September 2023
In the eighth episode of our “In Conversation with…” podcast series for 2023, Lucy Lewis, Partner at Lewis Silkin LLP is joined by fellow partner James Davies.
What if these optimists have been seriously underestimating the pace and scale at which automation will replace and change the jobs of today in the second quarter of the century? What if the insipid productivity growth we have experienced over the last 10 years or so continues into the second quarter of the century? And what if we have too few workers with the skills needed for the occupations of tomorrow?
Lucy and James discuss James’ upcoming report for the Future of Work Hub, and consider whether, despite current skills shortages, the future world of work in 2050 could feature too few jobs.
Key takeaways from the conversation:
- We could see a future with too few jobs: there is a significant risk that the future of work could be characterised by too few jobs for the number of workers. Employers, policymakers and individuals must take steps now to prepare.
- Skills shortages will persist: employers, policymakers and educators must invest in developing the skills of the future. If workers do not have the skills needed for the occupations of tomorrow, we could see a future where high unemployment co-exists with significant skills shortages in some areas. **
- The current tax regime is becoming untenable: as companies decide whether to automate jobs, we should reconsider how we tax employment so that there is less of a cost disparity between employing people and automation.
- Cross border competition for key skills will become more intense: employers will need to deliver on the values and priorities of workers, particularly younger generations, to attract and retain the best people.
- Technology and AI are not the only drivers of change: other drivers, such as demographics and geopolitics, could significantly impact the jobs market of the future.
Read James’ report: The future of work in 2050 – too few jobs or too few workers?
In Conversation with…James Davies
Season 3: Episode 8
This transcript has been edited for clarity and length.
Lucy Lewis: Hello, and welcome to the Future of Work Hub’s “In Conversation with…” podcast. I am Lucy Lewis, a partner in Lewis Silkin’s employment team, and in this podcast series I will be hosting exclusive discussions with innovators, business leaders and thought leaders to explore their perspectives on the longer-term trends and immediate drivers shaping the world of work.
And for this podcast I am really delighted to be rejoined by my fellow partner, James Davies. James truly is a leading expert in employment law. He has got over 30 years’ experience and he writes and he speaks widely internationally and nationally on issues related to employment law and, of course, the future world of work.
Now, some of you may remember that James joined us back in January and he had just published his report, ‘Eight Drivers of Change: 2022 and Beyond’ and we discussed what shifting demographics and changing societal values, what those things could mean for the world of work and the future political landscape.
Well, I am delighted to say that James has been busy and he has written a new report and that is due to be launched on the Future of Work Hub in a few weeks’ time. And the new report considers whether, despite the fact that we are experiencing skill shortages, we are likely to find ourselves in a position in the coming decades where there is a shortage of jobs and, if that is the case, how businesses, how policymakers, individuals how they can prepare. So that is what we are going to be discussing today.
But James first of all, welcome back. You are the first returnee to the podcast.
James Davies: It is great to be back and talking to you again.
Lucy Lewis: So, skills shortages look set to continue for the foreseeable future, and many employers, many of our clients we know from speaking to them, are struggling to recruit and retain the best people. But, against that backdrop, your new report suggests that actually the future labour market could be one where there are considerably fewer jobs due at least in part to the impact of automation and obviously AI. And you cannot go a day without headlines or announcements about new tech innovations and, you know, a really extensive debate about the impact that technological advancements are going to have on jobs; we see that all the time. You will not be surprised to know that a number of these conversations on the podcast, we have looked at that, we have touched on it. And so, I am interested to start by asking you, what has motivated you to write this report? What do you think are the key questions that we need to be asking ourselves and considering?
James Davies: Well, that is a good question. I think, as I was concluding my last report, I was looking a little bit further into the future and thinking that it would be quite interesting to consider how the various drivers of change might impact on the world of work, say in 2050. Now, of course, it is extremely difficult to predict the future, to crystal ball gaze so far into the future. But I think that policymakers, businesses and I think individuals themselves, need to be contemplating how the world of work might change over the next 20 or so years and I was struggling to think of jobs where technology would have potentially no role to disrupt and I could also see that job shortages were likely to accelerate employers automating and that really was the catalyst for the report which tries to look a little bit further ahead into the world of work. Of course, since then, since I first started thinking about the report, ChatGPT was launched in November last year and has propelled the potential of AI into the public consciousness and, as you say, barely a day goes by without a news item reporting on the impact that AI might have on the jobs market in the future.
But, of course, it is not just AI that has a potential to profoundly impact on the world of work. There are rapid technological developments in sustainable energy, battery technology, robotics, genomics, all of which have the potential to disrupt the labour market or create new jobs and I think it is that balance, its whether or not we are going to see more jobs or fewer jobs in the future that is the important question we need to grapple with.
