If you’re trying to imagine about jobs and the economic future you can punt or you can make predictions based on trends. For Toby Madden, a Saint Paul resident, consultant and former employee at the Federal Reserve Bank of Minneapolis, it’s all about trends.
Toby sees several megatrends in regard to our economic future, but three stand out: demographics, acceleration of technological change, and a trend in employment that includes a more collaborative arrangement between employer and employee.
In regard to demographics, Toby considers the size of the labor force and its impact. “Back in the 70’s it was growing at three percent a year: it was huge but that was considered normal. In other words it meant you needed three percent more office building space, three percent more parking, etc. In the last five years, 0.5 percent. In the next five years 0.3 percent. We’re dying more than having babies. That’s going down to 0.1 percent in 2020 to 2025 from the Minnesota Demographer’s office.
“So were forecast to die more than we have babies. So it’s having far reaching effects. Businesses’ number one concern is finding good people. It’s not dealing with competition, not finding customers, not government regulations or taxes.
The second megatrend is obvious: acceleration of technological change. But it isn’t only “technological change” but the resulting demands on the labor force.
Toby says, “Technology can be disseminated in three to six months. That means the innovations can happen that much quicker. As a result of the quick technological change the demand for services and labor changes quickly as well along with skill sets that are needed. There’s a lot of companies screaming for workers. It’s all about how long it takes to transition from doing one thing to another.”
The third trend includes rising levels of self-employment, what Toby calls a “collaborative” arrangement. He says that it is a result of costs associated with hiring workers.
“There are two conditions to creating a job. On the labor side the benefits per person has to outweigh the costs. For the employer the benefits for hiring somebody has to outweigh costs. And so that’s dependent on what kind of job it is, what kind of complications are involved, etc.
“So if a person says I could make 8 dollars per hour at McDonalds, well that’s not worth it because I’d rather sit at home. Or that could change because my kid is hungry and I have to get him some food so I’ll take the job to put food on table.
“And so there’s other factors at play here: I could give up government benefits because I took that job so I won’t take it. These are perverse incentives.
“On the other side the employer has to get more value than costs. You might think well if it’s eight dollars per hour the company only needs to make eight dollars and one cent for benefits to outweigh costs. But it’s really more like 20 dollars per hour. How does that work? Well, the employer has to pay for insurance if the employee gets hurt, the employer has to pay for unemployment insurance, the employer pays health care…Then there is management time to oversee this person., training time, etc.; and then government imposed regulation like reporting to OSHA, etc. There’s a wedge between what the person gets paid and the cost to the company. Sometimes that wedge is a lot larger than what’s paid to the employee.
The trends in employment are for more of a collaborative society. Because the wedge is so high for employers, the worker becomes the employer and the worker. The worker is going to rent out part of their house for Airbnb, or part of their car for Uber. Or they do graphic design, or mow lawns or provide other paid services.”
While the mega- and mid-trends show a “broad stroke” overview, the responses to trends can be practical. As far as homelessness and poverty are concerned, the means to finding work lies in re-training and re-education for current needs in the job market as these needs change. That would require not just an effort on the side of government to provide that education, but some re-thinking about how to deliver education in a way that keeps up with innovation. Or, alternatively, to educate in a way that prepares students for a lifetime of rapid change.
“If they can adapt and change quickly like with millennials then as one thing phases out another thing can phase in” Toby says.
Toby Madden is an experienced economist that seeks to help you make better financial decisions. He is a speaker, author, consultant, and the founder of Power Parametrics LLC, a boutique financial advising firm that uses statistical models and surveys to forecast the economy. Toby is the author of the book Club Fed, which takes an inside look at the good, the bad, and the fixable of the Federal Reserve.
Purchase Book: Www.clubfedbook.com