological change have not always been shared equally (or fairly) between corporations and workers. The adoption of the spinning jenny, for example, led to higher corporate profits among textile producers, but mass unemployment among the hand weavers employed by them. New and evolving technologies such as artificial intelligence and robotics may come with similar side-effects.  

We are of course unable to see how the workforce will evolve amidst these threats to large chunks of existing employment. New jobs and industries are continually popping up that our forebears would probably not be able to recognise as gainful employment – from app design to, dare we say it, investment strategy. Of course, democratic societies have the means to ensure that the benefits of technology are widely shared by many rather than funnelled to the privileged elite. But the relevant point is that the share of income split between corporate shareholders and workers has never been static. We see no reason why this shouldn’t remain the case.

Investment conclusion

It won’t surprise you to know that we think a diversified multi-asset class fund or portfolio can actually help. If we are looking to provide ourselves with a little long term insulation from some of the effects of this labour force turbulence, one way is own a diversified stake in its main beneficiaries – the global corporate sector. As new technologies emerge and are assimilated into our daily lives, corporate profits rise. Being invested in these corporates’ shares gives us a claim on these future profits. We should nonetheless be wary of attempts to (over)confidently isolate the sectors that will benefit the most in the future. As we’ve pointed out before, the true beneficiaries of such technological change can sit far away from the initial innovation. A diversified pool of investments giving us access to the wider world’s ingenuity is the key.  

(1) Guy, F – The global environment for business (2009)

(2) Chandler, A – Strategy and Structure: Chapters in the History of the American industrial enterprise (1962)

(3) Manning, A & Goos, M– Lousy and lovely jobs: the rising polarisation of work in Britain (2003) 

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