Considering the headlines and narratives we saw emerge from the last election, it’s clear that social and economic anxieties are running high within our nation. The reasons for this are obviously diverse and complex, but one root theme that encompasses the socio-economic anxiety we have been seeing is economic and technological disruption and its impact throughout all corners of our economy.
If you examine the industries that sparked and lit the raging fires that powered the U.S. economy in the ‘80s (the automotive industry), ‘90s and ‘00s (technology/Silicon Valley), at the root of these economic evolutions and revolutions were STEM (Science, Technology, Engineering and Mathematics) based concepts and jobs.
Fast forward to the present day and it is the advancement of automation and new applied technologies that has forced disruption—to the current marketplace, to long established business models and to the old factory jobs that have defined our nation’s economic prowess for generations. As is often the case, with technological disruption comes economic uncertainty. How will automation affect the future of work and labor? Will there be enough jobs to go around as automation becomes more prevalent in our factories and offices? Will new jobs created by technology and automation offset the loss of traditional administrative and manufacturing jobs? What will become of displaced workers?
And perhaps the most important question: will our children experience the same level of prosperity and quality of life as previous generations?
Economic Inequality, Rising Automation and the Long-Term Ramifications
After nine years of sustained economic growth and with unemployment hovering around 4%, polling shows that the majority of Americans feel we are still on the wrong track. Considering the success of populist-centric campaigns on the left and right during the most recent election cycle, it is clear that lingering economic anxieties are at the heart of much of our nation’s political unrest.
For generations, perhaps the most defining feature of our nation was the American Dream—the belief that if you were willing to work hard enough, you could improve not only your economic prospects, but the future prospects of your children. However, in the face of stagnant wages and growing economic inequality, it’s safe to say that the economic strides we have made since the Great Recession have not been felt by a large portion of Americans—from those living in old factory towns and rural counties to those in disadvantaged urban areas.
According to a report published last year by the Federal Reserve, the richest 1% of families controlled a record-high 38.6% of the nation’s wealth in 2016. Factoring in that U.S. wage growth remains slow, with median real wages growing only 0.2% over the past year, and considering that since 2000, wages have risen faster for the groups that are already paid the most (both statistics courtesy of the Economic Policy Institute), it’s clear that economic inequality is growing while the economic mobility that has defined our nation has significantly eroded over time.
Considering these numbers, the most logical conclusion to draw is that the economy, while under various empirical measurements, seems to be doing fair to well but is simply not performing to expectation for a large portion of Americans. Steps need to be taken to create a more dynamic and competitive economy, which will in turn create higher paying technical and progressive jobs, resulting in an increase in the quality of life for Americans—the ultimate barometer of all vibrant and progressive economies.
This is perhaps the greatest challenge of our time and one that has become all the more important as automation becomes more prevalent and cannibalizes old manufacturing, service and clerical jobs. According to statistics compiled by the McKinsey Global Institute last year, 39 to 73 million jobs stand to be automated in the U.S. by the year 2030 and an estimated 75 to 375 million people around the world may need to switch occupational categories or learn new skills. Technology and the disruption associated with it will inspire and force massive changes, with the study finding that automation and robotics will have an enormous impact on American society and the world, mirroring the shift from agriculture to industrial based societies in the early 1900s. While the study finds the potential for economic inequality (and political instability) to grow, it also has a more positive outlook for the future, finding that economic growth and rising productivity could offset job losses and that technology could ultimately create higher-paying jobs in the long-run.
However, such a future only becomes possible if there is a dramatic shift in our approach to promoting economic progress through technology and disruption—a shift that will require massive reforms from our policymakers and massive investment on the part of the private sector.
Embracing the Future: Policy Reforms and Technological Promise
The key to creating a more competitive and inclusive economy is not running from the disruptive effects of technology, but rather, embracing it. The adoption of new technologies always occurs at an accelerated rate—it took the airlines 68 years and automobiles 62 years to gain 50 million users but it took Twitter just two years to do the same. If we continue to cling to traditional notions and descriptions of jobs, other countries will invest in these new professions and develop entire systems around cultivating the next generation of technological labor. When it comes to technology and its adoption in the private sector, promoting economic policies that try to turn the clock back several decades is a prescription for disaster.
