Paul Wallbank | Paul Wallbank - Communications Professional

What will the workforce of the future look like?

How do we imagine the economy, workforce and government of 2055 will look?

Yesterday this site looked at the shortcomings of the Australian government’s Inter Generational Report and criticised it primarily for its failure to imagine how society and the economy would look by 2050.

While no-one has a crystal ball, making projections on how government spending will look in the future without having some basis for the assumptions on revenues and expenditures renders a document like the IGR somewhat useless.

So what might Australia’s economy in 2050 look like? Here’s a quick list of thoughts.

Rethinking retirement

The obvious is most western societies, including Australia’s, are going to be older. This has a number of consequences, particularly with the retirement age.

In 1909 the old age pension was introduced in Australia with eligibility starting at 65 for men and 60 for women. At the time, life expectancy was 55 years for men and 59 for females.

Today age pension age has barely moved with it becoming 67 for those born after 1952. Life expectancy today 91.5 years for men and 93.6 for women, this expected to increase by 2055 to 95.1 and 96.6 respectively.

More importantly, life expectancy at age 60 will move from 16.9/19.3 years today to 21.3/23.1 in 2055.

Quite clearly the superannuation assumptions of being able to get a tax free pot of gold at 60 are doomed, few people will get enough from their lump sum to see themselves through twenty years retirement.

That throws them back on to the state. Given these numbers it’s clear the eligibility age for the old pension is going to have to be increased.

Coupled with a declining birth and participation rates seeing fewer taxpayers contributing to government coffers, the need to reform the pension age is going to become more pressing.

A healthier population

One of the differences between 1909 and today is that we’re far healthier. A fifty something today is generally in better shape than a thirty year old of their grandparents’ time.

Coupling that with the changing nature of work where most workers of a century ago were employed in exacting physical labour, today’s employees are far more likely to be sitting on a computer. This means the working life can be extended.

While the population is going to be healthier, an older population is going to mean more people with chronic conditions and those with serious issues like dementia are going to be an increasing drain on medical services, not to mention increased incidence of cancers and possibly diseases related to sedentary lifestyles.

This means the nature of medical treatment is going to change, a lot more is going to be spent on early identification and intervention of chronic and debilitating conditions.

Changing the workforce

While the workforce is going to get older, it’s also going to become more precarious. This is already clear in the long term trends since the 1980s and with the rise of ‘collaborative economy’ businesses like O-Desk, Mechanical Turk and Airtasker we can see jobs becoming more casualised.

Today’s children will not have a steady career path and governments have to plan for extended periods of unemployment. This too affects the participation rate and the levels of household spending.

A precarious income also means workers are less likely to take on large debt commitments. This trend is already apparent and is the main reason why companies with a 1960s consumer spending model are struggling in the economy of 2015.

Property stagnation

The Australian middle class model that depends upons highly indebted householders paying down mortgages is likely to be unpopular by the middle of the century as people will be reluctant to take out a huge loan to buy a property when their medium term job prospects are uncertain.

This one aspect is where the Australia government projections go badly awry. It’s understandable not to consider this given the political poison of telling the population their assumed property gains aren’t going to happen but it damns the IGR to failure.

A society with lower levels of property ownership means a dramatic shift in the tax mix and government expenditures. Assuming that today’s normal will also be tomorrow’s is very risky.

Changing technologies

The technologies themselves are changing the revenue and expenditure streams for government, just rolling out diverless vehicles might eliminate the need for half the US’s police force while reduced registration fees, taxes and fines will hit state and local government budgets.

Similarly the global nature of digital businesses is going to challenge governments as the locations of where work is done, goods are delivered and profits made becomes less certain. Right now tax officials are struggling with the revenues of multinationals but increasingly smaller companies will present the same problems.

The other changing nature of work is going to be its composition, just as a hundred years ago nearly half the workers in western countries were in agriculture, a number that’s below one in twenty today, we can expect changes in employment sectors as robots and algorithms take over many of today’s jobs.

