The new work order - Ensuring young Australians have skills and

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The new work order

Ensuring young Australians have skills and

experience for the jobs of the future, not the past.

2 The New Work Order

The content of the report was prepared for the

Foundation for Young Australians by AlphaBeta.

AlphaBeta is a strategy and economic advisory business

Singapore and Sydney.

At the Foundation for Young Australians (FYA), we

believe young people are ambitious, creative and

capable of rethinking the world and solving tomorrow’s

problems today.

FYA is a national for-purpose organisation that is all

about backing the next generation of young people

who are going to rethink the world and create a

better future. At FYA we connect and inspire young

changemakers - the innovators, the makers, the

dreamers, the thinkers, the doers and the creators.

Find out more at fya.org.au

1968. Unless otherwise stated, no part may be reproduced by any process, unless permitted by the Australian

Young Australians.

The materials presented in this report are for information purposes only. The information is provided solely on the

basis that readers are responsible for making their own assessments of the matters discussed. Readers are advised

to make their own enquiries and to obtain independent advice before acting on any information contained in or

connected with this report. While every eort has been made to ensure that the information is up-to-date and

accurate, the Foundation for Young Australians will not accept any liability for any loss or damages that may be

incurred by any person acting in reliance upon the information.

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FOREWORD 2

1. OVERVIEW 5

2. THREE FORCES SHAPING THE FUTURE OF WORK 11

2.1 Automation 11

2.2 Globalisation 13

2.3 Collaboration 15

3. OPPORTUNITIES IN THE NEW WORLD OF WORK 17

3.1 Lower barriers 18

3.2 More exibility 19

3.3 Wider markets and more specialization 20

4. RISKS IN THE NEW WORLD OF WORK 23

4.1 Unemployment 23

4.2 Inequality 26

4.3 Insecurity 27

5. HOW TO MAKE WORK “WORK” FOR YOUNG PEOPLE 28

5.1 Policies to enable 30

5.2 Policies to protect 38

END NOTES 43

REFERENCE LIST 46

Contents

2 The New Work Order

Foreword

The future of work is changing. It’s a reality governments, industry and communities

are all grappling with. The Reserve Bank of Australia has raised concerns regarding fewer

working taxpayers to older people as the baby boomers retire and young people do not

replace them. We will need an innovative and entrepreneurial generation of young people

to maintain our standard of living.

The Foundation for Young Australians previous report

in this series, Renewing Australia’s Promise, clearly

identied we are not investing in our young people to

meet this challenge with 30% currently unemployed

or underemployed and a generation more in debt and

unable to access home ownership than their parents.

Graduates are nding it harder to nd employment and

employers are reporting mismatches in the skills young

people are learning and those industry requires.

The New Work Order, shows that more issues are ahead

for young people as the most signicant disruption in

the world of work since the industrial revolution begins

to have an impact in the next decade.

Economic changes are transforming work through

automation, globalisation and more exible work. This could

bring opportunity. But it could also further disadvantage

young people in labour markets. For example, the report

shows currently around 70% of young Australians are getting

their rst job in roles that will either look very dierent or be

completely lost in the next 10 to 15 years due to automation.

Nearly 60% of Australian students (70% in VET) are currently

studying or training for occupations where at least two thirds

of jobs will be automated. Over 50% of jobs will require

signicant digital skills and yet our young people are not

learning them in schools.

At FYA we see a signicant opportunity to sure up our nation’s

future by investing in the next generation and backing them

to create the kind of world they want to live in. Core to this will

be a generations of enterprising young people who are job

builders and creators, not only job seekers.

That’s why FYA is calling for a national enterprise skills

strategy to ensure young people are prepared for the

economy of the future and equipped with the tools to

drive economic and social progress. We want all young

Australians to learn the skills to be digitally-literate,

nancially-savvy, innovative and adaptable and help

them navigate complex careers of the future.

Enterprising skills are transferrable across dierent

jobs and are a more powerful predictor of long-term

job success and performance than technical knowledge.

They include communication project management

nancial literacy digital literacy and the ability to

critically assess and analyse information, be creative

and innovate. An enterprising skills education would:

> begin early in primary school and build consistently,

year on year, throughout high school

> be provided in ways that young people want to learn:

through experience, immersion and with peers

> provide accurate information and exposure about

where future jobs will exist and the skills to cra and

navigate multiple careers

> engage students, schools, industry and parents in co-

designing opportunities in and outside the classroom.

Our policy choices today will determine whether

Australia’s young people are ready to take on the

challenges of the future for decades to come. These

are not just challenges for individual young people.

They are challenges for our nation.

We must act now to ensure young Australians can thrive

in this new work order.

Jan Owen AM

CEO

Foundation for Young Australians

fya.org.au 3

Preparing young people for the new future

of work is an issue of national importance.

4 The New Work Order4 The New Work Order

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Work has long been important for the

livelihood, dignity, and happiness of

humankind. We intuitively and statistically

know that work helps us meet our most

basic and complex needs, providing a path

towards nancial security, mental and

physical health, dignity and meaning. For

at least the past century, the prospect of a

good job that pays a fair wage has been part

of Australia’s promise to our young people.

