Transformative technologies and jobs of the future

March 27-28, 2018

Summary and recommendations

This report focuses on the impacts of digital transformation on jobs and productivity and is intended as an input to discussion in the G7 Innovation Ministers track of the 2018 G7 Innovation and Employment Ministerial "Preparing for Jobs of the Future". It complements the Discussion Note on the Future of Work prepared by the OECD to support the parallel meeting of G7 Employment Ministers, which looks specifically at how policies and practices designed for a world of work of the 20th century need to be adapted to ensure fair and rewarding employment opportunities for all in the future.

The G7 has an important role to play in raising awareness of the transformation underway and can share experiences on how best to exploit the opportunities while effectively addressing the challenges. Such an exchange could focus on the design, implementation and evaluation of policies. The OECD can assist in this exchange and act as a clearing house in the dissemination of evidence and best practices.

Beyond information sharing, the G7 can work on shared challenges that are international in nature. Four have risen up on the policy agenda: i) ensuring the strongest possible benefits of transformative technologies on economies and societies, including the growing importance of data; ii) developing a common approach to artificial intelligence (AI); iii) fostering inclusive innovation; and iv) preparing for the jobs of the future. There is also an overarching need to enhance measurement of the digital transformation so that an evidence base is established for effective policy making across these four policy challenges. The OECD stands ready to contribute to G7 discussions, facilitate further dialogue with stakeholders and support the implementation of evidence-based policies in these areas. Key messages from the report follow below.

The impact of transformative technologies on economies and societies

  • A wide-ranging digital transformation is underway, affecting all economic sectors, characterised by almost universal connectivity and ubiquitous computing, and drawing on the generation and utilisation of vast amounts of data.
  • This transformation has positive impacts on productivity for many firms, but has not yet translated into stronger productivity growth at the economy-wide level. Larger impacts could result from policy efforts to foster a more wide-spread diffusion of digital technologies to all firms, notably to small and medium-sized enterprises (SMEs); greater investments in critical complementary assets such as firm-level skills, organisational change and process innovation; as well as support for further structural change to enable the growth of new business models and digitally-intensive businesses.
  • The wide scope of technological changes creates significant uncertainty about their future directions and impacts. Indeed, predictions about technological timelines are often inaccurate and overestimation of their short-run impacts is common.
  • The list of transformative technologies is long, but some technologies have the potential to be particularly far-reaching, notably AI, the Internet of Things (IoT) and blockchain. These three transformative technologies present some common features, notably their dependence on large data sets and a range of digital technologies. They also have a strong potential to improve the design, implementation and evaluation of public policies.
  • Greater technology convergence can be supported by cross-disciplinary co-operation, such as interdisciplinary research and development (R&D) and training. More needs to be done in G7 countries to overcome long-established mono-disciplinary institutional and organisational arrangements for funding and performing R&D. New cross-disciplinary spaces, e.g. clusters, can support such convergence.
  • Public sector research is often critical in supporting the development of transformative technologies. Emerging technologies carry several risks and uncertainties, and many also raise ethical issues.
  • Not only the development but the effective diffusion of technology is important. Certain institutions, such as technology extension services, can play an important role in supporting the diffusion process but tend to receive low priority in existing innovation policies.
  • Data is the essence of the digital transformation and increasingly underpins trade and the global economy, as well as science and innovation. Countries have different approaches to digital security risk management and privacy, as well as common challenges in bringing their regulatory environments up to speed with the digital age. The value of multilateral and multi-stakeholder discussion on data and its governance cannot be underestimated.

Artificial intelligence

  • The international debate on AI has gained significant momentum in recent years. In the Takamatsu Ministerial Declaration of April 2016 (G7, 2016), G7 ICT Ministers agreed on the need to facilitate R&D and the adoption of emerging technologies including AI, and to ensure policy frameworks take into account the broader societal and economic implications of such technologies as they are developed.
  • In September 2017, G7 ICT and Industry Ministers in Turin committed to a multi-stakeholder exchange on human centric AI for societies, reiterating the need for further information sharing and discussion to deepen the understanding of the broader potential effects of AI technologies on society and economies, ranging from issues of privacy, transparency and accountability, to ethics, job creation and cybersecurity, and to explore multi-stakeholder approaches to AI-related policy and regulatory issues. G7 countries agreed to continue to lead the effort towards a socially beneficial AI, with the support of the OECD.
  • OECD work shows that AI is not constrained to the digital world, with significant patenting activity taking place also in sectors such as transport and machinery, and with wide potential for deployment in a range of services such as healthcare and finance. Reaping the benefits of AI will require policy action in a number of fields, however, and education and training systems will need to ensure young people and in-work adults are equipped with the right skills to perform in an AI-enabled environment.