All of this means a very different society and workforce to today’s. While it’s difficult to envision what it looks like from here, just as the current economy was almost unimaginable in 1975, it’s necessary to give some thoughts on the shifts to make informed policy choices rather than the opportunistic populism displayed by most of today’s political leaders.

So how do you see the economy of 2015 looking? And where are governments going to raise their money from? I’d be interested to hear what you see in the crystal ball.

The Inter-Generational Report – Australia’s flawed roadmap

the Inter-Generational Report is of little use in planning for the challenges and opportunities facing Australia over the next thirty years.

“If you don’t know where you are now, you don’t know where you’re heading” says science presenter Karl Kruszelnicki – aka Dr Karl – in the publicity for the Australian government’s latest Inter-Generational Report.

Doctor Karl is part of a glossy campaign based around the report with the grand title of The Challenge of Change. The problem with the report is that it barely identifies any of the changes, let alone the effects, that might affect the economy over the next forty years.

The aim of the IGR is to identify the long term trends in the Australian economy and provide a basis for policy development. The first was delivered in 2001 and one has been produced roughly every five years since, making this the fourth.

An aging population

Much of the 2015 IGR hangs on the observation that Australia’s population is aging; stating the bleeding obvious that became apparent when the nation’s post World War II baby boom came to an end in 1965.

While the fact Australia’s population is aging despite massive immigration in recent years is undeniable, most of the report is a mish mash of motherhood statements that expose the key contradictions – dare one call it schizophrenia – lying at the heart of Australian politics and society.

The motherhood statements are all quite valid; the nation needs to develop better infrastructure, build a more skilled workforce and develop new industries as the mining boom sputters to a messy end.

Cutting education

Sadly the actions of Australian governments at both state and Federal level are in direct opposition to these laudable aims. The discussion on training and education illustrates the contradictions;

Under the ‘proposed policy’ scenario, Australian Government spending on education and training is projected to decline to 1.0 per cent of GDP by 2054-55. However, these figures do not take into account the significant increase in lending to students through the higher education and vocational education and training loan schemes.

Despite recognising the importance of training the workforce in order to keep the nation competitive the Federal government is actually forecasting to reduce spending on education and worker training.

Given the typical government education spending among developed nations is around 5% of GDP – in Australia total government spending is 5.1% for 2014 – this indicates a lot more cost to be pushed onto states to make up the shortfalls, if it is being made up at all.

A lack of investment

Particularly notable in the report is the scant talk about what industries are going to develop over the next thirty years or where the money for investing into them is going to come from.

The little discussion there is around private sector investment revolves around the superannuation system – the Australian equivalent of the US 401(k) personal pension accounts where workers are compelled to contribute into private schemes.

Total Australian superannuation assets have increased strongly since compulsory superannuation was introduced in 1992. At the end of 2013-14, total superannuation assets were $1.84 trillion, around 116 per cent of GDP. As the superannuation system matures and wages grow, total Australian superannuation assets are expected to continue to increase and make a growing contribution to national savings.

This statement ignores how the pool of superannuation funds is going to decline as baby boomers and Generation X reaches retirement age and starts to draw down its savings.

An even more important aspect missed by the authors are the risks Australian workers are exposed to as the only thing guaranteed by these funds are the rich fees charged by the managers.

During the global financial crisis of 2008 both the returns and asset bases of superannuation funds were hit hard with some funds suspended from trading and withdrawals restricted. The risk of similar event happening in the next forty years and its impact on household savings and business investment is simply ignored.

Ignoring the elephant

The key to understanding the Australian economic miracle of the last 25 years lies in the property market where housing lending has been boosted at the first sign of economy trouble.

As a consequence Australian households have become amongst the most indebted in the world and the bulk of domestic savings are in housing assets. Housing is the cornerstone of the Australian economy and the source of its middle class wealth.

Remarkably in the entire document the words ‘housing’ and ‘property’ only appear twice and three times respectively.