Optimists have always pointed to past industrial revolutions and the potential for technology to create new jobs as well as its potential to drive up productivity which should result in economic growth, rising wages, increased demand and more jobs. But in my report I will consider, what if these optimists are not going to be right this time and what if they have been seriously underestimating the pace and scale at which automation will replace and change the jobs of today in the second quarter of the century? What if the insipid productivity growth we have experienced over the last 10 years or so continues into the second quarter of the century? And what if we have too few workers with the skills needed for the occupations of tomorrow? Because clearly whether or not there are too few jobs or too few workers the skills that are going to be needed in those jobs are going to be very different from the skills of today.
Lucy Lewis: Thanks James. That is really, really interesting context actually and it sets the scene perfectly for our discussion.
You talked about the report was looking 20 or so years ahead. I have had a sneak preview and I know we are sort of anticipating this future world of work in 2050 and what the drivers that will shape that will be. Some of them known obviously, and some of them unknown events.
When we look at whether or not that future will be characterised by too few jobs, could you share some of the key things that you think will influence the labour market in the coming decades?
James Davies: Obviously, technology, artificial intelligence and other developments in technology will have a very profound effect on the number of jobs we have in the future. But there are various other drivers of change which are going to impact significantly on that question.
Demographics is an important question. We have an aging population, we have a relatively low fertility rate and the workforce has the potential to shrink and the UK population is only projected over the next 20 years to grow on account of projections in positive net migration figures. Politics may well impact upon that.
Geopolitics will have a profound effect on the world of work. We have seen with Russia's invasion of Ukraine the extent to which geopolitical turmoil can dramatically impact the economy and jobs. Who knows what turmoil lies ahead in the next 25 years. And, as I say, the number of jobs is going to be influenced significantly by the extent that we can increase productivity and generate economic growth.
And, I think, as much as anything, and, as I say, it is going to be preparing for the jobs of tomorrow, so that we do have the skills to do those jobs that are going to be critical and I think that one area in which the UK has fallen short recently is skills. And we hear politicians of all refrain talking about the importance of skills, but the Learning and Work Institute produces some fascinating reports and has shown that average business expenditure on training has declined by 28% since 2005 and UK business expenditure on training is half the EU average. Now, that's got to change and got to change quickly if we are going to be in a position where we have people with the skills, equipped for the jobs of tomorrow.
Lucy Lewis: Thanks James. I am going to come back to this question about skills and how we prepare because I think it is an important one.
But before we get to that, bearing all of that in mind and recognising, of course, that some of the things that may be significant influences are things that we cannot know yet… asking the really critical question: Do you think we will reach a position in the next few decades, 20 years or so, 2050, that is where we project ahead to, where there are too many jobs or too few jobs?
James Davies: Well, it, as you say, it is a very, very difficult question to answer and I think my position would be there is a significant risk that there will be too few jobs and that we need to start preparing for that and that is both preparing to mitigate the drivers that will lead to the potential for too few jobs but also ensuring that we have, as we have said before, have the skills for those jobs that exist.
I think that, you know, looking ahead, it’s sort of…one of the things my report will do in some detail, is look at different sectors, and look at the different forces that could create more or fewer jobs in each sector. Now, the largest sector in the UK workforce at the moment is the health and care sector. 13.3% of workers work in that sector and that is a proportion that has been gradually increasing in recent years and I think that with unmet demand the challenges that the health and care sectors have been facing - which have been much publicised, the ageing population - I think we will only see the numbers employed in the health and care sectors increase as a proportion of the workforce in the years ahead and we need to start preparing for that, ensuring that we have sufficient trained care workers, doctors, nurses etc., to do those jobs.
I think the number of scientific and technical jobs will increase at least in the short to medium term. The jobs that require what seem to be called STEM skills these days. But there is going to be global competition for that. These sort of jobs can be done by anywhere and I think one of the trends we will see is, whilst we may see manufacturing coming closer to home and these distant supply chains coming under scrutiny and threat, I think knowledge jobs are jobs that can be done in most cases from anywhere and we will see a geographical fragmentation of knowledge jobs and much greater international competition for those skills.
I think we will see the numbers employed in education probably increase. There will still be work for workers in management, law, thankfully for us, accountancy, finance, business consultancy and similar. But I think there will be fewer than there are at present because I think we will see AI complement the work of these professionals and also AI mean that more mid-skill jobs are created in these areas, working with AI. I think that we are going to see even greater replacement and displacement of routine and repetitive work by automation. And I think one of the things that we may begin to see, if we are right about the pressures on the number of jobs in the future, is going to be average hours decreasing.
It is a trend over the last decade that the average hours worked in the UK have slowly but gradually decreased. We see much talk about the four-day working week now, and one thing I would suspect that we may see within the next 20 years is the campaign for the three-day working week, so that the work that is available, which is being done much more efficiently and productively than it has been done in the past, is shared between people, because, you know, work is generally a positive thing for people.
Lucy Lewis: Thank you, James. Really interesting and particularly your thoughts around how the working hours might decline over time.
I said I would come back to this skills issue because I think that is really interesting, that we may end up in a world with too few jobs, too many people, but still have significant skills shortages, and that is a really interesting thing to ponder. And I said I would come back and ask you about how you think businesses, policymakers, employers can start to mitigate against the potential downsides of that shift. In other words, how can they start to prepare for this to make sure that they do not end up in a position where they have got too many workers for the jobs but not people with the right skills for them?
