Automation means greater productivity and economic growth but it is not clear who is going to pick up the tab for the displaced workers.

In December, General Motors (GM) announced plans to slash 15 percent of its salaried workforce and shut down five of its North American auto plants. Lordstown, Ohio was the first location to close its doors, to the protestations of laid-off workers who held signs reading “allocate us we’ve earned a new product” and “stop offshoring keep jobs here”. However, in this tragic story, it’s not the forces of globalization at work, rather these ousted employees are experiencing the first pangs of America’s digital transformation growing pains.

As GM cuts approximately 6,000 factory jobs and 4,000 white collar roles across the US and Canada, the company has also been hiring…. some 9,000 people in the last 24 months.

“We are going to continue to hire,” says GM CEO, Mary Barra.“Because when we look at the skill sets that we need for the future, the vehicle has become much more software-oriented, when you think about the hundreds of millions of lines of code that are in a vehicle that operates today, that’s only going to increase.”

What is happening at GM now, is emblematic of a greater shift globally, and belies the popular narrative that American manufacturing is disappearing. In fact, the U.S still produces 18.6 percent of all goods in the world (second only to China) and is expected to grow 3.4 percent in 2019… It’s the number and type of jobs that are pulling the vanishing act.   

This monumental shift in labor can be described as the 4th industrial revolution and relates to the implementation of smart technologies in factories, offices, and even vehicles, automating manual and administrative tasks, eliminating some jobs and drastically altering others.

The World Economic Forum (WEF) reports that by 2030, 210 million people are expected to change occupations. Furthermore, the Organisation for Economic Co-operation and Development (OECD) reports that 32 percent of all jobs will see significant changes in how they are performed. For example, jobs that focus on trade skills such as auto mechanics, machinists, electricians, and plumbers won’t be replaced by robots, however, the digital know-how required to caarry out the work will significantly increase.

“So far, the debate on these transformations has been sharply polarized,” says Andy Haldane, Bank of England Chief Economist. “Between those who foresee limitless new opportunities and those that foresee a massive dislocation of jobs…In fact, the reality is likely to be highly specific to the industry, region, and occupation in question and the ability of various stakeholders to successfully manage change.”

The U.S. is expected to be hit hard with 1.4 million workers to be displaced from their current jobs in the next decade. However, the OECD asserts 95 percent of at least the 1.4 million displaced workers in the U.S can be re-trained if money is invested in opportunities such as vocational schools, subsidizing graduate schools, providing on-site job training, or massive open online courses.

That’s all well and good, but WEF estimates such measures will run upwards of $34 billion, which begs the question – who’s picking up the tab?

“In our view,”  says Saadia Zahidi, Managing Director of the WEF and Head of the Centre for the New Economy and Society. “A combination of three investment options needs to be applied: companies working with each other to lower costs; governments and taxpayers taking on the cost as an important societal investment; and governments and business working together.”

The WEF predicts employers could cover up to 14 percent of the reskilling bill and still maintain a profit, as not reskilling comes with its own set of costs including, redundancy pay, recruiting, and the detriment to staff morale due to layoffs. As for the other 85 percent, a small portion could come from private investment – think entreprenuers starting coding boot camps – however, the majority of funding will need to be supplied by government programs.

This long-term reskilling investment may be a hard sell, yet the price of doing nothing could be higher. Think of the lost tax revenue and GDP,  as well as the wider societal implications of high unemployment rates, if 1.4 million workers are out of the job.

Proposals for government intervention in reskilling take many forms, one suggestion is a Wage Insurance funded by premiums of about $25 per worker, per year. In this program, proposed, but not passed, by the Obama administration in  2016, the government would cover half the wages (for up to two years) of a person who lost their job through no fault of their own and was either unemployed or employed at a lower paying job.

“Robot Taxes” is another funding proposition. The idea is to shift the normal taxes on labor, such as payroll taxes, onto a company’s capital which in this case would be their automated processes. If a company ultimately chose a robot employee over a human one, their taxes would contribute to reskilling programs or social security nets such as Universal Basic Income (UBI).

UBI is not a new idea, Martin Luther King Jr. proposed a similar concept in his 1967 book, ‘Where Do We Go from Here: Chaos or Community?’ Writing, “I am now convinced that the simplest approach will prove to be the most effective—the solution to poverty is to abolish it directly by a now widely discussed measure: the guaranteed income.”