In ignoring the effects of housing on both state and Federal budgets, the bureaucrats have ignored the single most important factor in Australia’s wealth.

Given even in the most favorable projections, baby boomers and Generation Xers will be selling down their property portfolios to fund their retirements during the IGRs forecast periods, it is nothing short of amazing there is little mention of such a critical factor.

A flat line future

An important feature of the IGR is its focus on government spending with a strong ideological bent supporting the Australian political obsession with privatisation and currying favours from the deeply discredited and corrupt global ratings agencies.

This blinkered view of the world makes it hard for the authors to give a balanced analysis of the risks presented to the Australian economy and this weakness is exacerbated by poor analysis.

Each of the reports has featured ‘flat line’ projections for growth, unemployments and trade. For example here are the terms of trade projections from the current report.

Such analysis is effectively useless and, because of each of the reports features such lazy forecasting, the projections in each time period end up being distorted by the circumstances of the day; forecast economic growth for the 2020s across the four report has varied between 1.6 and 2.8% over the reports.

Indeed the latest report is possibly the most optimistic with a 2.8% forecast growth rate which is at odds with the comparatively pessimistic view of 2.3% in the halcyon days of the 2002 report.

Lazy analysis

The IGR’s forecasters justify the flat line analysis by claiming long term trends will be due to underlying changes in the economy which will smooth out business cycles.

It is also important to keep in mind that the long-term projections look through business cycles and assume a smooth growth path through to 2054-55. In reality, it is almost certain that any economy will go through such cycles over a 40 year time period. However, the outlook to 2054-55 will not be driven by these cycles, but by the underlying trends in population, participation and productivity.

While this is to an extent true as short term cycles oscillate around the longer term trends, the forecasters do nothing to identify what will drive growth in the Australian economy for the next thirty years.

The IGR’s greatest failure is in not considered the structure of the economy and the workforce over the next three decades is its greatest flaw. How people are working and where they are working is going to shape the nation and government revenues.

Compounding the report’s failure to at least attempt to forecast the workforce’s changing structure, the authors’ projection of unemployment are almost an insult.

As this blog has pointed out constantly over recent years, the workforce is undergoing fundamental shifts in the face of automation, robotics and intelligent systems. While it may turn out five percent is the average rate of unemployment over the period we can expect major fluctuations in the workforce as industries are dislocated.

In turn those fluctuations are going to affect government revenues and expenditures, not to mention their influences on home prices and the superannuation balances of those facing extended periods of unemployment.

A flawed roadmap

Ultimately the Inter-Generational Report is of little use in helping policy makers and the community plan for the challenges and opportunities facing Australia over the next thirty years.

Like the Australia in the Asian Century report it’s a curiously selective document that fails to consider most of the external factors that are going to shape societies over the upcoming decades.

Just as the Australia in the Asian Century paper is a dated and discredited document a mere three years after its release shows the calibre of advice being given to the nation’s leaders.

While Doctor Karl is exactly right that we can’t know where we’re heading unless we know where we are, this report fails to acknowledge how Australia came to be in its privileged position and what the opportunities are in a radically changing world.

It may well be that The Lucky Country stays lucky to the middle of this century and caps off two hundred years of good fortune. If that does happen though it will not be because of this flawed and shallow report.

The authors of the Intergenerational Report ducked the challenge of change.

The engineer’s return – GE heads back to its roots

GE group’s aim to see engineering products make up almost all its earnings by 2018 shows a shift in the economy and business

In his mission to refocus GE on its engineering roots, CEO Jeff Immelt last week announced a restructuring plan that will see the company divest most of its real estate portfolio and shrink its finance arm faster than expected.

Bloomberg News reports the stock market took the announcement very well with the shares jumping 8.7% on the news.

GE now expects “high-value industrials” such as jet engines, oilfield equipment and diesel locomotives to generate more than 90 percent of earnings by 2018, up from just over half in 2014.

