Published

1

Aug

2013

Report

Revitalizing the Enterprise Skill Set

Jobs, wages and life-long learning

The need for improved information technology skills is very much in the news these days. While business leaders worry about a lack of sufficiently trained workers, workers themselves are anxious about their future. From an employment perspective, there is growing concern in both the US and Europe that – despite its many wondrous products and services – IT might be having negative effects upon overall jobs and wages.

Revitalizing the Enterprise Skill Set

Figure 1 – Why has job creation slowed?

Figure 1 – Why has job creation slowed?

The figure above provides the necessary economic context. Despite periodic recessions, US job growth has been robust in every decade since the Great Depression – until recently. Twenty-first-century job creation and unemployment in much of Europe has been similarly troubling. This period of Western job stagnation just happens to coincide with the explosive growth of the internet, which leads us to ask whether these two phenomena are related, and what (if anything) we might do about it.

Economists tend to cite three main sources of today’s unemployment problem: globalization, loss of Western competitiveness and increased automation (mostly due to information technology). However, it is widely acknowledged that these three factors are largely inseparable from one another – technology accelerates globalization, which gives a boost to low-wage national competitors, which spurs developed nations to pursue increased automation. Weighing the importance of each factor individually is difficult, probably impossible.

But for our purposes, the implications of these changes are clear. As labour markets become more global, the need for individuals to have the right skills will only increase, and many of these skills will involve IT. Similarly, to remain competitive, businesses must continually reshape their organizational skill mix to be ready for both the technology opportunities and economic uncertainties of the future. lastly, as information technology becomes ever-more pervasive and consumerized, IT professionals will need a very different skill set to serve their firms in the future.

In this report, we will examine today’s changing IT skill requirements from an individual, company and Enterprise IT perspective, drawing on research interviews with some 40 firms, as well as our ongoing work into the employee and organization of the future.

Figure 2 – Technology can now do many tasks that we used to think were ‘safe’

Figure 2 – Technology can now do many tasks that we used to think were ‘safe’

MIT professors Andrew McAfee and Erik Brynjolfsson (an lEF Advisory Board member), whose recent book is shown in the figure, describe themselves as digital optimists. They have devoted their careers to promoting what information technology can do for both business and society.

But today, they are part of a significant chorus of well-known IT leaders (including most recently Jaron Lanier) warning about the darker implications of our industry’s success, especially as it relates to job creation and job destruction. Most of us remember the days when offices were full of administration, support and middle management staff who handled document production, travel reservations, graphics, procurement, mail and many other relatively low-level tasks. Many of these jobs have, of course, disappeared, as employees typically manage such activities by themselves using various technologies and online services.

McAfee and Brynjolfsson point out that this type of IT automation is now expanding rapidly into areas such as self-checkout and many forms of free content and services. They argue that relatively few current jobs are really ‘safe’, and that machines will be doing high-level jobs such as driving cars, writing music and diagnosing diseases sooner than many of us expect. While the companies and individuals that build these new digital capabilities will prosper, the authors worry about where all the replacement jobs will come from. This is why they call their book Race Against The Machine.

Clients rightly point out that there is little that most companies can or should do about such long-term trends. But we believe that CIOs should be aware of how these employment dynamics are affecting their fi rm and industry, and be prepared to discuss these issues if necessary. Understanding IT’s growing impact on jobs, skills and wages will increasingly be part of what it means to be a business/IT leader.

Figure 3 – But history says: don’t be a Luddite

Figure 3 – But history says: don’t be a Luddite

Robert Atkinson, an lEF research associate who co-authored the book shown above, has a more optimistic view about the impact of technology on today’s economy. While he doesn’t dispute that many jobs are being lost to technology and globalization, he argues that people have worried about the risk of too much automation since at least the days of the luddites, 200 years ago, and they have nearly always been proved wrong – often comically so.

For example, in the 1850s, some 70 percent of the US population worked in agriculture; today the figure is around 2 percent. As farming became more automated, industrialization absorbed surplus workers. Productivity as a whole improved, and society became richer, not poorer. After World War II, markets opened up in the developing world to absorb ever-increasing Western output. Most recently, as the developing world has expanded its own production capacity, Western job growth has been mostly in service industries such as IT, health care, financial services, government and education.

Atkinson argues that, in the long run, automation and productivity increases are almost always good and should be encouraged because they will lead to higher wages and improved societal welfare. Workers who become redundant in one area will eventually be picked up by an emerging industry, albeit after an often painful transition period. Since the nature of these new industries is never fully visible at the time, we shouldn’t expect to be able to predict them in advance.

From this perspective, the most important determinant of jobs and wages is not technology but competitiveness. As the overall global economic pie is growing, the key question is which nations, firms and individuals can gain the most significant market share (broadly defined). Technology is essential to this competitiveness and thus it should be promoted, not restrained. This is the basic principle upon which most firms currently operate. They need to race with the machine, not against it.

 


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