New technology leads to growing polarisation in the labour market

“We’re unlikely to see massive unemployment caused by technological development. However, many jobs will change and adapting to this can be hard,” Stijn Broecke from the OECD recently told a seminar on the future of work, organised by the Swedish Ministry of Employment.

Stijn Broecke is an economist and one of the lead authors of this year’s OECD Employment Outlook. Some of the questions the report deals with include: how many jobs will be created and how many will be lost due to new technology? How common are the so-called atypical jobs, which are often found in the platform economy, and do workers in these jobs benefit from social security systems? 

Similar issues are highly relevant for the Nordic countries too. A three-year-long research project financed by the Nordic Council of Ministers began in 2018, looking at future labour markets and the impact of technological developments. Some 30 researchers from all of the Nordic countries are working on seven different strands, and number two focuses on digitalisation and automation and the opportunities and challenges this brings to the Nordic model.

More high-skilled jobs 

Professor Tomas Berglund from the Department of Sociology and Work Science at the University of Gothenburg is one of the researchers on the Nordic research programme. He is also part of a five-year-long research project on challenges and polarisation in the Swedish labour market, financed by the Swedish Research Council for Health, Working Life and Welfare – Forte. He spoke at the seminar on 26 August during the debate on ”Digitalisation at work: towards polarisation or upgrading”. 

“We see an upgrading of the workforce, with more high-skilled jobs. New technology replaces routine tasks, as well as person-centred jobs,” said Tomas Berglund.

The researchers have been studying changes to the labour market between 2000 and 2015, looking at the average wage for full-time work and dividing it into five parts – quintiles. By following developments year on year, they have been able to study workforce movements in the labour market. 

Household work, restaurant jobs, cleaning and care jobs are examples of the first quintile, i.e. the lowest paid. The second quintile includes office work, the third bookkeeping and accountancy assistants, the fourth include administrators with a university degree as well as social workers, teachers and psychologists, and the fifth includes architects, engineers, managers and more. 

“We see clear examples of upgrading in Norway, while there is a clear tendency for polarisation in Denmark. Finland has seen a degree of labour market growth and upgrading is the general tendency in Sweden,” said Tomas Berglund.

Stronger polarisation in the private sector

Sweden has created some 500,000 new jobs in the two highest quintiles during the 15 years that have been studied. At the same time, 91,000 jobs in the second quintile have disappeared, according to Tomas Berglund.

“We see stronger polarisation in the private sector than in the public sector, and also more polarisation between men than women,” says Tomas Berglund.

One explanation to the increase in low-paid jobs mainly in the private sector in Sweden, is that parts of the care sector were privatised and that the number of people employed in the private care sector increased by 174.6% during the 15 year period. Meanwhile, 67,000 people in that group disappeared from the public sector.   

In the private sector, architects, engineers and similar occupations have seen the second largest growth, while in the public sector the growth has been among managers and higher-level civil servants. There are more women in the best-paid jobs, and fewer in the lowest-paid jobs.  

Low-paid workers face uncertain conditions

There are also fewer native Swedes in the lowest-paid jobs, while the number of foreign-born people has risen in the two lowest wage classes. The three lowest quintiles have also seen an increase in the number of temporary jobs. 

“The lowest-paid jobs have become more uncertain and are increasingly held by people with foreign backgrounds,” said Tomas Berglund,

The OECD report also points to a trend towards a growing polarisation as a result of an increasingly tech-intensive labour market. It is true that there are no signs of technology causing mass unemployment, quite the opposite. Over the past 18 years, most OECD countries have experienced an increase in employment, but the jobs have changed. The number of production jobs has fallen by 20%, while service industry jobs are up 27%. 

14% of jobs are forecast to become automated and 32% will be strongly influenced by automation. High-skilled jobs are on the rise – in the past 20 years, they have increased in number by 20%. Many people now lack the necessary skills for the jobs that are becoming more plentiful. Six in ten workers in OECD countries lack basic computer skills, for instance.

“Many must probably change occupations, and the big question will be how we handle this change. Skills development will become crucial,” said Stijn Broecke.

Those who already have more

But the OECD’s report shows that skills development is not offered to those who need it the most. Quite the opposite. Those with the best education run little risk of losing their jobs to automation, and enjoy full-time permanent jobs. They are given considerably more opportunity to take further education than low-paid workers, the self-employed or workers on temporary contracts.

“The problem is that the most vulnerable workers are those who have the lowest chance of taking part in further education,” said Stijn Broecke.

He would like to see a fresh approach to adult education both from employers and individuals, and efforts to reduce existing barriers to skills development. He also wants to see earmarked investments in skills development for those who need it the most, and called for a system where more people share the economic burden of a more comprehensive adult education programme. 

Many fall outside of the safety-net

The OECD report also highlights that no employers should be left to fix this on their own, and that social security systems must also be adapted to include the growing group of people who have no permanent full-time work. On average, two-thirds of jobseekers in the OECD did not have access to unemployment benefits in 2016, for instance. In some countries, it is estimated that 40-50% of those who do not have a full-time permanent job will not be able to access benefits if they become unemployed. 

The OECD has presented a list of suggestions for how workers can benefit from social security systems. The future of work is not written in stone. But with the right policies and institutions, it can become more inclusive, partly by targeting measures at those who need them the most.