Inclusive innovation

  • In 2016, between 73% and 98% of adults in G7 countries accessed the Internet, with access almost universal in Japan and the United Kingdom. But despite the rapid uptake of digital technologies, divides remain, and the uptake of digital technologies still differs by age, geography, education and income levels, although these gaps are closing with time.
  • Gender is particularly important in ensuring an inclusive transformation. Although women are underrepresented in many areas of the digital transformation, there are also new opportunities to empower women and strengthen their position in the labour market and in driving the digital transformation.
  • Skills provide an important safeguard against the risk of automation. Fewer than 5% of workers with a tertiary degree are at a high risk of losing their job due to automation compared to 40% of workers with a lower secondary degree. To thrive in the digital era, all workers will need to be equipped with a wide set of skills, encompassing cognitive as well as non-cognitive and social skills (notably information and communication technology [ICT] skills; science, technology, engineering and mathematics [STEM] skills; and self-organisation skills).
  • Beyond these general initiatives, measures targeted at underrepresented groups will be needed. This includes not only women, but also indigenous people, early school leavers; those not in employment, education or training (NEETs), long-term unemployed and unemployed youth, as well as ethnic minorities, many of whom display a lower level of skill endowments.
  • Digital technologies can potentially also promote social inclusion by creating better access to quality education, offer new opportunities for skills development, enhance access to health care, or improve access to free and low-cost information, knowledge and data.
  • Enhancing access to technology to all groups in society can help ensure inclusive innovation, as can the application of new technologies for enhanced well-being. Industry and innovation policies in G7 countries can also help, in particular if these engage SMEs and sub-national regions.
  • While SMEs face challenges in the use of ICT, they also have important opportunities, such as the development of small firms that are "born global" (for instance, with owners located in several countries), global e-commerce, better access to a range of financing instruments, or the outsourcing of key business functions, all of which can help improve performance.
  • As the digital economy may exacerbate geographic disparities in income, regional and local development policies are important in ensuring inclusive growth.
  • More generally, inclusive innovation calls for inclusive, anticipatory governance of technological change that includes assessment of benefits and costs and an active shaping of future development. Such governance arrangements remain under-developed in G7 countries.

Preparing for jobs of the future

  • OECD estimates suggest that about 14% of workers are at a high risk of having most of their existing tasks automated over the next 15 years. Another 30% will face major changes in the tasks required in their job and, consequently, the skills required. About half of all workers will confront the need to significantly adapt to the new workplace environment.
  • While there is uncertainty about the speed of these changes, it is clear that the types of jobs that are being created are not the same as those that are being lost. Moreover, the workers affected by job loss in declining activities may not be those benefitting from the new job opportunities emerging in expanding areas.
  • Labour markets appear to be polarising, with middle-skilled jobs declining and low- and high-skilled jobs growing. Going forward, low-skilled workers are most likely to bear the costs of digital transformation, but are currently the least likely to receive training.

In particular, policy will need to facilitate worker redeployment, invest in skills, strengthen social protection, future-proof labour market regulations and promote social dialogue:

  • Facilitating worker redeployment. Adapting to technological progress will require policies facilitating the redeployment of workers across businesses, industries and regions.
  • Investing in skills. People, especially youth, need to prepare for the jobs of the future by being equipped with the right mix of skills required to successfully navigate ever-changing, technology-rich work environments. Skills development is not just about schools, but increasingly involves lifelong learning that requires rethinking and better targeting and incentivising the beneficiaries of training programmes.
  • Strengthening social protection. Adequate social protection is crucial to help workers transit smoothly between jobs, especially when they have been displaced.
  • Future-proofing labour market regulation. Maintaining and improving labour market performance in the future world of work also requires a fresh look at existing labour market regulations to ensure that they are still fit for purpose.
  • Fostering social dialogue. The future world of work can be shaped more easily and effectively if employers, workers and their representatives work closely together with governments in a spirit of co-operation and mutual trust.
  • A people-centred "adaptation agenda" needs to be formulated so that all individuals may benefit from a positive, forward-looking plan that does not leave anybody behind and puts welfare at the forefront. This is akin to the Nordic "flexi-security" approach but needs to be adapted to the institutions, history and norms of individual countries.

Improving measurement of the digital transformation

Better understanding the likely scope of the digital transformation, the sectors, jobs and regions likely to be affected, as well as the likely time frame, can help in devising better policies. The evidence base is lacking in many areas, including the uptake of digital technologies; the growth of the gig economy; or the impacts on productivity. The growing role of data, including in international trade, is a particularly important area where sound data (i.e. "data on data flows") is lacking. Improving data and statistics on these questions could be an important contribution of the G7.