The Future of Work – Five policies to help the middle class from displacement

A range of sensible policies at the federal and state levels can help limit worker risks of displacement and support adjustments when such displacements occur.

Education for 21st century skills

For instance, students at all levels of education will need better preparation in what are often called “21st century skills.” These include communication and a range of social and interactive skills (such as the ability to work in teams), as well as critical thinking and various kinds of problem-solving abilities. Workers with more such skills will likely be more complementary with and less substitutable by automation, while also finding it easier to retrain for a range of new tasks that will need to be performed following automation. It thus makes sense that educators in primary, secondary and postsecondary institutions should put greater emphasis on teaching such general skills, and policies should encourage this.

But the issue is complicated by the following fact: the programs that most successfully raise skills among low-income workers (when rigorously evaluated), and prepare them for possible entry into the middle class, tend to be specific to a sector with high unmet demands for workers, such as health care, advanced manufacturing, information technology, and transportation/logistics. Such programs include those based on partnerships between industry representatives and community colleges, brought together by a knowledgeable intermediary; or those more specific to employers in these industries, like apprenticeship.

Of course, the narrower and more specific the training, the greater the risks of displacement for workers trained in those skills in a dynamic and uncertain future labor market. On the other hand, given the fact of high current demand and compensation for such skills, and possible entry into the middle class for workers who have them, it would make it foolish not to provide them to currently low-income workers. Still, having more of the 21st century skills would likely help workers perform better in these jobs, and make them more trainable in the future. Thus, wherever they can be provided, a good mix of general and specific skills should be imparted to those being trained for specific occupations and industries. This should be true in high-quality career and technical education (CTE) beginning in secondary school as well as in higher education.

Lifelong learning accounts / Retraining support

Besides earlier educational preparation, what more can be done to help workers adapt when automation threatens them with job displacement? Financial support for retraining could be important here, and two forms of such funding could particularly help. First, states can create personal “lifelong learning” accounts into which workers pay a small percent of payroll each period, thus creating a fund for new education or training if/when displacement occurs. Indeed, the states of Maine and Washington already do so, and more might soon join them. Second, federal or state governments can provide financial and technical assistance to firms for on-the-job training, thereby encouraging employers to retrain rather than displace their employees.

This will have some appeal to employers, since it will enable them to retain employees with good track records, and avoid recruitment and screening costs for new employees of uncertain ability. And the new expenditures could perhaps be financed by a new tax on worker displacement, since these impose a cost on society which employers should be required to partly carry.

Workforce support

A wider range of additional policy initiatives could help as well. First, a more robust set of workforce services would help workers reeducate and relocate themselves. Information on career and training options as well as new jobs are available to workers at over 3000 of “America’s Job Centers” (formerly called One-Stop offices) around the country, though their funding and therefore their staffing quality has been quite limited. Improving the academic and career guidance available at community colleges would be very important as well.

Wage insurance

Many workers who will be displaced over time but not retrained will likely face a future of lower wages than before or no work at all. For them, some form of “wage insurance” makes sense. Such a program would compensate displaced workers for some part of their job loss – say, half – for a period of years. Thus, workers who formerly earned $30 an hour but only $20 now would receive $5 from the government for a period of time, such as five years. They would therefore be incentivized to work and would also receive needed financial assistance at the same time.

Unemployment and Disability Insurance reform

Finally, a set of reforms in our Unemployment and Disability Insurance systems might be warranted too. Reforms in the former might encourage them to obtain new training while they receive their stipends, while those in the latter would encourage workers and employers to engage in work rather than permanent lack of work for those with only moderate conditions.

I believe this set of proposals makes vastly more sense than others, like guaranteed public employment or universal basic income payments, which would be hugely more expensive to implement and would not incentivize everyone to do whatever is necessary to stay employed.

Employers: Take the high road

Though most of our policies above are aimed at helping workers adjust to automation, we should also have an overall policy goal for the employer side of the job market: encouraging them to take the “high road” in worker compensation and to actively invest in their employees as workplaces automate, to increase their productivity and performance. Economists have long argued that, in many industries, employers have some choice over whether to compete on the basis of high worker productivity and performance or merely low labor costs. Employers choose between these strategies, often called “high road” and “low road” approaches, early in the lives of their establishments, though they can also shift their strategies over time. Since “high road” employers invest more in their workers’ skills, and often allow them more “voice” in the operation of the workplace, they will be more open to implementing new automation in ways that are “worker-friendly” and to retraining them over time. Such approaches should be encouraged by policy at all levels.

Overall, the policies I propose will not completely protect the middle class from the disruptions and displacements they will likely face in the coming decades. But they will certainly help millions of workers join this class or remain there in the face of displacement risks, and will raise the net positive effects on workers that always result from automation.

Chosen excerpts by Job Market Monitor. Read the whole story at The robots are coming. Let’s help the middle class get ready.

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