To address the widening skills gap in the US workforce, two Harvard researchers call for a new social contract with the American worker, taking lessons from other industrialized democracies.
By Nick Psyhogeos and Nataliya Langburd Wright
Cult films like to shock us with depictions of dystopian takeover by super-intelligent machines. Equally threatening are the portrayals of the excesses of innovation, with the newest app cast as a digitized “Big Brother” recording our every move, tweet, and spoken word. Of course, the drama obscures the vast social and economic gains made possible by advancing innovations. But for many today, the threat posed by technological takeovers is more than a phantom apparition, as entire disciplines of work are vanishing or transforming seemingly without consideration of their past value or the livelihoods of those who’ve filled them.
The employment wreckage from COVID-19 only highlights just how vulnerable the workforce is to rapid shifts in demand: Several regions around the world saw more than 20 percent of jobs are at risk, disproportionately in hospitality, food, and retail. And for parts of the US, this rate looms at over 30 percent. Left to market forces, the global labor pool faces an ever-widening and potentially irreversible chasm from the aftermath of twenty-first-century automation and artificial intelligence. Who among us will fall through the cracks? As in the past, it’s the underemployed: the low- to middle-wage worker lacking traditional degrees, those so-called “golden tickets” to the middle class.
The Gathering Labor Storm
Supply and demand within the US labor market are on a collision course. The workforce is rapidly aging;1 entire fields of work face elimination or are being reshaped by automation;2 and more Americans are turning to part-time freelance or “gig” employment, often due to lifestyle considerations.3 While not unique in these trends, the US is seeing among the most egregious manifestations of them. For example, the US has a larger gap between cities with the lowest and highest share of jobs at-risk of automation, relative to peer economies like Canada, the United Kingdom, and Germany.
And all of this is happening within a labor pool where fewer than four in ten employed adults in the US have a college degree4 and for every technologist employed, there are four unfilled tech positions due to vast constraints in available talent.
This shift leaves employers and employees confused and concerned about how to remain relevant in the digital age. Nearly 80 percent of US CEOs express considerable unease about a fast-developing skills gap within their companies. The American worker is not naïve about what the future holds, as 53 percent of them believe automation will significantly change or make their jobs obsolete within the next ten years. To combat this perfect storm—as companies struggle with an increased need for tech talent in a diminishing pool of qualified applicants—the time has come to radically change how we perceive, prepare, and promote those among us whose livelihoods are in jeopardy.
The Challenge: Expanding the Talent Pool
Underemployment leads to what Harvard Professor Arthur Brooks calls a “dignity deficit.” As he aptly states:
Certain situations bring out a clear, conscious sense of our own dignity: when we receive praise or promotions at work, when we see our children succeed, when we see a volunteer effort pay off and change our neighborhood for the better. We feel a sense of dignity when our own lives produce value for ourselves and others.
Indeed, having a strong work ethic and disciplined work goes right to the heart of one’s self-worth, especially for blue-collar laborers. Countries around the world acknowledge the importance of this principle. Indeed, achievement of “decent work and sustainable development, which ensure dignity…for all” is a key component of the International Labour Conference’s (a United Nations Agency) Centenary Declaration for the Future of Work, unanimously adopted by governments, employers, and unions around the world in 2019. The conference’s “human-centered” approach involving investment in skills, institutions, and “decent and sustainable work” reveals the universality of the changing nature of work. The US is not alone in facing these challenges and has the opportunity to lead the transition by example.
Our research team’s call-to-action for expanding the talent pool is two-fold: eliminate entrenched, pervasive bias and anachronism from modern-day recruiting; and embrace an unprecedented upskilling program for the American worker.
How is the US doing on these two fronts at present? Mainstream recruiting practices and technologies have neglected to channel diverse talent into growth jobs. This failure is a result of two factors. First, employer job descriptions are loaded with needless “upcredentialing,” most commonly in the form of bachelor’s degree conditions for roles not requiring them for the tasks at hand. For example, 65 percent of secretarial jobs now require a bachelor’s degree, though less than a fifth of current secretaries have one. As a result, those without bachelor’s degrees—that is, over 60 percent of the US labor force, including underrepresented racial and underemployed low-wage employee groups—are disqualified from the outset. Second, recruiting technologies do not correct for this upcredentialing and instead mechanically match job candidates to roles, for example, through basic key-word searches or Boolean expressions. It is almost impossible for someone without a past experience nearly identical to the desired role to be matched to it, doing little more than locking-in employees to lateral moves (i.e., blue-collar to blue-collar or white-collar to white-collar sideways moves across analogous jobs). Furthermore, it prevents employers from finding sufficient and diverse talent to fill their growing needs.
