The global economy faces a reskilling crisis with 1.4 million jobs in the US alone vulnerable to disruption from technology and other factors by 2026, according to a new report, Towards a Reskilling Revolution: A Future of Jobs for All, published today by the World Economic Forum.
The report is an analysis of nearly 1,000 job types across the US economy, encompassing 96% of employment in the country. Its aim is to assess the scale of the reskilling task required to protect workforces from an expected wave of automation brought on by the Fourth Industrial Revolution.
Drawing on this data for the US economy, the report finds that 57% of jobs expected to be disrupted belong to women. If called on today to move to another job with skills that match their own, 16% of workers would have no opportunities to transition and another 25% would have only between one and three matches.
At the other end of the spectrum, 2% of workers have more than 50 options. This group makes up a very small, fortunate minority: on average, all workers would have 10 transition options today.
The positive finding of the report is the huge opportunity identified for reskilling to lift wages and increase social mobility. With reskilling, for example, the average worker in the US economy would have 48 viable job transitions – nearly as much as the 2% with the most options today. Among those transitions, 24 jobs would lead to higher wages.
The case for a reskilling revolution
The research, which is published in collaboration with The Boston Consulting Group, finds that coordinated reskilling that aims to maintain or grow wages has very high returns for workers at risk of displacement – and for businesses and the economy. At-risk workers who retrain for an average of two years could receive an average annual salary increase of $15,000 – and business would be able to find talent for jobs that may otherwise remain unfilled. With this approach, up to 95% of at-risk workers would find new work in new, higher-income jobs. Without such coordinated upskilling efforts, the report finds, one in four of at-risk workers would lose on average $8,600 of their annual income even if they are successful in moving to a new job.
However, this reskilling revolution requires that 70% of affected workers retrain in a new job “family” or career, highlighting the need for retraining initiatives that combine reskilling programmes with income support and job-matching schemes to fully support those undergoing this transition.
“The only limiting factor on a world of opportunities for people is the willingness of leaders to make investments in re-skilling that will bridge workers onto new jobs. This report shows that this investment has very high returns for businesses as well as economies – and ensures that workers find a purpose in their lives,” Klaus Schwab, Founder and Executive Chairman, World Economic Forum.
A future of jobs for all
The report also describes what reskilling would need to look like. The people who will do best in the transitions underway are those who have “hybrid” skills – transferable skills like collaboration and critical thinking, as well as deeper expertise in specific areas. Both highly specialized and highly generalist roles will need significant reskilling.
The report lays out 15 job pathways to demonstrate the precise range of options that reskilling can present for professions as diverse as assembly-line workers, secretaries, cashiers, customer service representatives, truck drivers, radio and TV announcers, fast-food chefs, mining machine operators and computer programmers.
However, for these viable and desirable job transitions to come to fruition requires concerted efforts by businesses, policy-makers and various stakeholders to think differently about workforce planning and to invest in reskilling that will bridge workers to new jobs.
“Work provides people with meaning, identity and opportunity. We need to break out of the current paralysis and recognize that skills are the ‘great redistributor’. Equipping people with the skills they need to make job transitions is the fuel needed for growth – and to secure stable livelihoods for people in the midst of technological change,” said Saadia Zahidi, Head of Education, Gender and Work System Initiative and Member of the Executive Committee, World Economic Forum.
A gendered impact
Of the 1.4 million jobs expected by the US Bureau of Labor Statistics to be disrupted between now and 2026, the majority – 57% – belong to women. This is a worrying development at a time when the workplace gender gap is already widening and when women are under-represented in the areas of the labour market expected to grow most robustly in the coming years. The data show that the current narrative about the most at-risk category is misleading from a gender perspective. For example, there are nearly 164,000 at-risk female secretaries and administrative assistants, while there are just over 90,000 at-risk male assembly-line workers.
