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GeoTech Cues December 8, 2021

Postpandemic letdown and western disarray

By Mathew Burrows, Julian Mueller-Kaler, Kaisa Oksanen, and Ossi Piironen

This page is only an excerpt of a technology foresight report in order to give readers an introduction to the topic and the opportunity to browse through alternative futures. To access all content, please download a digital copy of the paper or return to the main report page.

Hopes were high in the middle of 2021 that the West would pull out of the pandemic and see accelerated growth and a return to relative normalcy after a year of deep recession. Yet after a spurt of inclusive growth, in which most segments saw gains, all the prepandemic structural problems resurfaced, particularly the inequalities that had grown worse under the pandemic.

Believing it is best not to depend too much on the vagaries of human employment, employers raced to automate as much of their business as possible. For the unskilled and semiskilled, whom everyone depended on for basic services during the pandemic, it was a double whammy. Initially, their wages had grown as employers had no choice but to hike pay to attract any workers. Then, without the necessary tech skills, they soon learned they were expendable when firms began to automate their operations. Despite central banks’ monetary-easing efforts, there was no return to prepandemic full employment. Worker participation rates dropped in the advanced economies as many of the low-skilled workers grew frustrated in the search for good-paying jobs. Over time, many of the unskilled and semiskilled dropped out of the workforce or retired early.

The more tech-savvy workers had largely done well and saw their wages improve in the aftermath of the pandemic. That initial improvement was not, however, replicated year after year. Automation was now also impacting the more complex work processes that formerly required skilled humans to operate. Although not all their jobs were made redundant, there was enough disruption that even retained skilled workers felt the pervasive, growing sense of job insecurity. The prepandemic pattern of capital being remunerated much more than labor resumed. Business leaders made the case that productivity gains from automation had boosted GDP in advanced economies above prepandemic levels and government revenues as well, which helped with increased social welfare demands.

Moreover, automation was helping firms deal with China, which was increasingly unfriendly to Western businesses. After being the other large economy that didn’t suffer a severe recession during the pandemic, China’s growth sputtered in the years following the initial outbreak of the coronavirus. Continuing outbreaks from different variants, such as delta or omicron, crippled parts of Chinese industry. Xi Jinping’s data security reforms also hit China’s tech firms hard. Beijing’s efforts to de-Americanize China’s supply chains— part of the Made in China plan—caused more disruption. With tensions increasing, US and Chinese firms sought to avoid any dealings. European businesses were caught in the crosshairs, and some bowed out of the Chinese market for fear of US secondary sanc- tions while others concentrated on doing business with China and sold off their US interests. With the contraction of global supply chains, US and European firms saw an opportunity to eliminate jobs through advanced automation technologies. Chinese businesses were more constrained in investing in automation technologies as the government was worried about higher unemployment. Robotics and 3D printing also took off in the labor-saving effort by Western businesses.

Workers’ Rights and Reforms

Smaller countries fared better than larger ones in stanching the growing societal divisions that grew out of rapid technology changes. To begin with, the income disparities were not as high in the many smaller European countries that had invested in expensive social welfare efforts. There was an understanding that automation could not be stopped—and shouldn’t be for the sake of improved efficiencies and all-around productivity. After all, automation was a godsend for Western societies with low birth rates and rapidly aging societies. Instead, the unskilled should be incentivized to learn new skills. Indeed, the educational systems would have to be completely remade. Everyone had a right to periodic sabbaticals for months of learning new skills. Just as there was a right to healthcare and retirement, all workers had opportunities for lifelong learning. Businesses could see the benefits.

Larger European countries had a harder time coming around to revamping the whole educational system, despite the benefits these smaller countries were achieving. There was pushback by businesses against another set of enhanced worker rights which the private sector would have to shoulder. In these bigger societies, reform had been more difficult for some time, adding to the challenge undertaking these reforms. In France, for example, where the reelected Macron government had been trying to lessen the burdens on employers, there was worry that enhancing the existing training programs and relatively generous social welfare would be too costly. Critics cited the low educational standards in job-deprived and socioeconomically disadvantaged areas as the real culprit for workers not being able to easily upgrade their skills.

In the United States, deep political partisanship combined with a decentralized educational system slowed any reforms. Americans had seen sagging educational standards for some time, which federal government officials felt increasingly powerless to reverse given much of the authority for the educational sector rested with local and state officials. Conservatives decried the growing role of government in the economy and saw the new proposed training-voucher scheme as pushing the country toward socialism and higher taxes. The growing numbers of college and high-school dropouts fueled populism at both ends of the political spectrum—left and right—leading to a political crisis. When the unemployed staged a million-person march on Washington, the National Guard was called out to protect the protesters from armed right-wing militant groups. As it was, the battles between protesters and the radicals resulted in several hundred dead and much of downtown Washington vandalized. Similar riots broke out across the country. At the congressional midterm elections, lawmakers calling for increased training programs and a top-to-bottom reform of the US education system were elected. Businesses also saw that they had gone too far with automation and promised to retrain existing workers for new jobs instead of just firing them.

New Social Model Evolving

Aided by the lessening of fears of a super-competitive China, Western leaders felt they had some maneuvering room to develop a new social model countering what was the fragmenting effect of the new technologies. Just as World War II had been important for spurring a new social peace buttressed with healthcare and pension benefits for all, the postpandemic era ended up redefining social welfare. Educational excellence would no longer be reserved for the privileged who could pay for it. Everyone had a right to having their abilities fully developed with no one being left behind. For decades, teachers in many Western societies had been poorly paid.

That changed along with the importance of providing a good education to everyone. Several big corporate CEOs took the lead in trying to regain the trust of their employees by offering more social benefits—paying for educational and retraining programs—and promising new employment to those whose jobs were eliminated through automation.

With personal dignity being so connected with employment, the concept of work was expanded. Volunteerism was honored and treated as equivalent to paid work. Moreover, with the rapid expansion of the educational sector, many jobs were created that did not exist before. Small and medium-size businesses—not just the big ones—became more adept at retraining and finding new opportunities for their workers. Where young workers once planned to spend only a few years with an employer, they now found the advantages of staying and benefiting from retraining so enticing that many ended up, like their grandparents, staying with one firm for their whole careers.

At times it had looked like some Western societies would be pulled apart and there was no hope of finding a solution to inequalities. Yet there was a deep, popular well of support for inclusiveness. The pandemic had been an eye-opener for many of the deep divisions in society. For the more tech-savvy, younger, and coming-of-age generation, it was intolerable that the unskilled and semiskilled should be “losers” in the latest technological revolution. Older generations—increasingly victims of automation—also began seeing the benefits of a better social safety net. Over time, the fears fueling populism dissipated and centrist politics came back with the maintenance of a social consensus, a broad-based popular expectation for political leaders.

This page is only an excerpt of a technology foresight report in order to give readers an introduction to the topic and the opportunity to browse through alternative futures. To access all content, please download a digital copy of the paper or return to the main report page.

Related Experts: Mathew Burrows and Julian Mueller-Kaler