The new economy—the emerging tech economy—is one that can create high-paying jobs, promote long-term prosperity and bring upward economic mobility back to the U.S. However, this can only occur if we pursue reforms that embrace technology and give people the technical skills needed to fill the growing number of STEM vacancies. The danger in not accelerating toward training and developing a skilled, technologically astute workforce is that other countries will do it and further influence the migration of technology and labor to other countries.
In short, embracing the STEM economy—and the public and private sector policy reforms needed to ensure this transition takes place—is the only path forward to creating a competitive economy that works for the vast majority of Americans. Here are a handful of simple policy prescriptions that can accelerate this process:
1. Placing a Higher Emphasis on STEM Education
STEM education has always been a personal passion of mine and reforming our education system to shift the focus toward STEM subjects is something that I have written extensively about in the past.
The trendy saying “all companies are technology companies” is fast becoming a practical reality. With technology becoming more ingrained in our factories and workspaces, it will be hard to find jobs in the future that don’t require a certain amount of technical prowess and familiarity. From manufacturing and transportation to healthcare and financial services, technology is not only taking and creating jobs, but it is changing the nature of work, how we work and the tools we use to work throughout many diverse industries.
It has been estimated that more than two-thirds of tech jobs are already outside of the tech sector, highlighting the growing importance of technology throughout numerous sectors of the economy. As such, developing a strong STEM skillset is the greatest competitive edge a professional can achieve in the current job market—and reforming our education system to encourage the next generation to develop these skills will promote a more dynamic economy—one that is more inclusive and provides a path to upward economic mobility.
2. Highlighting the Diversity of Opportunity in STEM Careers
There have been a number of recent reports about declining interest in STEM and it is a well-known fact that women and minorities are by and large underrepresented in STEM-based fields. Why is this relevant? As stated earlier, if we do not increase the number of people entering the nouveau technological fields that are going to power the next economic evolution/revolution, these jobs and opportunities will go to other countries.
There are a number of systemic reasons for this, ranging from how we teach STEM subjects, to differing educational opportunities for those of different socio-economic backgrounds, to perhaps a lack of awareness on the diversity of opportunities that exist within STEM careers. No matter the reasons, informing students on the diversity of career paths that exist in STEM will certainly help to spark interest in filling technical vacancies throughout our economy.
For instance, it might surprise many students to know that half of all STEM jobs are in manufacturing, healthcare and construction. The Brookings institute also notes that half of all STEM jobs are available to workers without a four-year college degree and that those jobs pay an average annual salary of $53,000—a wage that is 10% higher than jobs with similar education requirements. For those looking for an alternative to an undergraduate education (and many times at a fraction of the cost or debt), a career in STEM could prove to be a wise investment.
3. Public and Private Sector Investment in Retraining Programs
When we talk about education, we often only refer to primary and secondary schools. However, the stark reality is that education is a lifelong exercise, one that requires us to keep up with the latest trends to be effective professionals. As technology advances, not only will certain jobs be displaced by new professions, the requirements and skills required for those jobs will inevitably change.
In order to ensure that our professionals stay engaged in the economy, that their jobs stay in the U.S. and that they always experience the purpose that only the dignity of work can provide, it’s imperative that the public and private sectors work together to invest in training and retraining our professionals. A strong public and private partnership will be necessary as our economy moves forward given that private companies do the work and know the exact skills their employees need to be successful, and considering the impact of foreign competition, our government will need to take a more active approach to ensure our economy remains fair and competitive. Financially investing in the future of our workers will go a long way toward achieving that goal.
Change and disruption always create a certain amount of stress and unrest. However, I remain optimistic that this is healthy and will provide the spark necessary to fan the flames of our future. Implementing the education and policy shifts suggested above will no doubt be an enormous challenge, but in the end, embracing disruption and the emerging tech economy will strengthen the American Dream and create another generation of prosperity for all Americans.
About the Author
Dhaval Jadav is the Chief Executive Officer at alliantgroup, America’s leading provider of tax credits and incentives to U.S. businesses. Dhaval co-founded alliantgroup in 2002, and since its inception, his passion to serve businesses and the CPA firms that advise them has resulted in alliantgroup helping U.S. businesses claim more than $7 billion tax credits incentives.