Equally problematic are the scant public- and private-sector development efforts for training today’s labor force for the challenges of tomorrow. Traditional secondary education leaves employers and employees unprepared for the vast needs of the digital economy, particularly in the US, which trails behind the average of OECD economies in secondary math performance and in adult numeracy proficiency. This widens the opportunity deficit between our nation’s top performers/earners and the rest, who crave the kind of personal satisfaction made possible from employment worthy of their capability and ambition.
Put simply, when it comes to our labor markets, we are losing. And when it comes to the American worker, we have abandoned them.
A New Social Contract with the American Worker: Three Pillars for Success
We are living through a transformation of work brought on by artificial intelligence (AI). MIT economists estimate that one additional robot in a commuting zone results in a decline in the employment-to-population ratio by 0.2 percentage points and wages by 0.42 percent. AI-based automation can strike decisively and with little warning, essentially in the time it takes to develop and deploy an algorithm across a hosted network or through a lightweight device, as we’re seeing with the wholesale elimination of call center representatives by chatbots and fulfillment center workers by squat, rechargeable robots.
And as a nation, the US spends less than nearly all other industrialized economies on so-called active labor market policies (ALMPs) that train and advance the careers of its workers. As of 2016, America’s ALMP expenditures topped off at 0.1 percent of GDP, a mere fraction of the OECD average of 0.52 percent and global leader Denmark’s 1.96 percent.
Our research group proposes three main pathways for returning all citizens to the dignity of work:
1. Private Sector Must Lead the Upskilling Revolution
Employers must take the lead in ensuring employees reach their potential. Unfortunately, as a nation, we are falling short in supporting the skills needed by the workforce. While the federal government is spending $180 billion annually on higher education, its investment in training and workforce employment programs is a paltry $12 billion. Despite injecting degree-bias into job descriptions for roles not requiring them, employers are simply not pulling their weight when it comes to developing their own workforce.5 According to an Accenture survey, only 21 percent of US workers reported receiving employer-sponsored training in the previous five years and, as recently as 2017, only 53 percent of employers offered any form of tuition assistance, down from 66 percent less than a decade earlier. Compare that to over 40 percent of surveyed employees in European countries, such as Norway, Ireland, France, and Italy, who reported participating in continuous vocational training provided by their employers.
On-the-job training plays a fundamental role in advancing work-ready employees into higher-demand roles. Employer-backed apprenticeships are among the most effective and proven vehicles for doing just that. Once again, Europe provides a good view into the social and financial benefits of early-intervention apprentice programs.
In Switzerland, for example, student pairing with businesses begins at the age of sixteen, with 71 percent of high schoolers participating in all fields (trades, blue- and white-collar occupations). Spending up to three days per week working in industry-specific training, the Swiss youth earn a monthly stipend of between $800 and $1,400. Upon graduation from high school at the age of nineteen or twenty, students leave with a diploma, several years of work experience, a sizable savings cushion, and typically an in-hand offer from an employer or a targeted higher-education pathway. Neighboring Germany provides a further blueprint for early apprentice-based occupational development. While only 5 percent of the youth in the US train as apprentices, the number is closer to 60 percent in Germany across such diverse fields as hospitality, banking, IT, and advanced manufacturing. Embracing the concept of dual training, apprentices split their time evenly between classroom instruction and on-the-job-training, ensuring their academics keep pace with their practical skills development. Likewise, Singapore offers an example of on-the-job training and apprentice options for those later in their career, enabled by government-supported mid-career switches and attachment opportunities, which job candidates may apply to on the MyCareersFuture platform.
The training lag in the US must be reversed, and the spark must come from corporate employers this decade, before the full force of AI-led automation is felt. The good news is a number of US businesses are taking charge in readying their workforce for the digital economy and future-proofing their employees from obsolescence, serving as a model for others to emulate. For example, Amazon recently pledged to spend $700 million to train 100,000 employees for in-demand roles by 2025, leveraging its home-grown technical academy and machine learning university. In the early 2000s, John Deere partnered with community colleges to develop a two-year associate’s degree open to anyone with a high-school diploma, landing most graduates in full-time roles with dealerships. Perhaps at the head of the corporate class, multinational consumer goods giant Unilever launched a Future of Work initiative in 2016 comprising a framework for readying its 150,000-plus workforce for digitization and automation, transforming the way it recruits, on-boards, trains, promotes, and even off-boards its employees.
