Living in Australia's "orange light" economy
It strikes me recently that there may exist something like an elephant curve in economic understanding. After all, in the simpler analogue world, knowledge was explicit, linear and standardised to a much greater degree. Now, however, in the transition to the digital era, simply earning a University degree has lost its relative value. Why? Because it is not getting the degree that matters any more, it is what people do with the knowledge it contains. But this shift in value hasn’t yet penetrated at a large-scale level for either individuals or institutions, so many of us essentially wonder why yesterday’s medicine doesn’t work for today’s ills.
A research report by the Centre for the New Workforce at Australia’s Swinburne University has examined people’s attitudes towards the future of work (http://bit.ly/2LslO7J). I found the first five figures (from survey questions 1,2,5,6 and 7) to be really interesting, because the results split almost half and half on each question. Now, I cannot tell if it is the same respondents on each side for these questions, but it stands to reason that they may be.
Beyond that, Figure 6 within the report suggests that only 59% of survey respondents see themselves as most responsible for preparing for the future of work. This is not surprising if you consider that our education system has taught people to expect a social contract where employers or government will look after them if they do as they are told and follow the rules.
Figures 12 and 14 suggests that “knowledge sector” workers are more aware of the changes coming, and more worried as a result, but also further ahead in adjusting to the changes required. Figure 16 is even more powerful – there is a clear gap in learning confidence among those on lower incomes. This is understandable, particularly if these people found any prior formal education to be a difficult or painful experience.
So perhaps (on the basis of the survey) half of the Australian population is confident in their ability to adapt to change. But who does the other half consist of? Are some of them misguidedly confident, thinking that their industry is safe from dramatic changes? Are some people even aware of the need for change? Are they aware, but terrified, desperately hoping that the need to change will go away? Or are they aware but have no idea where and how to find the answers they need?
I think that we are dealing with different groups of people reacting rationally to different economic triggers. Those at the leading edge of technological change are (perhaps) taking advantage of their highly in-demand skills to demand higher wages. Those who are “educated” (in the old sense of the word, meaning they hold a qualification of some sort) may be under a false sense of security. Many have huge housing debts, so they are not looking to change jobs without certainty. Allied to this is that they are not pushing for wage rises, for fear of losing jobs they think are stable. The third group is those who are not “educated” in the old sense of the word. This group may well understand that something is amiss, but they cannot describe what “it” is, and with rising costs for essentials, don’t have much capacity to do very much about it anyway.
On a related topic, the Australian Federal Treasury has recently released research (based upon micro-data) outlining that Australia is suffering from less job switching and a lower rate of entry for employing firms (http://bit.ly/2Y1QvGP). Standard economic theory would suggest that people should move to where the work is. But housing costs have made the most productive cities prohibitively expensive for most people to live in, and so economic growth (and income growth) is becoming increasingly geographically concentrated. Not surprisingly, so is poverty. After all, there is little point to moving if only similarly poorly paid and unstable work is on offer, especially if it removes someone from the support networks of family and friends.
As for the lower rate of entry for employing firms, that stands to reason too. Given that banking standards are tightening for residential lending in the wake of the Royal Commission, then it stands to reason they will tighten further for small business lending. Younger potential entrepreneurs are less likely to be able to access growth funding because they don’t own residential property to secure business loans against.
Another gap in economic understanding comes on the spending side. Australia has some of the highest private debt levels in the world, particularly in relation to housing (http://bit.ly/2M2Wipb), which is clearly impacting upon the ability of younger generations to build wealth (http://bit.ly/2SmQd7X). Our lack of financial literacy is widespread (http://bit.ly/2LxDHSL). On a cultural level, we invest in housing instead of innovation because we lack the financial literacy to understand the difference business investment makes to our long-term collective benefit.
Until we work off the massive amounts of debt in our private lives, and our education, tax and welfare systems become effective in a 21st century context, we will be stuck in what I have come to think of as the “orange-light” economy. It’s not “red light” (although it could easily become so given the recent levels of global political and economic turbulence). But nor is it “green light”. Unlike the Baby Boomer generation, we cannot necessarily expect rising living standards punctuated by the odd (temporary) recession. All of the low-hanging productivity fruit has gone, and we are in uncharted waters.
So, how do we fix these issues? Well, I think we need dynamism in economic and social policy, along the historical lines of the New Deal. We need to shift the conversation away from education in straight lines to experiential learning, with the emphasis upon trial and error – and where it’s OK to make mistakes. We need to clearly outline and educate the public about how things have changed, and that lifelong learning is not about gaining pieces of paper, but about proactively learning in our free time. It would also help if many employers put more effort into training more broadly than just what people need for their existing role.