Vanguard Research Shows Technology Fuels A More Human-Driven Labor Market

VALLEY FORGE, Pa., Oct. 16, 2018 /PRNewswire/ -- In a new research paper, Vanguard economists examined the effects of advancements in technology on the U.S. labor market and found that technology will likely continue to help reinvent and evolve jobs, not destroy them. The future of work is the first in a new series of research pieces by Vanguard that will study "megatrends" affecting the U.S. and global economies. In the first installment, Vanguard posits technology will play a pivotal role in raising the value of "uniquely human" tasks and emphasizes that the workforce will need proper education and training to develop creative intelligence, build technological acumen, and cultivate emotional intelligence.

Tasks, not jobs, face automation
Vanguard economists utilized data from the Department of Labor's Occupational Information Network (O*Net) to better understand the wide array of occupations in the labor market. Recognizing that a series of tasks make up any particular job, Vanguard analyzed and categorized the 41 most common critically-important responsibilities spanning nearly 1,000 jobs into three simple categories: basic, repetitive, and uniquely human. Basic tasks require little advanced training, but aren't easily automated by machines or technology; repetitive tasks are a series of simple steps that could be at a higher risk for automation; and advanced or "uniquely human" tasks are those that require adaptability and conceptual thinking.

Over the years, tasks have evolved as technology has become more advanced, enabling jobs with basic or repetitive tasks to focus more on those uniquely human elements. Those changes have taken place over a variety of occupations, skill sets, and wage levels—regardless if they were a predominately technology-focused role. For instance, drones and electronic monitors have replaced oil field laborers in inspecting pipelines, granting more time for those uniquely human tasks, like training, teaching, or problem-solving.

"Pessimistic observers have long predicted that advancements in technology would ultimately lead towards more automation and mass unemployment," said Joseph Davis, Vanguard Global Chief Economist and an author of the paper. "What they hadn't considered was how technology could complement occupations, generating more time for intellectually and conceptually-driven activities and skills."

Future of labor
To forecast how technology may continue to change tasks in the future, Vanguard researchers analyzed two time periods—2003-2007 and 2010-2015—to omit bias resulting from the global financial crisis. In particular, they studied the relationships between tasks, technology, and labor's contribution to growth in economic output, and drew three main conclusions:

• The nature of jobs has changed. Post-financial crisis, jobs with the most uniquely human tasks made greater contributions to gross economic output. The opposite is true for those jobs with tasks that combine basic and repetitive activities.
• Human tasks outpace technology. The more uniquely human tasks involved in a job shows that there is less gross economic output from technology. In repetitive or basic tasks, technology has a higher output.
• Technology is making humans more valuable. As technology becomes more sophisticated, the need for more uniquely human tasks rises and continues to add value to labor's output, demonstrating that technology is evolving jobs, not eliminating them.

In addition, Vanguard researchers found that the financial demand generated by the global financial crisis hastened the automation of basic and repetitive tasks, but helped to uncover the value of uniquely human work. Jobs evolved, and as such, there are 9.2 million more jobs today than in 2007. Further, more than 50% of workers in the U.S. spend their time on uniquely human tasks and those tasks account for at least 50% of a job's critically important activities. In the future, Vanguard believes that jobs will not be completely replaced by technology, but rather sees a shift in the task composition of jobs.

Potential for a labor market paradox
As technology and automation accelerate and complement uniquely human tasks, the potential increases for a labor market shortage. Despite record low unemployment rates, labor market shortages will continue to occur as we see a rise in robots and a decrease in the number of people with uniquely human skills. In order to best prepare the working population for those tasks that contribute most to economic growth and output, Vanguard believes policymakers and employers need to evolve education and training to help people develop uniquely human skills—like creative and emotional intelligence and technological acumen—rather than those that can be automated by a machine.

Vanguard's Megatrends series
Vanguard's "Megatrends" series is a research effort that investigates fundamental shifts in the global economic landscape that are likely to affect the financial services industry and broader society. A megatrend may bring market growth or destroy it, increase competition or add barriers to entry, and create threats or uncover opportunities. Exploring the long-term nature of massive shifts in technology, demographics, and globalization can help us better understand how such forces may shape future markets, individuals, and the investing landscape in the years ahead.

About Vanguard
Vanguard is one of the world's largest investment management companies. As of August 31, 2018, Vanguard managed more than $5.3 trillion in global assets. The firm, headquartered in Valley Forge, Pennsylvania, offers 408 funds to its more than 20 million investors worldwide. For more information, visit vanguard.com.

SOURCE Vanguard

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