2. Public Sector Role: Policy Incentives for Building the Workforce of the Future
To truly activate employer skills initiatives, American policy makers must pave the way with sensible but aggressive policy initiatives. While incentives to help employees with displacement are in place, they have narrowly focused on specific sources of labor disruption. For example, Trade Adjustment Assistance provides training and other workforce benefits to those displaced due to international trade. But the labor market is ever changing, with new disruptions arising each day, whether due to global pandemics, technology, or financial crises. To ensure their resilience in the face of dynamic market conditions, such incentives should be agnostic to the exact source of involuntary labor market disruptions that cause job displacement or skills redistribution.
Two such policy incentives are Lifelong Learning Accounts (LLAs) and Worker Training Tax Credits. LLAs are employee-owned accounts that help pay for professional training. There are numerous options, but fundamentally, they operate much like a 401(k) or a health savings account, creating tax-favorable training incentives for employees in low- to mid-wage occupations. Most variations will include employer and/or government matching up to a capped amount. Current US programs generally only cover employees, but given the trends toward a gig economy, they would benefit from expanding their coverage. Illustrative examples include Canada’s learn$ave, France’s individual learning accounts, and Singapore’s SkillsFutureCredit, which broadly cover employees, the self-employed, jobseekers, and inactive workers.
Expanding the Worker Training Tax Credit and the Tuition Reimbursement allowance cap would further unlock the potential of competency-based learning. Under current US tax law, an employer can deduct employee training costs it accrues, but the deduction is generally limited to trainings required as a condition or requirement for continuation or improvement in their existing role. Much like the Research and Development Tax Credit incentivizes a firm’s investment in innovation, an expanded Worker Training Tax Credit applied toward broad employee training and skills development would assist employee movement toward higher-wage and higher-impact roles. Similarly, extending the $5,250 tuition reimbursement income allowance to cover new trade or occupational skills development and otherwise loosening its stringent requirements would arm employees with the financial backing to pursue credentialing or certificates in more highly desired and compensated occupations.
3. The Role of AI and Technology in Workforce Transformation
Let us not forget how we arrived at this point, acknowledging that AI and automation pose significant displacement risks to the labor market. While that is undeniable, AI also presents itself as a generationally transformative technology that must be leveraged for the US to meet the innovation challenges of the global economy.
Nations that have embraced—rather than ignored or retreated from—technological progress serve as a playbook for economic prosperity. The tiny Baltic nation of Estonia is a case in point. The Economist describes its evolution from one of the least advanced nations technically in 1991 (less than half of its population had fixed-line telephone service) to among the most advanced two decades later. The national agenda started with a declaration of internet access as a human right, thereby ushering in free web services to its citizenry, a simplified tax code, aggressive privatization of industry, and entrepreneurial investment. By 1998, it had equipped its classrooms with computers, and its secondary education curriculum moved online. By 2007, it had become the first nation to adopt online voting, and has boasted among the most startups per person globally. Certainly, its small size and cultural and language homogeneity played a role in its transformation. But many lessons can be learned from its example of combining an embrace of technical advancement coupled with aggressive policies that activated the entrepreneurial spirit within its citizens.
Job Intermediaries Can Help
The promise of technology to lift all careers was the genesis of the founding of our startup, Fork. Using machine learning, it delivers aspirational yet achievable career pathways for employees that move them away from declining jobs and toward higher-growth and higher-wage occupations, and this includes blue- to white-collar transitions. With some recommended upskilling, we could see many possible career transitions—like a factory worker to a solar installer, a telemarketer to a software tester, and a retail salesperson to an account executive. Technologies such as these are needed to support employee growth across careers, while discarding the outdated and biased recruitment tools and practices in use for decades.
In order to address the skills gap in the US, “job intermediary organizations” have emerged to help the massive pool of capable and teachable alternative-pathway employees navigate the job market. For example, State Street Bank formed the Boston Workforce Investment Network (“Boston Wins”) to establish education and apprenticeship opportunities in the financial services industry for those from marginalized backgrounds. CareerWise Colorado enrolls high school students in a three-year program that delivers paid work experience with local businesses within an industry of their choosing. In addition, employee-facing platforms and communities have emerged that leverage the reach of the web to get people jobs. For example, Apprenti increases diverse hires in technology and iRelaunch activates return-to-work adults and its 82,000 strong membership of career “relaunchers” through apprentice positions at Fortune 500 companies. Other communities include Opportunity@Work that provides a marketplace for employers to match with those “skilled through alternative routes” and Jobcase that serves as a “people-first social platform” to “empower workers.”
