Fighting Technological Unemployment with Technology

An update from my article on LinkedIn with the same title: Published on July 7, 2015

The situation of youth inequality in Europe is in a paradoxical state. While most of the youth in Europe are informed and educated, a large population remains jobless. In this post we will review some recent research conducted by myself and my colleague in the aim of attempting to understand what the reasons for this paradox are, and if the current status quo is likely to offer any respite to the youth of Europe.

Europe seems to be in the limelight of infamy these days. Whether it’s the threat of Grexit or reports of growing inequality within and amongst the member states, there is always some form of looming crisis ready to break the union. Things began to escalate even more in the past week, with Greece’s Finance minister/next Bond villain, Yanis Varoufakis, quitting his job as Greece’s Finance minister whilst dramatically mentioning that he would be ready to wear the creditors’ loathing with pride as he left office.

While these crisis-sparked fireworks have captured the media’s attention in recent days, it has diverted the focus from some persistent problems which were set ablaze even prior to the crisis… Namely, the situation of inequality and unemployment for the youth of Europe. These problems have been brewing from well before the crisis and it is important to shed some light on a few statistics in order to comprehend how imbalanced things have become for the youth of Europe.

Youth Unemployment:
As it can be seen in the figures below, the situation of youth employment has been worsening since well before the crisis.

In fact, it is the older population that has been largely better off since the crisis, with employment levels actually increasing for them while the population of young people (15-24 years), continue to face growing employment issues. A country-wise inspection of these results reveals that the group of countries in the end of the distribution with lowest income disparity  do not include any member states that were greatly impacted by the crisis (e.g.: Greece, Cyprus, or Ireland), leading some researchers to hypothesize that increasing income inequality was one of the driving forces of the crisis (Goda, 2013).

Youth Earnings:
Unsurprisingly along with working less, the European youth population has also been earning less. In some EU countries, the risk of poverty for the youth today is more than twice than what it is for the older populations. The figure below looks at the average change in risk of poverty rate between 2007-13 for 27 European countries on the basis of age:

With these rather dire statistics in our peripheral vision, the evident question that arises is what is the cause of these stark discrepancies? While policy makers strive to address these issues and researchers continue to analyze this dynamic environment, the keyword to be memorized is Dichotomy.

The Digital Chasm:
As the world becomes increasingly technologically driven, the first signs of the technological unemployment geared to today’s generation are beginning to crystallize. This new version of unemployment lies on the bedrock of automation and is tailored to the age of the industrial internet, where big data is omnipresent and where deep learning is the next software update.

It is here where we hear the word dichotomy resonate. Technological change is not a new subject. It is part and parcel of how our economies grow and how we evolve as a socio-economic species, constantly adapting our skills and knowledge in order to achieve some decorum of prosperity. As the industrial revolution became digitized, we continued on this path right even until recently with the services sector replacing the manufacturing sector as the mainstay of employment. As these changes reverberated throughout our economies, we adapted our skill sets in order to remain employable. However, it is here that the line of dichotomy is currently taking a tangent and creating a chasm of inequality for the youth.

Every member of today’s generation has heard the same tale: Get yourself a degree, preferably a Masters, and then get a job to help you achieve your dreams, ambitions and the chance of a middle-class lifestyle. But as higher level education becomes increasingly common, the job market is getting increasingly polarized. MIT professor David Autor, classifies today’s polarized work environment into 4 task-specific groups on the basis of the jobs workers today perform:

1. Cognitive non-routine tasks (High Skills) – jobs that require high cognitive flexibility and involve abstract thinking. Ph.D.’s, Scientists & Professionals.
2. Cognitive routine tasks (Medium Skills) – jobs that normally require a college degree. Also includes entry level jobs, Sales, Clerks, etc.
3. Manual routine tasks (Medium Skills) – Jobs that require a Diploma or trade certificate for jobs such as technicians, machine operators, etc
4. Manual non-routine tasks (Low Skills) – Jobs that do not require much education or training. Anything from janitors to celebrity dog walkers.