That the company’s announcement has been taken so well by the market shows how the US economy is slowly shifting from financial engineering and debt driven spending to building real products.

For the rest of the world there’s a clear message – the 1980s era of Gordon Gekko is coming to a close. It’s time to start figuring out where the real growth is going to come from rather than just goosing household spending with easy credit.

Where companies like GE are going today is where governments will be looking in five to ten years time. Some will find they are further behind than others when the shift becomes apparent.

Building the closed internet

Social media services like Facebook and LinkedIn are building API walled gardens that will change how online services work

One of the great strengths of the social and cloud business model was the idea of the open API, recent moves by Twitter and LinkedIn show that era might be coming to an end.

This week Nick Halstead, the founder and CEO of business intelligence service Datasift, bemoaned his company’s failure to negotiate an API access agreement with Twitter that restricts their ability to deliver insights to customers.

Earlier this year LinkedIn announced they would be restricting API access to all but “partnership integrations that we believe provide the most value to our members, developers and business.”

Monetizing APIs

Increasingly social media and web services companies are seeing access to APIs as being a revenue opportunity – something many of them are struggling to find – or as a way of building ‘strategic partnerships’ that will create their own walled gardens on the internet.

For developers this is irritating and for users it restricts the services and applications available but it may turn out to backfire on companies like LinkedIn and Twitter as closing down APIs opens opportunities for new platforms.

A few years ago industry pundits, like this blog, proclaimed open APIs will be a competitive advantage for online services. Now we’re about to find out how true that is.

One thing is for sure; many of the companies proclaiming their support for the ‘open internet’ are less free when it comes to allowing access to their own data.

Dropbox and Microsoft’s alliance of convenience

The Microsoft alliance with Dropbox puts Google at a disadvantage and shows how alliances are evolving on the cloud

Today’s announcement that Dropbox and Microsoft have deepened their alliance throws a further challenge out to Google’s ambitions to take a slice of the office productivity market while further reducing profits for the once dominant software giant.

Dropbox’s new deal with Microsoft give of users the ability to edit Office documents natively in their browser. It’s an advanced version of the feature that Google have offered with their Docs service for some years.

A notable aspect of this deal is how Dropbox have been prepared to partner with Microsoft – a decade ago smaller and relatively new companies were suspicious of working with Microsoft given the giant’s well deserved reputation for ruthless behaviour.

Equally Microsoft teaming with more agile newcomers rather than trying to bully them out of business is a distinct change from the company’s peak days under Bill Gates.

The real target of the alliance though is Google and the Dropbox-Microsoft deal makes Office 365 a far more formidable offering as a cloud service.

For Google the deal means they have to add more features to their Docs service to counter a more competitive Microsoft offering. It also shows the marketplace is shifting as alliances of convenience are forming.

Dashing to the shops with the internet of things

The Amazon Dash Button gives us a hint of how the Internet of Things will change shopping.

Amazon this week showed off their Dash Button, a device that lets brands set up a one press ordering system for customers.

The idea is that a brand, say a laundry detergent, gives out buttons that when pressed will automatically deliver washing powder or whatever product is preprogrammed into the device.

While its safe to say Amazon’s Dash button is a gimmick, it’s not hard to see washing machines, coffee makers or industrial equipment that comes preprogrammed to automatically order supplies when it detects reserves are running low.

So the Dash Button could be showing us how the Internet of Things will help us shop with smart devices automatically organising deliveries for us.

On it’s own the Amazon Dash Button won’t be changing the way we shop but the future of retail is going to be very different as the IoT rolls out.

Is the tech startup sector a boys’ club?

The Ellen Pao sexual discrimination case illustrates the risks in letting an industry be a selective boys club

I’m putting together a story on what the Australian tech community can learn from the Ellen Pao story where an upcoming female associate at iconic Silicon Valley venture capital firm Kleiner Perkins Caufield & Byers sued the firm for sexual discrimination.

