The Digital Golden Age & The World Beyond

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The Digital Golden Age & The World Beyond

As every Trends subscriber knows, the majority of the world's workforce is aging rapidly and labor force growth is slowing, except in India and Africa. US labor force growth, will slow to 0.4% per year in the 2020s. That major demographic shift is bringing an end to the abundance of labor that has fueled economic growth since the 1970s. Thanks to longer and healthier lives, many people are working well into their 70s and beyond, but the trend toward later retirement is not likely to fully offset the negative effects of aging populations.

As the total size of the labor force stagnates or declines in many markets, the limitations on human capital could potentially reduce the momentum of economic growth. If it does, governments will face major challenges in dealing with surging healthcare costs, old-age pensions and high levels of debt. On the plus side, the lagging wages that faced middle and low-skilled workers in advanced economies since 2000 should rise due to the simple economics of greater demand and lesser supply. However, demographics is not the only force in motion.

As we forecasted in Ride the Wave, the Deployment Phase of the Fifth Techno-Economic Revolution is expected to unleash an unprecedented and accelerating wave of automation based on AI, the IoT and service robotics. Faced with a rising scarcity of labor, companies and investors will increasingly depend on automation technologies to boost productivity.

But to grow, economies need demand to match rising output. According to analysis by Bain & Company, automation could realistically push output potential far ahead of demand potential. For instance, the rapid spread of automation may eliminate as many as 20% to 25% of existing U. S. jobs—equivalent to 40 million displaced American workers, while depressing wage growth for many more workers.

Bain expects that the largest share of the benefits from this automation will flow primarily to two groups: the owners of capital and the top 20% of workers who will remain highly-compensated and highly-skilled. In fact, the growing scarcity of highly-skilled workers could push their incomes even higher relative to lesser-skilled workers...

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