How it works is the whole population (of a given polity) receives a regular amount of money from the government, no strings attached. There have already been pilot projects in Canada, Kenya, and Switzerland, and the results are largely positive; give people free money and they pump it back into the local economy – cars get repaired, parents have a night out, and teens get part-time jobs.

One example of UBI is Alaska’s Permanent Fund Dividend. Over the last four decades, the area’s permanent residents received annual dividends from the state’s oil investment fund – to the tune of $1,000. At first, it was assumed that with this income boost, people would work less, but a 2018 study found that influx of cash actually increased part-time work 17 percent.

With all these options on the table, the only thing left is to act, but therein lies the problem. While the business sector is leaping into action – just yesterday, Microsoft announced partnerships with five colleges and universities to address the skills gap in fields such as  AI, data science, computer science, and cybersecurity – government lags behind, especially in the US.

Why? The Harvard Business Review (HBR) identifies three main obstacles: political gridlock, a focus on deficit reduction, and expensive, slow-moving K-12 education overhauls.

“We think that companies can and should take the lead in training workers to fill the middle-skills gap.” Writes HBR, referring to technical skills that require post-secondary training, but not a four-year degree. “Realistically, that can happen on a large enough scale only if business leaders cooperate with one another, unions, and educational institutions, both regionally and nationally. The key words are cooperate and nationally.”

New research says the skills gap is the product of low unemployment, but this new report may be missing the point.

Earlier this year a report from American Economic Association spurred articles by the Washington Post and Vox triumphantly proclaiming the ‘skills gap’ to be solved – since it never existed at all.

The response to these articles on Twitter was mixed, with one economisttweeting, “Every time you hear someone say ‘I can’t find the workers I need,’ add the phrase ‘at the wage I want to pay.’” At the same time,  many recruiters simply retweeted the stories for conversational fodder without committing to an affirmative or negative stance.

Economic analysis and predictions are esoteric practices, and the public doesn’t seem too surprised when pundits get it wrong, so the news of a labor crisis — given credence by the Obama administration and the US Chamber of Commerce — being totally discredited disappeared by the next day’s news cycle.

We couldn’t let it go. We reached out to SmartRecruiters followers in a casual Twitter poll, and 60 percent of respondents named ‘skills shortage’ as their top sourcing challenge. Granted, our sample size was certainly not large enough to make a claim, either way, but it did make us take a closer look at the American Economics Association study, and — as you may have guessed — there’s more to the skills gap than ‘true or false’.

It seems that when the US Chamber of Commerce and then-President Obama talk about the ‘skills gap’, they’re referring to the digital transformation making many laborers obsolete, but when American Economics Association talks about the ‘skills gap’, they’re talking about the degree and skill inflation within job ads.

The thesis of the research from Alicia Sasser Modestino, Daniel Shoag, and Joshua Ballance argues that when unemployment rises, employers can be choosier and require more skills from candidates. Thus the skills gap is a self-perpetuated, non-emergency resulting, in large part, from the financial crises of 2008.

Indeed, the analysis of over 36 million job ads from 2007 to 2012 does show a significant uptick in skill requirements. For example, jobs that previously required a high school education minimum began asking for candidates with four-year degrees. Employers acknowledged this phenomenon as a conscious decision in the report, saying, “the recession is a wonderful opportunity to acquire top talent.”

The question still remains, does this report show the skills gap is a lie? If we look at it from a digital transformation perspective, then no. This digital transformation skills gap, cited by the White House and the US Chamber of Commerce, is about a shortage of IT skills, a shortage which is still very real.

According to a 2018 Statista report, the largest deficits in tech are in Big Data/ Analytics, Technical Architecture, and Security/Resilience. And, it’s not just tech companies that need IT workers, as IT skills are necessary for any business to compete in today’s economy. Even the mom and pop store on the corner needs to consider web presence and data security.

So, if neither is wrong what does this report really tell us about today’s talent economy. We turned to Sarah Wilson, head of people at SmartRecruiters, for some practitioner insight into the conundrum.

Is there actually a skills gap?

It is accurate to say when the unemployment rate is higher and the candidate pool is more plentiful, companies become more choosy and require more experience and education. However, when people refer to a skills gap, they usually are talking about technical skills.

The skills gap in the tech space is ongoing, especially with emerging technologies like machine learning and artificial intelligence. In many areas, technology is advancing faster than the workforce.