Although Pao lost the case it rightly caused much debate within the US tech community about the lack of gender diversity, particularly given the number of women in the American venture capital industry has collapsed from 10% in 1999 to 6% in 2014

The reason for this seems to be simple, as Lauren Helper pointed out in the Silicon Valley Business Journal back in 2013 the industry is intensely tribal quoting one industry participant, Mark Taguchi, ‘“people operate in tribes,” he said. “They have groups of people that they learn to trust, that they work with, that they like.”’

In some respects this is a strength for the Silicon Valley industry as it means new entrants have to be vouched for by trusted figures but it also risks the sector being insular and dominated by narrow groups based on background, ethnicity or gender.

Once an industry defines its leaders and innovators by their friendships, schools or workplaces it risks becoming irrelevant to the outside world and it’s inevitable an inward focus will blind the group to new trends and developing technologies.

The warning from Pao’s case is Silicon Valley may be becoming too insular, it’s a handy wakeup to remind participants there is a big, diverse world outside the Bay Area.

However the US tech sector might survive without diversifying given its size and access to capital. Forother countries’ developing industries – like Australia’s – it’s a hindering factor few can afford.

In most ecosystems diversity is strength, it’s hard to see how that’s any different for the tech sector. Boys Clubs are relic of last century and have little place in this one; for regions looking at copying Silicon Valley, this is one trait not to pick up.

Microsoft’s server clock counts down

Microsoft’s ending of support for Windows Server 2003 marks the end of the box software era.

One of the challenges facing Microsoft are the millions of users quite happily using the company’s older products.

While Windows XP is by far the biggest problem – only last year the number of systems running the fourteen year old operating system still outnumbered those running the latest version – Microsoft faces similar issues with its server 2003.

This week Microsoft warned support for Windows Server 2003 has entered its last one hundred days and urged customers to look at shifting onto new systems.

Interestingly most of the case studies they cite involve customers moving from on premise servers onto cloud services.

While that’s very good advice as most customers, particularly small businesses, don’t have the capabilities it shows how the industry has shifted in the last twelve years.

For most of those companies a decade ago cloud service, or Software as a Service (SaaS) as it was known then, weren’t available for most business functions. Today they are the norm and usually the best option for smaller operations.

That shift to the cloud has meant an entire industry now faces extinction as the army of suburban IT service companies that once maintained those servers are now largely redundant.

As the clock ticks down on Windows 2003 server so too does it for all the businesses that once depended upon the PC industry.

How Google could be about to disrupt the telco industry

Is Google about to disrupt the global telecommunications industry?

Google are in talks with Hutchison Whampoa for the Hong Kong based conglomerate to provide global roaming for Google’s proposed mobile phone network reports the London Telegraph.

Hutchison, who recently agreed to buy UK operator O2 for £10.2 billion from Spain’s Telefonica, are one of the quiet global telecommunications players with services in East Asia, Europe and Australia. An international roaming agreement with Hutchison would give Google a substantial global headstart.

While the mobile phone angle is the obvious service for a global cellular network, another attraction for both Google and Hutchison is the Internet of Things. Being able to offer a worldwide machine to machine (M2M) data service fits very well into Google’s aspirations with products like Nest.

For the mobile phone operators, the prospect of Google entering their market can’t be comforting with the search engine giant having three times the stock market capitalisation of the world’s biggest telco, China Mobile.

It may well be however communications companies have little choice as the software companies start to take the telcos’ profits just as they have done with many other industries.

Should the story be true about Hutchison and Google being in talks it will probably be the start of a massive shift in the global communications industry and one that will see many national champions threatened.

Google’s global network ambitions could change the future of the Internet of Things industry.

Microsoft in Middle Age

Microsoft CEO Satya Nadella seeks to find a future for the company as it enters middle age.

One of the great business stories of today is how Microsoft is reinventing itself in the face of a totally changed industry. With the company turning 40, The Economist has a look at the business in its middle age.