James Davies: I think that burden falls on all parties, it falls on policymakers. Policymakers need to ensure that organisations are incentivised to upskill. I think it falls on businesses who need to prioritise skills.
I think sometimes there is too much of a short-termism in organisations, and we all need to be preparing a more long-term approach to preparing for the future, and I think there is a role for individuals who need to recognise the need to acquire the skills for the work of tomorrow.
I think schools need to adapt. I think with the rapid development of automation and artificial intelligence, the skills that humans have - the things that they might be able to do better than machines - we need to think what they might be and, clearly, some of the soft skills - empathy, cooperation, leadership, communication, emotional intelligence- are skills that are going to be in greater demand, and I think we need to think about an education system that develops those skills and values them.
I think that also amongst managers, there is quite a lot said about working with AI, and I think that showing managers understand and can collaborate and embrace the potential of AI is going to be important and I think this rapid pace of change is going to mean that change management skills are going to come to the fore. So, I think those in management need to look carefully at the skills that they are going to need in the future.
I think with geographical competition for jobs, there is going to be a burden on employers, ensuring that they are providing the right environment for workers. They have got a track to retain key workers and they have got to understand what workers are looking for and they have got to deliver the values and priorities of workers, particularly the younger generations. I said quite a lot about that in my earlier report, but I do think that international cross-border competition for key skills is going to become more intense.
I think that what we see now is the shift to a much more interventionist industrial strategy. We have got ’Bidenomics’ in the States, and the EU also having a much more interventionist approach and I think that the days of sort of laissez-faire economics are probably over, and we will see a shift in the UK, whatever political party is in power, to a much more interventionist, industrial strategy. You could see Rishi Sunak talking about making the UK an AI hub. I think that sort of government policy in those areas is going to become much more important.
And another sort of thing, I think, encouraging employment, encouraging people to work is a good thing, and we need to recognise the need to embrace automation and AI to ensure that we are competitive, competitive internationally, and that goods and services are being produced or provided as efficiently as possible. But, at the same time, we need a level playing field, and one of the things I always think is increasingly untenable, is taxing jobs. So, employers’ national insurance contributions.
So, if you are looking at whether you decide whether to automate a job or to employ somebody to do the job, paying 10% plus in addition is inbalancing the scales. And whilst we are going to need more rather than less tax revenue in the years ahead, I am not sure taxing jobs in that way is going to be sustainable for much longer. It is going to imbalance the people versus machines equation.
I do think, though, whatever steps we take to prepare for the changing world of work in the future, the potential of having too few jobs, and the potential of not having the skills for the jobs that are there, that we do need to start thinking about how we manage society with insufficient work to go round. And whether that is the shorter working week that I have talked about, mentioned earlier…it might also mean that we are re-visiting concepts like the universal basic income. We need to be thinking about and preparing for the world ahead. Hope for the best. Prepare for the worst.
Lucy Lewis: Thank you, James. Really interesting and fascinating that what you have talked about is things that employers can do directly, businesses can do directly, but obviously other things that sit with government and policy makers: universal basic income, tax etc. Very interesting to see what happens. We will have to have you back in 20 or so years to let us know whether you were right in your predictions.
Now, you will know that usually at this point in the podcast, I ask the question, same question to everybody, and that is what they think is missing from the current conversation about the future of work. What is not getting enough attention and why they think it's important.
But we are in an unusual position because you have already answered that question when you came on the podcast in January, and what you explained was really interesting. You explained your thoughts about the climate emergency, how that was really going to be a significant driver of change, it would alter workplace decisions, and you also talked about growing inequality and the fact that you thought that would get a lot more attention by society and by governments and, as a result, by employers. And, obviously, both of those things are really important issues and they are clearly still very relevant to the future of work discussion, but I wondered if there was anything you want to add before we go?
James Davies: So yes, I do think that those areas remain important. Obviously, AI is going to have a dramatic impact on everything, but I do not think one would say it is receiving inadequate attention at present.
So, knowing you were going to ask me this question, I had a think, and I think perhaps it is tax. I think that we have a tax system that was designed for a world of yesterday, and we need to have an adult debate about tax. I mentioned employers’ national insurance contributions earlier. I suspect we are all going to need to pay more tax in the future. I suspect that we are going to see a bigger public sector, and the question of who should bear the burden and what should be taxed needs a thorough debate and it seems a shame to me that any suggestion that any taxes should be changed just seems too toxic for sensible debate at the moment, and we need to move on and have that debate.
Lucy Lewis: Thank you, James. Yes, very interesting and particularly in the context of, well, the party conference season and moving into an election year.
Thank you so much for your time.
James's report, as I said at the beginning, will be available on our website at futureofworkhub.info in the next couple of weeks. I have had a sneak preview. It is great and I would really recommend you having a read of it when it comes out.
Thank you again, James.
James Davies: Thank you, Lucy. It is always a pleasure.