An Auspicious Storm
Two timely developments stand to usher in these transformations: the proliferation of online learning and the vast work-from-home reset from COVID. While zip code historically has been a leading indicator of educational opportunity as well as overall financial well-being, the ongoing forced experiment of online learning and remote work has opened up a world of possibilities for technology to serve as the great equalizer toward accessible education and career opportunities for all. Those employees who were otherwise shut out of working for mega firms in superstar cities due to mobility constraints will no longer be limited to jobs in their immediate locale. Indeed, the expectations and preferences of both employees and employers are coming together on the possibilities. A recent, post-COVID survey reveals that 65 percent of American workers will seek more flexible work arrangements and autonomy in the future, and 90 percent of business leaders see talent platforms as keys to their future success. Perhaps as the silver lining to the deep pain felt by so many from this destructive virus, this is exciting and welcome news indeed.
The United States stands at a crossroads: Stay the course and watch its labor force and economic standing continue a backward slide on the global stage; or accept head-on the opportunity to reignite the self-fulfillment of purposeful work within all Americans and recapture the nation’s standing as a technology and innovation leader. Now more than ever, the ability to engage and educate displaced or disregarded individuals matches the urgency companies face to fill roles created by the growing digital economy. American businesses and policy makers should follow the example of fellow nations to adopt innovative training paths and incentives to allow all to pursue and realize the dignity of meaningful work.
—Nick Psyhogeos, Fellow, Weatherhead Scholars Program, Weatherhead Center for International Affairs at Harvard University; and Nataliya Langburd Wright, PhD Candidate, Harvard Business School.
Nick Psyhogeos is a Fellow in the Weatherhead Scholars Program at the Weatherhead Center for International Affairs at Harvard University. He is also general counsel and chief growth officer at Pattern Computer, and cofounder and CEO of Fork, Inc. His research interests focus on artificial intelligence and the future of work, including the application of technology to advance the careers of the underemployed.
Nataliya Langburd Wright is a PhD Candidate at Harvard Business School. She cofounded Fork, Inc., served as a senior technology consultant at the World Bank and staff economist at the White House Council of Economic Advisors, as well as advised/mentored future of work and technology social enterprises and startups across the US, Europe, and Asia. Her research focuses on issues at the intersection of global strategy, digital economy, and entrepreneurship issues.
- Replica of 'Maria' robot, designed and made for Fritz Lang's film Metropolis, 1927. Built by prop-makers KropserkelScience Museum Group Collection Online, Object Number 2016-343. Accessed March 16, 2021. Credit: The Board of Trustees of the Science Museum, London (CC BY-NC-SA 4.0, background color added to original)
- Public expenditure on activation policies in 2017 as a percentage of GDP. Data on Active Labour Market Policies: The labour market policy statistics covers public interventions in the labour market aimed at reaching its efficient functioning and correcting imbalances. The primary target groups are those people unemployed or employed at risk of involuntary job loss. Accessed March 16, 2021. Credit/data source: OECD.Stat
- Apprentices at Unilever Overview, YouTube. Accessed on March 17, 2021. Credit: Unilever UK Apprenticeships
- Older adults are set to outnumber children under age 18 for the first time in our history by 2034. By 2030, the entirety of the 70M+ baby boom demographic will be aged 65 or over (US Census Bureau), signaling a potentially harsh labor and skills shortage in the near future.
- Analysts estimate that one-third of activities in 60 percent of all occupations will be automated, requiring up to 54 million Americans to change occupations over the next decade alone (with upskilling needed for those hoping to keep pace). “Jobs lost, jobs gained: What the future of work will mean for jobs, skills, and wages,” McKinsey Global Institute, November 28, 2017. Accessed March 16, 2021.
- More than one-third, or 57 percent of the US workforce are part of the gig economy. Due to mobility restrictions, family care obligations or other reasons, workers are increasingly turning to part-time or consulting-based employment. Gallup, 2018.
- Pew Research data reflects that while the trend is on the upswing, only about 40 percent of US millennials (25–29) have a bachelor’s degree, with sharp contrasts across racial lines: 65 percent of Asians, 47 percent of whites, 27 percent of Blacks, 21 percent Hispanics. “Today’s young workers are more likely than ever to have a bachelor’s degree,” Pew Research Center, May 16, 2017. Accessed March 16, 2021.
- An HBS study estimates that more than six million jobs are at risk of degree inflation. “Dismissed By Degrees: How degree inflation is undermining U.S. competitiveness and hurting America’s middle class.” Published by Accenture, Grads of Life, Harvard Business School, October 2017. Accessed March 22, 2021.