The Economist concludes CEO Satya Nadella is making the important changes to the business that founder Bill Gates couldn’t make because he was too protective of the company’s core products and that Steve Ballmer, Nadella’s predecessor, wasn’t interested in making as he sweated the existing assets.

As this blog has pointed out before, The Economist notes the profit margins of the cloud and mobile services Nadella is focusing on are far slimmer than those Microsoft are used to from their server and desktop products.

Those fat profit margins were the reason why Nadella’s predecessors had little reason to refocus the company but towards the end of Ballmer’s leadership it was clear Microsoft couldn’t resist the shift for much longer.

Microsoft’s dilemma was clear to the stock market as well with The Economist having a chart showing the relative performance of IBM, Microsoft and Apple over the last 35 years.

When Microsoft peaked in the late 1990s, the company was worth over twenty percent of the total tech sector’s valuation – today Apple has stolen most of that value.

A particularly jarring from The Economist’s graph is just how much IBM dominated the tech sector a generation ago and its steep decline following the introduction of desktop computers.

IBM’s decline in its dotage is exactly the fate Nadella is trying to avoid for Microsoft, with companies like Google, Apple and Amazon as competitors he has a tough task ahead of him.

Who owns a smartcar’s smarts?

The question of software ownership in a smartcar opens a range of difficult questions about the internet of things.

Automakers Say You Don’t Really Own Your Car states the Electronic Frontiers Foundation.

In their campaign to amend the US Digital Millenium Copyright Act to give vehicle owners the right to access and modify their automobiles’ software the EFF raises an important point.

Should the software licensing model be applied to these devices then purchasers don’t really own them but rather have a license to use them until the vendor deems overwise.

Cars, of course, are not the only devices where this problem arises. The core of the entire Internet of Things lies in the software running intelligent equipment, not the hardware. If that software is proprietary and closed then no purchaser of a smart device truly owns it.

Locking down the smarthome

This raises problems in smarthomes, offices and businesses where the devices people come to depend upon are ‘black boxes’ that they aren’t allowed to peer into. It’s not hard to see how in industrial or agricultural applications that arrangement will often be at best unworkable.

Four years ago tech industry leader Marc Andreessen pointed out how software is eating the world; that most of the value in an information rich economy lies in the computer programs that processes the data, not the hardware which collects and distributes it.

That shift was flagged decades ago when the initial fights over software patents occurred in the 1980s and 90s and today we’re facing the consequences of poorly thought out laws, court decisions and patent approvals that now challenge the concepts of ownership as we know it.

Is ownership outdated?

However it may well be that ‘ownership’ itself is an outdated concept. We could be entering a period where most of our possessions are leased rather than owned.

If we are in a period where ownership is an antiquated concept then does it matter that our cars, fitness bands, kettles, smoke alarms and phones are in effect owned by a corporation incorporated in Delaware that pays most of its tax in the Dutch Antilles?

Who owns the smartcar’s data?

The next question of course is if the software in our smart devices is secret and untouchable then who owns the data they generate?

Ownership of a smartcar’s data could well be the biggest issue of all in the internet of things and the collection of Big Data. That promises to be a substantial battle.

In the meantime, it may not be a good idea to tinker too much with your car’s software or the data it generates.

Then they came for the sheepdogs – drones take to the farm

Could even the humble sheepdog’s job be at risk from robots

While we focus on how technology is changing the workplace and displacing jobs, we often overlook how it affects animals as well.

A video posted by Irish farmer Paul Brennan shows how a drone can be used to herd sheep, putting the humble sheepdog out of work.

The possibilities in using drones on farms are endless, they free farmers up to do substantially more tasks and if they’re equipped with sensors to communicate with stock, crops or farm infrastructure they can be pulling in more information about the property.

For the poor sheepdog this isn’t the first time a farm animal has been displaced. Until the arrival of the steam engine and then farm tractor horses had been an essential part of agriculture for thousands of years.

But while news isn’t good for sheepdogs not all animals are intimidated by drones as one unfortunate owner found out when he decided to harass a mob a kangaroos.