Economic Opportunities in the 21st Century
Claudia Juech

Claudia Juech Former AVP & MD, Strategic Insights

February 02, 2015

Economic Opportunities in the 21st Century

Claudia Juech

Claudia Juech Former AVP & MD, Strategic Insights

February 02, 2015

A version of this post originally appeared as part of The World Economic Forum’s Global Strategic Foresight Community series on members’ perspectives on global shifts.

“The manner by which work happens is changing for many people, calling into question our assumptions about how we enable economic mobility and what decent work should look like.”

Society has long assumed that enabling individuals to have a single, relatively stable, full-time job is among the most effectual ways to move people out of poverty. We need to re-examine this normative model, as in the 21st century it is dwindling in the developed world and becoming largely illusory in the developing world. In the future, the livelihoods of the global middle class may thus look remarkably similar to the patchwork baskets of work that poor families have long relied on for their livelihoods in developing countries. The manner by which work happens is changing for many people, calling into question our assumptions about how we enable economic mobility and what decent work should look like.

“We need to decouple formal employment from pension, health, and welfare schemes.” 

The concept of a stable, formal job with benefits is coming to be replaced by a livelihood based on quasi-formal employment, freelancing and mixed earning strategies. The poor have long subsisted through such diversified livelihood strategies, combining various types of formal and informal work to make ends meet.

Several forces are driving this shift. Global mobility of capital and the weakening of organized labour over the past few decades have led to less stable employment as a consequence of increasing flexibility in production. Changes in macroeconomic trends, including manufacturing’s declining share of global GDP, the declining share of global income going to labour and the automation of routinized work, are eliminating steady jobs that were once pathways out of poverty into the middle class. This plays out at the international level, as countries in Africa, especially, find the industrial path to middle income status closed. New research implies that many of today’s developing economies may never approach the same levels of industrialization that the rich countries did in their ascent from poverty.

The years after the global financial and economic crisis may prove to be an inflection point with drastic implications for today’s poor and near poor.

Stable jobs with benefits may dwindle. Stable employment may come to be reserved for those with what the International Labour Organization calls “non-routine, cognitive occupations”—creative jobs that depend on critical thinking and have traditionally been reserved for those with university degrees. Increasingly, people without the means to pursue advanced education or without the skills to adapt to technological solutions may be ineligible for the few stable employment offerings favouring a small elite group possessing financial capital or sought-after skill sets. The specialized nature of existing jobs and the removal of benefits will make poor workers more dependent on social safety nets. However, most pension, healthcare and welfare schemes are in some way connected to formal, stable employment.

The employer-employee relationship may thus no longer be a reliable keystone of the welfare state. One could imagine a world where low levels of economic growth and a growing gap between decent jobs and eligible workers contribute to a significant increase in inequality and unstable livelihoods. Ultimately, the accountability, credibility and stability of governments could depend on how well they can adapt to this possible future.

The nature of capital itself is shifting. Investments in human capital and personally owned tools (such as the software used by a freelance graphic designer) will be as important to middle-class livelihoods across the globe in the future, as factories and office buildings once were.

Yet, this shift in the labour market could also offer opportunities for both the middle class and the global poor.

As more employment becomes quasi-formal, there may be opportunities to detach benefits like pension and healthcare from formally earned wages, making safety nets more inclusive and accessible and encouraging a more dynamic and resilient work marketplace. As more middle-class workers become accustomed to quasi-formal work and freelancing, the positive side of the change—autonomy and self-direction—could be encouraged and the downsides addressed.

“What will replace the concept of a stable, formal job with benefits?” 

In the developed world, instruments like TaskRabbit might offer a first glimpse at how future labour markets could respond to multiple types of employment by making the process of matching contractors and contractees much more efficient. In addition, assessment tests and reference checks will be almost completely automated. This might open the way for new forms of credentialing that are not (only) based on formal degrees, but also assess the soft skills required for a task, making jobs accessible to a wider range of applicants. In the development context, economic development programmes will need to be built more deliberately around the concept of quasi-formal and informal employment options. With the rising number of poor living in middle-income countries, there is also an opportunity to adapt existing financial tools, such as Trust Card, a savings product with behavioural features that incentivize asset building and offer the potential to increase access to capital through new measures of reliability beyond credit scores.

Tools such as Kiva, Airbnb, and Coursera point towards new ways of accessing work, new income-generating activities and skills training. But these have yet to rise to the enormity of the task, especially for the poor. Still, they point to ways that both the public and private sectors can rise to the challenge of creating more inclusive economies in an era when the “good jobs” of yesterday no longer exist.