By many measures, Australia has continued

to deliver on its promise. We have enjoyed

relatively strong economic growth, high

wages and low levels of unemployment.

1. Overview

But beneath the seemingly benign surface of Australia’s

labour market, there is a quiet revolution occurring in

the way we work. The old ‘blue collar’ part of workforce

is barely recognisable today. As the factories in our

urban manufacturing suburbs have been closed down

or automated, the manual jobs they once provided

have been decimated. Over the past 25 years, we have

lost around 100,000 machinery operator jobs, nearly

400,000 labourers, and nearly 250,000 jobs from the

technicians and trades.

Osetting these losses, there

has been an explosion of more than 400,000 new jobs

in community and personal services. The work

revolution is no less visible in what we used to call

‘white collar’ jobs. Computers have swept through

corporate towers and small business oices, displacing

nearly 500,000 secretaries and clerks. At the same time,

the increasing complexity of business processes and

nancial markets has created 700,000 new jobs across

the professional and business services.

While our unemployment rate may be low, our

factory floor workers have not seamlessly switched

their hard hats for a healthcare job. Instead, unskilled

workers, especially men, have stepped out of the

labour force on mass. Over the past 25 years, nearly

one in ten unskilled men lost their jobs and did not

return to the labour force. Today, more than one in

four unskilled men don’t participate.

Big economic

shifts are not costless for everyone.

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6 The New Work Order6 The New Work Order

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Young people already struggle with challenging pathways

into work. Around Australia, nearly one in three young people

are currently unemployed or underemployed. On top of this

staggering underutilisation of our young talent, around one

in seven young people who are not studying have stepped

out entirely from the labour force and don’t appear in the

unemployment gures. For those who are working (and not

studying), the work is oen part time. More than one in three

15-19 year olds (39%) who are not studying and one in four

20-24 year olds (26%) are in part time work.

Looking forward, the revolution in work for young

Australians will be driven by three economic forces.

Automation: Ever-smarter machines are

performing ever-more human tasks – taking,

replacing or eliminating the need for whole

categories of employment.

The technologies that automated millions of routine

transaction jobs (such as clerical work) and production jobs

(such as assembly-line work) are now rapidly encroaching

on more complex routine and non-routine tasks. In Australia,

some 40% of our current jobs are considered at high risk of

automation over the next 10-15 years.

Critically, our young

people are not being trained in the jobs that will survive

automation. More than half of young Australian students

are currently getting educated for dying jobs nearly 60% of

students are being trained in occupations where the vast

majority of jobs will be radically aected by automation

in the next 10-15 years. If we focus on VET students, this

number rises to 71% of students.

Globalisation: Our workforce is going global and the

global workforce coming to us.

The globalisation of labour is not a new phenomenon

and in the future, we should expect to see the continued

rise of trade and the physical mobility of people. Australia

has already lost hundreds of thousands of manufacturing

jobs to competing locations around the world. Now, new

technology platforms are making it possible for foreign

workers to do jobs in Australia from remote locations

including legal, IT, design, architecture and business services.

Research suggests that up to 11% of service sectors jobs may

be at risk from being lost to workers undertaking jobs

in Australia from foreign countries.

Collaboration: Technology is increasing the

potential for cooperation and collaboration

across multiple platforms.

While the archetypal worker is a full-time employee on

an indenite contract, the future will see the continued

rise of the exible worker engaged in work with a range of

dierent employers, potentially at the same time. Since

the 1990s, more than half of the jobs growth across the

OECD (54%) has been in roles that are temporary, part-

time or self-employed.

Such gures, which typically

account for only the primary source of income, might

mask an even wider trend towards multiple sources of

secondary income. Survey data suggests that some 30%

of Australia’s workforce are engaged in exible work,

including moonlighting, multiple part-time and casual

roles, and independent contracting.

8 The New Work Order

These forces present massive changes in the way we work

and will throw open new opportunities for young people.

> Lower barriers: The barriers to entrepreneurship are

falling. Technology and globalisation are making it

easier and cheaper at multiple stages in the lifecycle

of a start-up.

> More exibility: New technologies and ways of

working are providing unprecedented exibility in

how and where people work, which is one of the key

drivers of worker happiness. Looking ahead, around

70% of Australia’s <34 year olds are open to using a

digital talent platform (e.g. Airtasker, Freelancer) to

source income in the next year. Research has indicated

that adoption of digital talent platforms in Australia is

estimated to add 1.9% to GDP and 271,000 jobs by 2025

as a result of higher participation and hours worked,

lower unemployment and higher productivity.

> Wider markets and specialisation: Technology

has accelerated the division of labour and enabled

companies to divide up work into ever-smaller tasks

that can be sourced from a global labour pool. Young

people in Australia are getting more educated and

graduate at higher rates than OECD averages.

