Why do these three factors matter? The interplay of these three factors can shape the labour market. The demand and supply of labour can impact wages. When there is abundant supply of a skill, it dampens wages. Of these three factors, I believe that the birth rate when combined with other factors such as longevity driven by improved health, medicines and awareness can determine the path your career will take.
Expanding the Labour Pool
In his book The Rise & Fall of Nations, economist Ruchir Sharma explains that the trigger for economic growth lies in a 2.1% increase in working population. The birth rate is falling in many countries. The Wall Street Journal wrote recently about the restaurant that is using robots to flip burgers because they are unable to find enough people. Using robots also boosts productivity because the machines do not complain and can work 365 days a year. When the birth rate falls and people live longer, two things happen:
1. The demand for goods and services drop. The older folks do not spend on as many goods and services as the youth. Hence, the problem of unsold goods begins to haunt the manufacturers.
2. The increasing share of people over 65 starts straining the social security system since a smaller working population has to support an ever growing population of elderly dependents.
The nations have to create policies to get more untapped labour pools into the workforce. Women, retirees, immigrants have to be used to supplement the dropping labour pool.
Immigrants create jobs
The robots are now getting better and cheaper. The cost of automation drops and it becomes increasingly attractive to replace humans with machines. That means developing countries like India will have to keep competing against dropping costs of robots.
The investment in education has to be re-examined. In the developing countries, the new talent pools — women, retirees, immigrants — have to be reskilled. Immigrants are seen to be a threat because everything from crimes to unemployment is blamed on them. The reality is otherwise. Apple, Google, Oracle, Amazon, Symantec and eBay have all been created by immigrants or their children. As many as 216 of the Fortune 500 companies were created by immigrants or children of immigrants.
Fixing Education System
India needs education that encourages going beyond basic literacy and employability. The opportunities will continue to be skewed in favour of the highly educated. Organisations are ready to pay a premium for jobs that need higher education and deep specialisation. AI salaries are topping a million dollars even at non-profit organisations. The world cannot have enough of them.
That is the paradox. Low wages for workers today are likely to predict low wages for those same workers tomorrow (and for many years after), says Oxfam. The inequalities will rise. In a digital world, the distribution is never according to the normal distribution. It favours the top 1%.