For years, blue-collar workers have been losing their jobs to globalization, as companies increasingly move production overseas.
According to prominent Canadian economist Armine Yalnizyan, white-collar workers will soon be at risk, too, as digital platforms put them in competition with workers around the world. This shift could also lower wages, exacerbating economic inequalities and perhaps even slowing down GDP.
The digital future will change how we work and how we measure economic prosperity, says Yalnizyan, the Atkinson Fellow on the Future of Workers. And with the acceleration of the digital shift caused by the COVID-19 pandemic, it’s more important than ever to consider what the future holds.
In 2017, the federal government asked Yalnizyan to answer this question: Could the emergence of digital technologies slow the growth of or even reduce the gross domestic product (GDP) — long used as the barometer of economic health — instead of increase the GDP as happened with past technological shifts?
Yalnizyan looked at a number of possible scenarios and found that, in some versions of our impending future, the advent of digital technology could slow down GDP in some sectors or countries, if not globally, resulting in negative effects on the average worker while making it more difficult for governments to plan for the future.
What has happened before may not happen again
Historically, technology has boosted GDP, said Yalnizyan, as companies figured out how to do things cheaper and in new markets, increasing sales and profits.
“Whether you’re creating a new thing or figuring out a better way to do what you’ve always been doing, technology is a way of reducing costs, which means you can increase volumes of sales, which means GDP growth,” she said.
Progress and productivity are often measured using both the prices and volumes of market transactions, she said, and this latest round of technological advances tends to lower unit prices while increasing scale.
Unlike the physical production of things, such as clothes or cellphones, digital goods like movies and music are easier to scale up, said Yalnizyan, to the point where producing one more unit can cost next to nothing. The more broadly digital technologies are adopted, the greater the deflationary effect on the entire economy, she says.
Yalnizyan noted that her report doesn’t serve as a prediction, but rather as an exercise in what could happen, whether globally, in Canada, or some sectors of the economy.
Yalnizyan’s report, published by Policy Horizons Canada, stipulates that there are two plausible economic futures that could emerge, depending on how digital technologies impact various parts of the economy.
In the first scenario, digital technologies facilitate lower production costs and wider distribution, increasing purchasing power and consumption — a continuation of the economic effects previous technological advances have had.
Yalnizyan argues that as more jobs are automated, workers in advanced economies will increasingly face competition from workers in emerging economies thanks to the rise of online platforms. This could lead to “global wage convergence,” meaning that while wages and incomes in advanced economies may go down, this will be offset by rising wages in emerging economies, resulting in a net increase in global purchasing power and GDP.
In the second scenario, the rise in digital technologies could lower wages and incomes more rapidly than lowering prices of goods and services, reducing global purchasing power. Yalnizyan’s report notes that these scenarios will not play out evenly at the global or national level.
“The big question from a policy perspective is: do the prices of goods and services fall faster than the prices of wages and incomes?” said Yalnizyan. “That’s really the big challenge for any government that’s trying to bulletproof their suite of policies to deal with digital.”
Digital technologies both replace jobs and unbundle jobs into tasks, says Yalnizyan. With the aid of digital platforms, companies can save money by purchasing task-based labour, meaning for the first-time, well-paid white-collar workers such as engineers and accountants will be exposed to global competition the way blue-collar workers were in the 1970s to 1990s.
If the income loss in advanced economies is not offset by wage increases in emerging economies, this could decrease global purchasing power, she said.
But Yalnizyan points out that growth, or its opposite, don’t usually happen equally. In both scenarios, there are winners and losers, with the advent of digital technologies amplifying existing or emerging inequities.
Yalnizyan also examines the ways digital technologies are transforming various integral parts of our economy, including production, consumption, labour, trade and financial market behaviours, and the different scenarios that could arise depending on how these transformations play out.
One example of these transformative technologies is 3D printing, which is becoming ubiquitous as a low-cost way to produce anything from a prosthetic limb to the parts for a bridge.
As well, platforms including Uber or Airbnb have changed and expanded the way we access local goods and services, while other such platforms facilitate labour relations across borders, changing both the demand for and supply of labour, locally and globally.
Employment becomes harder to define and track with the expansion of digital platforms and task-based work. Agencies like Statistics Canada may struggle to gather representative data on consumption and trade thanks to e-commerce and the use of cryptocurrencies.
As digital technologies transform all these parts of the economy, including what we value economically, it may become more difficult to read the market, says Yalnizyan. Indicators including GDP, the unemployment rate, and the Consumer Price Index (CPI) may become less reliable ways to measure progress. For example, people could be better off despite falling GDP (usually a sign of recession) if their purchasing power is increased because of rapidly falling prices for a broad range of goods and services.
This data has been essential to our economic forecasting, says Yalnizyan, and so the harder it becomes to rely on these indicators, the harder it will be for governments and businesses to plan ahead.
What does this mean for you and your job?
It’s not as simple as robots taking all of the jobs. Instead, technology will change the nature of jobs, and create new ones, says Yalnizyan.
But that will still impact workers.
For the first time, what we call white-collar workers will experience what blue-collar workers experienced decades ago: globalization, the outsourcing of their jobs to other countries where labour is cheaper.
“The ongoing technological change will also impact professions such as accountants, lawyers, architects, engineers, software developers, editors, and auditors,” the report states. These higher-paying jobs, previously protected by geography, will now be in competition with workers around the world, thanks to digital platforms.
Even if your own job isn’t affected, you will be affected by a slowing GDP, if that happens, said Yalnizyan.
If technology leads to slower GDP growth or even a reversal of that growth due to its impact on wages and incomes, it will be harder for governments to meet the rising demands for more public services from an aging population, because growth in public revenues will also slow down or reverse, said Yalnizyan.
“If the demand for public services outstrips the growth in public revenues and the capacity to meet those demands…then we will see either an increase in austerity, or an increase in taxes,” she said.
Creig Lamb, a senior policy analyst at the Brookfield Institute, agreed that technology, while rendering some jobs obsolete, also creates new ones.
However, he is concerned Canada isn’t moving fast enough when it comes to technological innovations.
A 2017 Bank of Canada report on the digital economy notes that Canada lags behind the U.S. when it comes to technological innovation and growth, which could impede our ability to benefit from digital technology compared to other economies.
One major impediment to overall GDP growth Lamb sees is the unequal distribution of wealth, whether that’s between countries, companies or people.
“You can’t just generate wealth for a select few and then leave a bunch of people out and then expect that the economy’s going to be prosperous,” he said.
Daniel Munro, senior fellow in the Munk School’s Innovation Policy Lab, said that while in the long run, technology is generally good for productivity and creates new jobs to replace those it destroyed, many workers won’t see those benefits in their lifetimes, and so the government needs to help them adapt.
Because of Canada’s “mediocre track record” in adopting new technology, it’s yet unclear how digital technology will affect Canadians, Munro said. But one silver lining to Canada’s relative slowness in adopting innovation is that we can take more time to consider the implications of these advancements, he said.
“Workers need to be prepared for the possibility that their jobs could change or disappear as a result of certain kinds of technological transformation,” he said.