Vanguard experts on how innovation is changing the way we work

Joe Davis, Vanguard’s chief economist, Roger Aliaga-Díaz, chief economist for the Americas, and Jonathan Lemco, a senior investment strategist, discuss the skills future workers will need to be successful.


Global macro matters

Lara de la Iglesia

Lara de la Iglesia: Hi, I’m Lara de la Iglesia. Technological innovation is constantly changing the way we work. That means job seekers of the future might need an entirely different skill-set to be successful. To discuss what the labor force of the future might look like, I’m here today with three of Vanguard’s top economists: Roger Aliaga-Díaz, Joe Davis, and Jonathan Lemco. Thank you, guys, for being here.

Group: Thank you.

Lara de la Iglesia: Jonathan, I’m going to start with a question for you. It’s certainly on my mind. What might the future look like for the average millennial worker or, let me take that two steps further, someone from Generation Z or the Alpha Generation, which happens to be the children of millennials.

Jonathan Lemco

Jonathan Lemco: It’s amazing to think about Generation Z, if that’s what we’re going to call it. Be that as it may, I think what we are going to see for all of these generations is a work environment in which change will be constant and where they will have to continue to upgrade their education throughout their working lives. Technology is so powerful a force, and it promotes enough competition as well, that workers now and the workers of the future will continue to have to adapt to change. And I think we’ve been seeing these trends for some time, certainly since the dot-com revolution, but it is moving at a pace that is extraordinary. Social science teaches that a typical graduate today can expect to have seven distinct employers from the time of graduation to the time of retirement. That’s a median, some will be more, some will be less. But what that means is that this isn’t so much job-hopping; it means that requirements change, that technology changes and you have to adapt, that the economy changes. So innovation will be a constant as well. We must be adaptable, and that’s the most obvious scenario for the workplace.

Lara de la Iglesia: And movement, too, right? So, that might not be seven jobs in the same state or country.

Jonathan Lemco: No, it implies labor mobility, it implies that we have to move from one state to another state; maybe move internationally. Whatever it is, enjoy what you’re doing and recognize that tomorrow, it could be different, and that your task may be somewhat different as well.

Joe Davis
Joe Davis

Joe Davis: And even in the analysis we did, right, just over the past decade, we looked at all the detailed occupations, to Jonathan’s point. Twenty percent of a person’s time, 20% has radically changed just over the past decade across all—on average across all professions. So, take one day out of five, that whole day’s time spent is on a different type of task than what was before. It may be less time collecting information, less time processing it, more time analyzing it.

Think of things like that and so, I know that’s true in our work, right? And so, the [inaudible] has other implications for things, everything from lifelong learning to even how one thinks about education. So, these are important, what we call mega-trends, that we’ve been spending time on.

But it’s not going to slow down.

Lara de la Iglesia: So, Roger, then what are your thoughts for someone that’s closer to retirement age? Is 75 the new 65? How does what we’re talking about here impact those workers?

Roger Aliaga-Diaz
Roger Aliaga-Diaz

Roger Aliaga-Diaz: Certainly. The change is coming to the entire workforce, basically, and for people in retirement. Technology is basically creating two types of changes. On the one hand, we have an increase in life expectancy from advances in medicine, health care, pharma; and on the other hand, we have technologies that basically allow for a more flexible way to work, a way to contribute to the workforce.

So while it is true that the problem in retirement is that now people need to work longer to sustain a retirement, technology at the same time is making it easier to work longer as, basically, occupations are shifting away from physical activities or physically intensive activities and more into things that people in their 60s, 70s, and 80s, gradually even, can continue contributing from their experience in a very flexible way. You have telecommuting, part-time, different ways.

Lara de la Iglesia: Joe, let me ask you a question. So, technology should boost labor productivity growth, right, and real wages. But despite the technological revolution that we’re currently in, we’re not seeing that. We’re seeing stagnant productivity growth and wages. Why is that?

Joe Davis: Well, there’s a notion from some really well-respected economists that believe that not only are we in stagnation now, we are headed for what some call “secular stagnation.” We will not see material improvements for average wages. We don’t believe that’s the trend. In fact, we believe it’s misdiagnosed. It’s not stagnation of what we were currently entering into. It’s one of disruption.

Now, that does not mean that we do not and we’ll not continue to have pockets where real wage growth is very—is marginal, whether it’s certain industries—certainly certain households, it’s certain parts of the country, or any national or regional economy.

And that’s because those may be in the crosshairs of technological change and automation through machines. But in aggregate, we are seeing, more often than not, despite those sources of pain, strong gains, actually, increasingly of labor productivity and wages. It’s not as widespread as we would like. But we are seeing that—we see that across various industries.

Typically, they have one shared characteristic. And they are occupations that are focused on tasks where the machine is an asset, they’re not competing against the machine. So, you know, as one professor in the industry said, “You want to race with the machines, you don’t want to race against them.”

So, think of tasks that are uniquely human where the machines—a computer, a robot, whatever it is—that form of technology makes you more productive. We will continue to see that, there’s various fields that have this. So, we’ll continue to see that, which is why 80% of the world economy is at or near full employment.

Lara de la Iglesia: So, given that we’re all parents, what do we tell our children then? Jonathan, you alluded to this a little bit but what guidance can you give to them about the labor market that they’re likely going to encounter?

Roger Aliaga-Diaz: Yeah, I mean I’m optimistic, perhaps too optimistic, but I think when I see my children, basically, they have been born with technology. It is part of them, so I’m sure they will be able to understand and to speed up, perhaps knowing all the background. What are the activities in which they can actually continue—which is certainly in activities in which they are not going to be trained to compete. They are going to try to leverage that technology. But specializing in uniquely human tasks. But I’m thinking that they will be able to make the right choices.

Joe Davis: And I’m thinking—I’m not an educator but interested in education for my children as well—obviously, follow your heart. If possible, try to help solve some of the world’s problems in any small way. It is this fallacy of stagnation that there’s a finite amount of work. Take a look at the challenges we have in the world, right? There’s a lot of good things going on in the world, but there’s a lot of challenges.

Lara de la Iglesia: Opportunity to solve them, jobs to do that, right?

Joe Davis: Solve whatever is to solve for, so there’s more work to be done, a vast amount of more work to be done.

Lara de la Iglesia: Thank you very much.

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