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Productivity Commission ponders four futures

Sarah Putt, Contributor. 23 April 2019, 6:00 am

"The future's not ours to see," sang Doris Day, but the Productivity Commission doesn't appear to have been listening. It has released an 82-page issues paper titled Technological Change and the future of work in which it proposes four scenarios, against which policies and institutions can be measured.

The scenarios range from the positive future where tech replaces more jobs than it displaces to the rather bleakly titled 'Stagnation', here's a short description of each one:

More tech and more jobs

Capital productivity rises as the price of technology falls and firms only adopt the tech that will improve their performance. At the same time, labour productivity rises with the increasing need for skilled specialised labour.

"Such an economy will tend towards high levels of employment. But one concern is that disparities in wage incomes may increase. Low-skilled labour may attract low or stagnant wages while the wages of those with skills in demand may soar. On the plus side, in such an economy there are more resources, in total, to enable redistribution of the benefits," the report notes.

More tech and fewer jobs

Similar to the first scenario, only instead of creating more highly skilled and highly paid jobs, new technologies replace labour.

"An expected consequence of this combination of drivers is widespread unemployment. While workers losing jobs would contribute to job churn, overall job scarcity might encourage those with jobs to hold onto them for longer. Average wages might fall over time as labour supply would exceed available jobs. Wage inequality for those still in employment might fall as a consequence. However, income differences between the employed and unemployed could drive an increase in overall rates of inequality."


The pace of technology adoption slows, possibly due to a decline in innovation, as well a decline in the adoption of new technology by organisations.

"In this scenario, there will be less change in the volume, churn and nature of work, and income and productivity growth will slow. There could be reduced opportunities for people to find jobs that are well matched with their skills, preferences and circumstances. Slower technological change may prompt calls for more government intervention to encourage firms to undertake research and development (R&D) and innovate."

Steady as

Technology drivers of labour market changes stay the same in the next 10-20 years, as they have done in past two decades (in which we saw the advent of the smartphone, eCommerce and social media).

"This scenario includes the continuation of slow productivity growth and generally slow technology adoption by New Zealand firms (though consumer technology adoption may stay high). This scenario is compatible with full employment and stable levels of income inequality. Actual outcomes will vary, as other drivers of labour market change - such as variation in the business cycle or demographic change - are likely to predominate."

The graph below shows how these scenarios are related to the two factors driving the future of work - the rate of adoption of new technology and whether labour is augmented or replaced by new technology.

Screen Shot 2019-04-22 at 1.42.28 PM.png

Do you agree or disagree with these proposed scenarios? If so, the Productivity Commission is keen to hear from you. Submissions to the issues paper close on 5 June 2019, with the final report due to Government on 31 March 2020. You can check out the paper here.


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