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MAR 15

Technological disruption and the future of work

Technological progress leading to mechanical automation has already changed how people work around the world, but advances, particularly in software and computing power are opening up new possibilities of automation and disruption. This change was described recently by Xero Managing Director Chris Ridd, “anything that can be automated will be through software”. Workers, businesses and policy makers will all need to consider the ramifications of these deep changes into the future.

Such automation, software solutions and communication technology will inevitably start to add global pressure on our service sector, which is often referred to as the non-traded sector, because they previously could not be traded across borders. This will mean over time service providers such as accountants, drivers, lawyers, and even doctors will increasingly find themselves competing on the world stage. Imagine, for example, what autonomous vehicles will mean for the transport / delivery service sector and the impacts on the use of transport infrastructure.

These advancements will improve utilisation, greatly increasing the productivity of many services. The sector has generally lagged behind in productivity improvements because of much lower competition, causing rising costs well above the average rate of inflation. However the potential loss of jobs in many sectors will need to be a key policy consideration in future.

These advances, particularly in internet speeds, communication technology and algorithms that can cope with uncertainty will also add competitive pressure in areas such as education. Skilled educators can now reach much further than just a physical classroom or lecture theatre, due to Massive Open Online Courses (MOOC), many offered free by universities around the world ( is one example). Such technology and wide reach lowers the cost of the courses to near zero, and with the current trend of rising education costs around the developed world, it is feasible to see such online courses playing a bigger part of our education picture in future. This however will be disruptive for many educators and institutions which are already feeling pressure; yet more work for policy makers.

While this is a challenge and great opportunity for the education sector, the availability of these online courses may greatly improve the ability of businesses everywhere to train their staff and improve skills and knowledge, and give many people access to education which has previously been out of reach, thereby further increasing competition.

The manufacturing sector has long felt global competitive pressures, either as exporters, or by competing with imports in the New Zealand market. This pushes our manufacturers to stay on the cutting edge and innovating to take advantage of new technologies to stay competitive against firms located in countries with different competitive advantages, such as low cost labour, policy support and even their monetary policy depressing their currency’s value. While this pressure inevitably leads to the end of some firms that are unable to adapt, there is equally a huge amount of successful and innovative manufacturing companies that remain and start up in this competitive global environment.

The potential disruptions in the service sector in the future are yet another reason to have a policy focus which aims to promote the manufacturing and exporting sectors, to support a solid economic base that can thrive through future disruptions. Firstly, manufacturing activity helps to raise our overall economic complexity, which helps create the knowledge, skills and technology to continue to innovate, grow, and stay competitive in the future. This is why supporting and promoting activities like Research and Development (R&D) is so important, as the spill-over benefits in terms of economic growth, complexity and job creation can far outweigh the costs – R&D is vital to staying competitive.

A focus on fostering the skills needed in the sector is equally important. For most manufacturing firms, finding the highly skilled workers they need is not always an easy task. To this end, promoting understanding between the manufacturing sector and educators is important to ensure the training matches the needs, MOOC will intensify competition between educators and also between those who consume and apply the education.

The Manufacturing Inquiry completed in 2013 remains a great starting point for policy makers to consider when trying support the sector, by being informed directly by manufacturers. And while future disruptions are hard to predict, some change is inevitable – but a strong and resilient manufacturing sector can go a long way to making sure our country and people can thrive.

tags: exports, manufacturing, innovation, work, employment, automation, competition, education
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