Vanguard experts discuss technology and its impact on an aging workforce
Jonathan Lemco, a senior investment strategist, and Andrew Patterson, a senior economist, in Vanguard’s Investment Strategy Group look at the aging workforce and how technology is changing the way they do their jobs.
Global macro matters
Lara de la Iglesia: I want to now frame our discussion on demographics in terms of technology in the workforce. And, Jonathan, if you could, briefly explain to us what happens to the workforce when a very large group of individuals enters or nears retirement.
Jonathan Lemco: We’re beginning to face a lot of that now in North America and in parts of Europe, too. It relates to something called the dependency ratio in which there are an increasing number of older people or those below 18, relative to those in the middle—what used to be the large majority of workers, if you will. So, more and more people are living longer, going to be calling on government benefits longer as well, and there are going to be fewer and fewer people in the workforce to pay for that. That’s an ongoing trend we’re seeing in the industrialized world as a whole right now, again, this widening.
Lara de la Iglesia: And that’s the demographic pyramid, right? We’re seeing a shift in that?
Jonathan Lemco: Exactly, that’s exactly right. Now with regard to the technological part of that, it’s not as if people of 65 or older necessarily are going to be retiring, either. It may well be that they can live as long as they’re healthy and as long as they maintain their skill set, as long as they can learn how to adapt to new technology, for many years still to come. That is also different from the way things were, certainly, when I was a kid, if you will, where typically you worked till you’re, let’s say, Social Security age, and then you’re done. And the insurance companies would make a bet that within five to ten years you might be gone.
Well nowadays, it’s very likely, with health care innovations, with technological change, you can live and, especially, work longer and productively. There’s something to be said for wisdom. You may not have the same energy you had at 25 as you have at 65, but you’ve got wisdom. And so, if you can adapt to technological change—a big if—then in turn you could thrive for a significant period of time. And that wasn’t true before.
Lara de la Iglesia: And so, Andrew, in terms of adapting to technological change, share with us a bit about Vanguard’s research on that. What are our views? I mean, is it really that the jobs will be gone and technology is going to replace or is something else going to happen?
Andrew Patterson: I think it’s much more so the jobs are going to be different, right? Certainly, there will be jobs in certain industries, certain sectors that are going to suffer; and that’s very, very difficult on an individual, on a personal basis, for those individuals or those industries going through that.
But in aggregate, our view is that things are going to change, and in all likelihood, you could end up with more jobs and the need for increased levels of sophisticated skills that maybe people aren’t prepared for today. So, it’s going to be paramount that we have institutions such as universities working with business leaders to come up with programs that help train workers, not only during their college years, but beyond for the skills that these new jobs are going to require.
How many people today are working in the intergalactic space travel industry? Not many relative to—
Lara de la Iglesia: Is there such an industry?
Andrew Patterson: There is, there is. You look at certain firms operating in that space, in terms of technological advancement, and they’re not as big as the Fords and GMs and the car producers and manufacturers in general. But that’s not to say that they won’t be at some point, right? We have a long way to go in terms of our understanding of just how impactful these technological changes could be, not only on growth and inflation but on us as a society and individuals.
Jonathan Lemco: Andrew makes a very key point here. At Vanguard we talk in terms of tasks sometimes more than jobs. Tasks may change over the years more rapidly than traditional job function. We, as workers, have to continue to adapt to new tasks, to new skills, and it’ll be ongoing throughout our working lives. That was less true in years past.
Lara de la Iglesia: So, the importance of upscaling as we shift from a labor-based economy, or have shifted from a labor-based economy to a knowledge-based economy.
Jonathan Lemco: Right.
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