Recent research is now showing that jobs requiring medium skills are now in a state of constant decline in terms of demand, leading to the creation of a polarized work environment where jobs requiring high skills and low skills are increasing while those requiring medium skills are not. The reason for this dichotomy is automation, robotization and the other usual suspects who we keep hearing about in the news today.

Is Education the Answer?
The chances of getting out of poverty or reducing the state of inequality are exaggeratedly higher for those without an education. But since the crisis, there has been another twist in this tale. In the figure below we see the change in the number of people with higher level degrees since the crisis:

The surprising finding of this analysis reveals that it is in those countries with the highest levels of unemployment are also where we find the highest levels of educated people, leading to the conclusion that the unemployed prefer to remain in their studies rather than braving the employment scene in Europe.

Fighting Technology with Technology

As Employment, Earnings and Education options offer little solace in light of technological change, the subject of technology by itself begins to gain gravitas. Analysis of technology as a subject reveals that whilst a plethora of new technologies continues to devour jobs and the existing skill sets, the most consequential of these technologies are the Information and Communication Technologies (ICT).

Gauging the impact of such a wide-ranging sub-section of technology is a complex affair owing to the many industries and societal paradigms in which ICT is embedded. But thanks to the World Economic Forum’s composite ICT indicator, the Network Readiness Index (NRI), made in tandem with INSEAD and Cornell, we are now in a position to rank countries based on their technological prowess.

The NRI is a rather clever indicator that takes into consideration a collection of 52 ICT related variables in juxtaposition with the WEF’s Technology Survey. Essentially each country is measured, weighed and compared and then given a score from 1 to 7, with 1 being the least and 7 being the highest. A brief introduction is presented in the video below:

 

Using AHC Clustering techniques, we were then able to group 28 EU countries on the basis of their technological competitiveness and having done so, we performed a detailed analysis of their employment and inequality situation from the youth perspective as per the country clusters. Our summarized results are:

Although it would seem simple to infer that improved technological standing directly relates to improved prosperity, correlation does not often lead to causation.The reason for this is because each member state in the EU is different in terms of the what kinds of sectors drive its economy. But irrespective of the diversity of the economy, one thing remains constant. For economies to grow, information needs to grow.

In his recently released book, “Why Information Grows” eminent MIT professor, César Hidalgo, uses enormous amount of economic data and complexity economic theories, to show that for economies to grow, they need to improve the diversity of their product manufacturing capabilities, which in turn is related to the way they share and spread information within the country.

Our analysis comes to the same conclusion when seen from the exemplar of youth inequality.  It is those countries which provide the infrastructure and policies which allow their youth to leverage ICT and increase the amount of information being spread that offer their youth a better chance of curbing inequality. While education will continue to remain a pillar of self-development and skill-acquisition, its relevance is being questioned in a world where exponential technologies require individuals to update their skill set every 5 years.

In this rapidly changing world, it is the ability to resourcefully learn and adapt rapidly that will be the ultimate skill set. And while policy makers and institutions contemplate if the Universal Basic Income will be a solution to reducing inequality, we need to ask ourselves what is the very definition of inequality.

A new definition of equality:
The classic example of middle-class prosperity seems to be attached to a romantic model seeped in grainy 1960’s home videos, where prosperity is emulated as one member of the family becomes the breadwinner while the other maintains the home. But in the age of technological unemployment and materialistic abundance, comparing ourselves this standard seems identical to chasing a mirage.

It for these reasons that apart from leveraging technology to help the youth learn and grow, we as a society also need a new definition of class structures and what exactly does it mean to be unequal. Without these definitions, we will not have a compass to guide us and we will leave behind a populace which struggles to find direction and purpose.

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This article is a summary of the paper ” Inequality, Technology and Job Polarization of the Youth Labor Market in Europe“. It only reflects the views of the author. All graphs were made solely by the author using data from Eurostat’s and OECD.

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