I think as more and more new tech emerges, companies (especially large ones) will need to figure out how to upskill their existing workforce because allowing them to become obsolete isn’t a sustainable business model. I see a trend of accountability on the part of the business to provide opportunities for development.

Do recruiters have an exaggerated view of the skills gap?

The tools that we as recruiters traditionally used to engage talent aren’t delivering like they used to. Now that almost every company has a LinkedIn recruiter license, any quality candidate is inundated with in-mails and emails about new job opportunities.

Just as employers take advantage of high unemployment, candidates can be choosier when unemployment is low. Recruiters need to be creative with how they find and connect with talent pools that might even involve sharpening up their tech skills.

Learn why 47 percent of employees claim to be shut out of tech adoption, and how companies can do better – including employee personality types and motivations.

Employees want the best tools for their jobs, but when companies adopt new tech they often feel out of the loop, and ‘put upon’. How many of you have received an email like ‘we are changing systems, please complete these 10 easy steps…’ and then just ignored it forever? You aren’t alone! …Or maybe you were the one who sent that email, and wondered ‘why is everyone complaining and dragging their feet?!’ Most of us have been there as well. The simple fact is, that getting buy-in for new tech is hard, especially when people don’t understand why.

In a recent survey, PwC found that while 90 percent of managers report the introduction of new technology is made with the workers’ needs in mind, only 53 percent of the employees agreed, and 73 percent of those employees say they know of systems that would help them turn out higher quality work than the ones they use now… uh oh.

Those numbers are bleak, especially when one takes into account that this isn’t a niche problem. The survey included 12,000 workers spanning c-suite to administrative roles, from eight countries, and through a wide range of industries including consumer markets, health industries, financial services, manufacturing, and technology and media.

It’s clear then that tech adoption is a widespread problem, and a pain point on both sides of the equation – the departments pushing digitization and the workers being bowled over by it. So, here are some things to consider before driving innovation!

What motivates employees? When it comes to motivations there are three distinct employee personality types with their own distinct set of motivations. Curiosity-driven, status-driven, and rewards-driven.

• • Curiosity-driven: 34 percent of employees are motivated by curiosity, efficiency, and teamwork. This group is the most open to new tech adoptions and will invest up to 20 hours of training per month. These are the folks who champion tech to the rest of the company!

• • Status-driven: 37 percent of employees are motivated by advancement in their careers, recognition, and status. They likely already feel overwhelmed by all the different tech being introduced into their working lives, and would prefer streamlined solutions. Don’t let the grumbling fool you, this segment will still spend around 17 hours on tech training every month.

• Rewards-driven: 29 percent of employees are motivated by individual achievement within a predictable environment. This group likes a routine and cares about the well being of their coworkers. They are the hardest to evangelize as they don’t prize efficiency or recognition as highly as the first two segments.

How much time are they willing to invest? Turns out, most employees are willing to invest upwards of two days per month in upskilling, but only 50 percent are satisfied with the available resources, and 46 percent say their company doesn’t value tech-savvy workers. This data signifies an opportunity for leaders to define avenues for their teams to learn, and be rewarded for their learning. Sooner, rather than later, would be ideal as The World Economic Forum projects that by 2022, 54 percent of employees will need a substantial amount of training, with 35 percent of those in need, requiring at least six months of instruction.

Does the human touch still matter? Yes, when asked employees would still prefer, by in large, to have face to face interactions when it comes to talking with colleagues, providing feedback, getting help with difficult questions, and receiving HR assistance.

… but the digital assist still has its place. Some processes can be both human and digital. For example, initial tech evangelization can happen through in-person meetings, and product demos while extended training on features and nudge reminders can happen digitally over slack or via the product directly.

Things employees would prefer to do via tech: schedule vacation time, update personal info, get IT help, review benefits, enroll in benefits, and look for new employment.

Confer with mixed-level tech committees: Consider conferring with “informal leaders”, people who may not hold a leadership title per se, but who can give you an idea of what the company looks like on the ground level. Don’t discount the value of this view!

***

At the end of the day, employees want to feel like the leadership is driving tech-innovation to enable workers, not replace them. When asked if the rise of AI would make the world a better place, 88 percent of the C-suite respondents said yes, while only 48 percent of the staff surveyed agreed. This disconnect is emblematic of why the tech adoption can be so tricky; workers fear that digitization isn’t to support them, but to edge them out. The best thing any organization can do to encourage innovation is to involve employees in the decision, and illustrate the value proposition clearly!