Without reskilling, on average, at-risk women have only 12 job transition options, while at-risk men have 22 options. With reskilling, women have 49 options, while men have 80 options. With reskilling, the options gap between women and men narrows. However, these transitions also present an opportunity to close the persistent gender wage gap. Combined reskilling and job transitions would lead to increased wages for 74% of all currently at-risk women, while the equivalent figure for men is 53%.
The many futures of work
Towards a Reskilling Revolution: A Future of Jobs for All is complemented by a second World Economic Forum report launched today: Eight Futures of Work: Scenarios and Their Implications, also produced in collaboration with The Boston Consulting Group. It presents eight visions of the future of work in the year 2030.
“The future of work is not predetermined. All of the scenarios we present are possible, but none is certain. It is in our hands to proactively manage the changes underway and build the kind of future that maximizes opportunities for people to fulfil their potential across their entire lifetimes,” says Rich Lesser, Global Chief Executive Officer and President, The Boston Consulting Group.
The scenarios make the case that, while stakeholders cannot definitively choose to bring about any scenario that they might prefer on their own, they can manage the changes underway and influence the future through collaboration. Eight Futures of Work identifies reskilling the current workforce as one of the most critical actions that can be taken to proactively shape a new, positive future of work. Together, both studies aim to provide actionable tools that will help individuals, employers and policy-makers take action to influence a more inclusive and positive future of work.
The World Economic Forum project on Closing the Skills Gap provides a platform for public- and private-sector leaders to work together on reskilling and education reform, and will use both studies to tailor solutions for workers. At the Annual Meeting 2018 in Davos, the project will announce a new target for collaboration to reach workers with appropriate reskilling and retraining.
The Towards A Reskilling Revolution: A Future of Jobs for All report introduces a new methodology built on innovative new data from 50 million online job postings, encompassing 15,000 unique skills, collected over a two-year period by Burning Glass Technologies, the data partner for the report. Combined with labour market statistics from the US Bureau of Labor Statistics, the data used in the study covers 958 unique types of jobs.
The methodology combines the various aspects of a job, including work activities, skills, knowledge, abilities, years of experience and education, into an index of job-fit to measure the similarity between jobs in the set. While the methodology uses the United States labour market as an example, it can be applied to a variety of job requirements and sources of data to map out job-transition opportunities in diverse labour markets, and will be expanded in the future.
The Eight Futures of Work: Scenarios and Their Implications report creates eight potential worlds based on how different combinations of three key variables may come together – the rate of technological change and its impact on business models; the evolution of learning among the current and future workforce; and the magnitude of talent mobility across geographies.
Concerted Action Needed to Address Unique Challenges Faced by Pacific Island Countries
Small island developing states (SIDS) must position themselves to take full advantage of often limited, but nonetheless available, opportunities to improve standards of living and accelerate economic growth, according to the latest issue of the Asian Development Bank’s (ADB) Pacific Economic Monitor launched today.
The Monitor focuses on addressing the development needs and challenges of the Pacific SIDS, which in the context of this publication are the Cook Islands, the Federated States of Micronesia, Fiji, Kiribati, the Marshall Islands, Nauru, Palau, Papua New Guinea (PNG), Samoa, Solomon Islands, Tonga, Tuvalu, and Vanuatu.
The Monitor notes that the geographic and physical challenges faced by SIDS manifest in elevated cost structures and heightened economic vulnerability that severely constrain development prospects. These are further compounded by fragility from thin institutional capacities for effective governance and increased climate change risks.
“Development challenges stemming from vulnerability and fragility, which are further amplified by climate change impacts, call for a differentiated approach to long-term development among the SIDS,” said ADB Director General for the Pacific Ms. Carmela Locsin. “Sustainable development financing as well as innovative, fit-for-purpose strategies for institutional strengthening are central to such an approach.”
