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December 19, 2005

The Changing Shape of the Labor Force: A Peek into the Future

Robert Reich on the changing shape of the workforce. I'm not sure the categories he sets up make that much sense: "personal services" are extraordinarily heterogeneous. I also think he's reading the future into the present--the changes he talks about are not that far advanced, but they will be.

The New Rich-Rich Gap : Almost 15 years ago, in "The Work of Nations," I described a three-tiered work force found in most advanced economies. At the bottom were workers who offer personal service.... In the middle were production workers in factories or offices, performing simple, repetitive tasks. At the top were "symbolic analysts," like engineers or lawyers, who manipulate information... the knowledge workers of the new economy. I predicted that advances in technology, and globalization, would widen the gaps in income and opportunity between these tiers. I was, sadly, prescient.... What I didn't predict was that the three tiers would change shape so dramatically. The top and bottom tiers are growing, and the middle shrinking, much faster than I expected....

Two different groups of symbolic analysts are emerging: national and global. Most symbolic analysts still work within a national economy, manipulating various kinds of symbols with the aid of computers... accountants, engineers, lawyers, journalists.... Yet a new group is emerging at the very top. They're CEOs and CFOs of global corporations, and partners and executives in global investment banks, law firms and consultancies. Unlike most national symbolic analysts, these global symbolic analysts conduct almost all their work in English, and share with one another an increasingly similar cosmopolitan culture....

There's a good economic reason that this group of global symbolic analysts emerged. Global commerce is now occurring on a scale and with a complexity that no commercial contract can adequately cover and no single legal system can sufficiently enforce. Hence, global dealmakers must rely to an ever greater extent on an extended network of people whom they trust....

Meanwhile, the ranks of production workers have fallen... between 1995 and 2002 more than 22 million factory jobs vanished. The United States wasn't even the biggest loser. America lost about 11 percent of its manufacturing jobs, while Japan lost 16 percent and Brazil lost 20 percent. The biggest surprise: China, which is fast becoming the manufacturing capital of the world, lost 15 percent of its manufacturing jobs.

What's going on? In two words: higher productivity. Factories are becoming more efficient, with new equipment and technology, and in nations like China, market reforms are replacing old state-run plans with modern ones. As a result, even as China produces more manufactured goods than ever before, millions of its factory workers have been laid off.

Routine office jobs are disappearing almost as fast as routine factory jobs. Almost any office task—claims adjusting, mortgage processing—can be done more cheaply and accurately these days by specialized software. Jobs that can't be turned into software are heading to low-wage countries as fast as telecom systems can reach them....

Yet unless the advanced economies invest more in education and basic R&D, they could lose their global lead in science, engineering and high-value-added production within a few decades. China and India are now graduating more engineers and computer scientists than are emerging from American and European universities. At some point, national symbolic analysts in advanced economies will lose ground. Their global brethren, meanwhile, will continue to dominate global commerce. The income and wealth gap between them will widen into a chasm. They will live, literally, in different cultures.

Posted by DeLong at December 19, 2005 11:48 AM