TECHNOLOGY AT WORK

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6 Citi GPS: Global Perspectives & Solutions February 2015 Contents 1. The Changing Nature of Innovation 7 2. Technology at Work 15 3. Technology in the 21 st Century 23 The Big Data Revolution and the Digitisation of Industries 23 The Internet of Things and Advanced Sensors 31 Intelligent Robotics 34 The Market for Industrial Robotics 40 Autonomous Robots 49 3D Printing 55 4. The World of Work in the 21 st Century 57 The Expanding Scope of Automation 57 Technology and New Work 63 The Concentration of New Work and the Rise of Innovation Cities 64 Self-Employment: The New Normal? 65 5. Digital Transformation: Risks and Opportunities 67 Risks 67 Inequality 67 Macroeconomic Stability Risk 72 Secular Stagnation 72 Opportunities 78 Productivity 78 The Sharing Economy 80 A World of Leisure 81 6. Adapting to Technological Change: Pathways and Strategies 83 Planning for the Long Term 83 Tax Wedges and Active Labour Market Policies 84 Making Growth Inclusive 88 Transforming Education 89 About the Oxford Martin School 92 References 93 The Oxford Martin Programme on Technology and Employment is a new research programme established in January 2015 with support from Citi. It has been created to investigate the implications of a rapidly changing technological landscape for economies and societies. The programme will provide an in-depth understanding of how technology is transforming the economy, to help leaders create a successful transition into new ways of working in the 21st century. The programme is part of a wider research partnership between the Oxford Martin School and Citi, analysing some of the most pressing global challenges of the 21st Century. © 2015 Citigroup
February 2015 Citi GPS: Global Perspectives & Solutions 7 In addition to providing remarkable achievements in technology… …the digital age has also decreased labour’s share of GDP The digital age has benefited consumers but not necessarily workers 1. The Changing Nature of Innovation The 21st century has already brought remarkable technological achievements. The leading corporations of the digital age — including YouTube, Facebook and eBay — barely existed only a decade ago. The Human Genome Project was completed in 2003, the year Skype was first released. The first iPhone was launched in 2007 and in 2010 Google announced their first fully autonomous car. 1 Yet, the benefits of these developments have not been widely shared. Real median wages have stagnated in about half of all OECD countries since 2000, and have fallen even further behind growth in productivity. Between 1980 and 2000, each pound of UK gross domestic product (GDP) growth, for example, was accompanied by around 90 pence of median wage growth. Over the period 2000 to 2007, the equivalent number was 43 pence. 2 As a result, many countries have witnessed significant declines in labour’s share of GDP. According to a 2013 study by Loukas Karabarbounis and Brent Neiman, 42 out of 59 countries experienced a fall in the share of GDP accruing to labour — a trend that is also found in emerging economies like China. Crucially, about half of this decline can be explained by the decrease in the relative price of investment goods, which in turn is driven by advances in computer-driven technologies, leading companies to substitute labour for capital in production. In the United States the decline in the labour share has been even more substantial when a small group of highly skilled workers with soaring income is excluded. 3 Instead of labour, the greatest beneficiaries of the digital age have been shareholders. According to a recent estimate, the three leading companies of Silicon Valley employed some 137,000 workers in 2014 with a combined market capitalisation of $1.09 trillion. 4 By contrast, in 1990 the three largest companies in Detroit had a market capitalisation of $36 billion while collectively employing about 1.2 million workers. To be sure, the digital age has brought indisputable gains to consumers, including the World Wide Web and smartphones, but its impact on the world of work has arguably been more disruptive than anything seen in the past. Thus, less than 20% of American workers now believe that the generation currently entering the workforce will have better lives than themselves. A recent report even predicts that living standards for many low-to-middle income households in the United Kingdom are likely to be lower by 2020 than they were in 2008. 5 Substantial wealth is being created with only a few workers, and with the exception of a small fraction of highly skilled workers, wages may not rise over their lifetime. Building on a widely discussed paper entitled The Future of Employment: How Susceptible are Jobs to Computerisation?, by Carl Benedikt Frey and Michael Osborne, this report examines how the changing nature of innovation, stemming from the digital revolution, is transforming the world of work and the challenges it brings. 1 The authors are very grateful to Andrew Pitt and Professor Ian Goldin for guidance in framing this report, as well as to Kathleen Boyle at Citi and Anushya Devendra the Oxford Martin School for their advice and editorial support. 2 Pessoa and Van Reenen (2013). 3 Elsby, Hobijn and Sahin (2013). 4 Chui and Manyika (2014). 5 Resolution Foundation (2013). © 2015 Citigroup
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