This is the 28th issue of the Monitor, the ADB Pacific Department’s flagship economic publication, which was launched in 2009 to provide more regular economic reporting on the Pacific islands. It reveals that a weak external environment is translating into a softer 2019–2020 outlook for the Pacific through subdued exports. The subregional outlook is for average growth of 4.0% in 2019 before moderating to 2.5% in 2020, largely reflecting weaker prospects in Fiji and a return to low growth in PNG as the ongoing recovery from last year’s major earthquake fades.
The Monitor includes country articles as well as policy briefs. Country articles feature analyses of labor productivity and youth unemployment in Fiji, fishing revenues in Kiribati and Tuvalu, and how various SIDS manage unconventional revenue streams. Other articles focus on recent fiscal adjustments in PNG, sustaining tourism-led growth in the Cook Islands, improving the business environment in Palau, Samoa’s ability to rebound and build resilience after disasters, and urbanization issues in Tonga.
Topical policy briefs in the report further examine the common development challenges faced by SIDS. The first policy brief discusses the structural constraints to long-term development among SIDS and highlights the crucial role of sustainable development financing to overcome these. Another policy brief mapping fragility in the Pacific shows that although some progress has been made over the past decade to strengthen institutional capacities among SIDS, there is still work to be done. Other policy briefs outline key takeaways from some Pacific atoll nations at the frontlines of climate change, and explore poverty reduction challenges in small island developing states, with special reference to PNG.
The Pacific Economic Monitor is ADB’s bi-annual review of economic developments and policy issues in ADB’s 14 developing member countries in the Pacific. In combination with the Asian Development Outlook series, ADB provides quarterly reports on economic trends and policy developments in the Pacific. The Monitor welcomes contributions of policy briefs from external authors and institutions.
Weak Outlook in GCC Due to Muted Oil Prices & Global Trends
Economic growth in the Gulf Cooperation Council (GCC) was significantly weakened in 2019 due to muted oil prices and excess oil supply, according to the new World Bank’s Gulf Economic Update released today. As a result, overall real GDP growth in the GCC is estimated to drop to 0.8% this year compared with 2% last year. While most GCC countries retained strong external positions in 2019, the ongoing slowdown in China and the continued global trade war are hindering their efforts to boost non-oil exports. Meanwhile, resurgent geopolitical risks are raising risk perceptions, which could hurt prospects for investment.
This issue of the Gulf Economic Update, titled “Economic Diversification for a Sustainable and Resilient GCC”, explores ways in which GCC countries can pursue diversification that is environmentally sustainable and resilient to global megatrend. Many countries in the region have pursued ‘traditional diversification’, meaning diversifying away from hydrocarbon production but towards heavy industries that still depend on fossil fuels. The emissions-intensive nature of ‘traditional diversification’ has increased the GCC countries’ exposure to disruptive low-carbon technologies, international policy efforts to address climate change, and negative public perceptions of fossil fuels and their derivatives.
“As GCC countries strive to diversify their economies, they should ensure that diversification strategies are aligned with environmental sustainability goals,” said Issam Abousleiman, World Bank Regional Director for the GCC. “Ensuring that the Region’s diversification efforts are climate-friendly is critical not only for environmental sustainability but also to help the GCC invest in sources of growth that are resilient to global technology and policy impacts.”
The report suggests three ways to help align diversification strategies to environmental sustainability objectives.
First, ensuring that diversification strategies take an ‘asset diversification’ approach; one that moves beyond the concept of diversifying output and broadens the composition of a country’s national wealth to include human capital, in addition to natural and produced assets.
Second, GCC countries can hedge the risks of traditional diversification by liberalizing energy and water prices, scaling up investments in renewable energy and carbon capture and storage to help mitigate the impacts of climate change. Energy subsidy reform and increased investment in renewable energy are already underway in the Gulf.
Third, the GCC must establish effective environmental management institutions and practices to ensure that the region protects its fragile ecosystem and reduces environmental cost of industry as it invests heavily in new sources of economic growth.
GCC Countries Outlook
Bahrain: Bahrain’s economy is expected to grow at a moderate rate of 2% in 2019 and average 2.3% over 2020-21, driven by the non-oil sector. Nonoil GDP growth will be driven by an increase in manufacturing output and higher levels of infrastructure spending.
Kuwait: Kuwait’s growth rate is expected to dip to 0.4% in 2019 before picking up to 2.2% in 2020, as the OPEC production cuts expire, and 2% in 2021, as the government increases spending on oil capacity enhancements and infrastructure to boost the non-oil sector.
Oman: Oman’s growth rate is projected to accelerate from an estimated 0% in 2019 to 3.7% in 2020 and 4.3% in 2021, supported by rising natural gas production. The potential boost from the diversification investment spending would continue supporting growth in the medium term.
Qatar: Qatar’s economy is projected to grow by a modest 0.5% in 2019 before accelerating to 1.5% in 2020 and 3.2% in 2021. Growth will be driven by a boost in gas production as the new Barzan Project starts operations as well as by the non-oil sector supported by the government’s investment program targeting infrastructure and real estate.
Saudi Arabia: GDP growth rate will likely slow to 0.4% in 2019 driven OPEC’s oil supply reduction drive, before rising to 1% in 2020 and 2.2% in 2021.
United Arab Emirates: GDP growth rate is projected to stabilize at 1.8% in 2019, before accelerating to 2.6% in 2020 and 3% by 2021, driven by government stimulus and a boost from hosting Expo 2020.
Tax revenues have reached a plateau
Tax revenues in advanced economies reached a plateau during 2018, with almost no change seen since 2017, according to new OECD research. This ends the trend of annual increases in the tax-to-GDP ratio seen since the financial crisis.
The 2019 edition of the OECD’s annual Revenue Statistics publication shows that the OECD average tax-to-GDP ratio was 34.3% in 2018, virtually unchanged since the 34.2% in 2017.
Major reforms to personal and corporate taxes in the United States prompted a significant drop in tax revenues, which fell from 26.8% of GDP in 2017 to 24.3% in 2018. These reforms affected corporate income tax revenues, which fell by 0.7 percentage points, and personal income tax revenues (a fall of 0.5 percentage points).
Decreases were also seen in 14 other countries, led by a 1.6 percentage point drop in Hungary and a 1.4 percentage point drop in Israel. In contrast, nineteen OECD countries report increased tax-to-GDP ratios in 2018, led by Korea (1.5 percentage points) and Luxembourg (1.3 percentage points).
In 2018, four OECD countries had tax-to-GDP ratios above 43% (France, Denmark, Belgium and Sweden) and four other EU countries also recorded tax-to-GDP ratios above 40% (Finland, Austria, Italy and Luxembourg). Five OECD countries (Mexico, Chile, Ireland, the United States and Turkey) recorded ratios under 25%. The majority of OECD countries had a tax-to-GDP ratio between 30% and 40% of GDP in 2018.
Corporate income tax revenues continued their increase since 2014, rising to 9.3% of total tax revenues across the OECD in 2017. This is the first time corporate income tax revenues have exceeded 9% of total tax revenues since 2008.
In contrast, the share of social security contributions in total tax revenues continued the consistent decline seen in recent years, dropping to 26% in 2017, compared to 27% in 2009. Other tax types have not exhibited a clear trend in recent years.
This year’s report contains a Special Feature that reconciles data on environmentally related tax revenues in Revenue Statistics with the OECD Policy INstruments for the Environment (PINE) database. This exercise provides higher-quality data for policymakers and researchers in this important policy area.
The Special Feature shows that environmentally related tax revenues accounted for 6.9% of total tax revenues on average in OECD countries in 2017, ranging from 2.8% in the United States to 12.5% in Slovenia and Turkey. As a share of GDP, environmental taxes account for 2.3% on average, with country shares ranging from 0.7% in the United States to 4.5% in Slovenia. The largest share of ERTRs is derived from energy taxes, both on average and in nearly every OECD country, accounting for nearly three-quarters of ERTRs, according to the report.
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