The eects of the forces in the future of work are not

ambiguously positive and will present key risks for the

ongoing promise of safe jobs and decent pay. Given their

relative disadvantage in the labour market, young people

are likely to bear a lion share of these risks.

> Unemployment: One risk is growing unemployment.

Already nearly one in three young people in Australia

are either unemployed or underemployed. And over

the past 25 years, nearly one in ten unskilled male

workers lost their jobs and never found another.

Today, more than one in four working-aged unskilled

men are neither in work nor looking for a job.

The occupations that help young people get their

foothold in the workforce are dying. Around 70% of

young people in Australia currently enter the labour

market in jobs that will be lost or radically aected

by automation over the next 10-15 years.

> Inequality: Another risk is rising inequality. As skilled

labour becomes more valuable, and unskilled labour

becomes a global commodity, incomes are likely to

continue to diverge. Pay for the skilled will rise, while

unskilled workers will be forced to compete with low

cost automation at home and foreign workers abroad.

Already these forces have contributed to growing

inequality in Australia. Over the past 15 years, incomes

of the top 10% have grown 13% higher than the bottom

90%. Incomes of the top 1% have grown 42% higher.

> Insecurity: Finally, the future of work contains a risk

of increased employment insecurity. More than half

of new jobs in advanced economies since the 1990s

have been temporary, part-time or self-employed.

The collaborative economy presents enormous

opportunities, but important questions remain

unanswered: how will the collaborative economy

maintain social protections? How can perpetually

exible workers access entitlements like minimum

wages, insurance, sick leave and parental leave?

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Globally, these policy options have generated dierent social and economic returns.

Promisingly, many of these policies

have enjoyed signicant positive impacts on growth, employment, income and equity.

The future of work, especially its inherent risks, need not be cast in stone for young Australians. The critical question

for Australia is: How do we ensure that the future of work maintains reward and opportunity for all young Australians?

The answer depends, in part, on our policy responses. In this document, we look at some of the ways policymakers around

the world are dealing with similar challenges and opportunities. We have observed policies that both enable participation in

this future of work and protect workers from the downsides. Many of these policies are worthy of consideration in Australia.

We can take active steps to both enable young people in this future and oer protections against the worst risks.

10 The New Work Order10 The New Work Order

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The future of work for young Australians

will be characterized by exibility and

continuous change in how, what and where

young people will work. The three key

forces that will shape the future of work

are: automation: ever-smarter machines

performing ever-more human tasks;

globalisation: our workforce going global

and the global workforce coming to us;

and collaboration: many jobs, with many

employers, oen at the same time. Other

non-economic forces such as climate change

and sustainability are not covered in this

report, although the impact of such forces

on work will be signicant.

2. Three forces shaping

the future of work

2.1 AUTOMATION

Ever-smarter machines performing

ever-more-human tasks

Concerns that smart machines will herald the ‘end of

work’ have abounded for the best part of two centuries.

The Luddites famously protested the introduction of

labour-economizing technologies in their textile factories

in the early 1800s. As the snapshot of work over the

past 25 years in Australia shows, unemployment has

not been driven to astronomical heights. However, the

composition of the workforce has undeniably shied

towards skilled workers, and dierent groups have

been winners and losers as a result.

Fig 1. Smart machines will impact dierent types of jobs in dierent ways

12 The New Work Order

To breakdown and understand the impact of technology

(especially automation) on jobs, economists have

classied occupations as comprising cognitive and

manual tasks, which are performed in either routine

or non-routine ways (see Figure 1).

Technology has

aected the relative share of routine and non-routine

jobs in our workforces. Specically, both cognitive and

manual routine jobs (procedural, rule-based activities)

are well suited to smart machines and, as a result,

occupations like brokers and factory workers have

increasingly been automated. Non-routine work, which

requires interpersonal or environmental adaptability or

problem solving and creativity, are less exposed to the

rise of smart machines. However, as smart machines

learn to recognize visual and language cues and develop

situational adaptability (like driverless cars), the machines

will increasingly compete for manual non-routine jobs

and some cognitive jobs.

The impact of smart machines is a global phenomenon

and the Australian economy is no exception. Over the

past 25 years, the highest jobs growth has been enjoyed

in occupations that are either high touch or high skill (see

Figure 2). The number of jobs in community and personal

services has grown 87%, aer accounting for total growth

in the labour force, and the number of jobs in professional

occupations has grown 54%.

As the snapshot of

Australia’s workforce in the past 25 years showed, the

winners of this trend have been skilled workers and

women. Conversely, medium and lower skill occupations

have experienced either no growth or negative jobs

growth, once we account for total growth in the labour

force. The losers in this trend have been the unskilled,

and especially unskilled men. While their unemployment

rate is only marginally higher than the national average,

the proportion of unskilled men that have stepped out of

the labour force (rather than moving onto unemployment

rolls), has dramatically increased from 20% to 28%.

Fig 2. Occupations that are high skill or high touch have grown,

while lower skill routine occupations have shed jobs, 1991 to 2015

% growth in # of jobs by occupation – growth in total labour force

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2.2 GLOBALISATION

Our workforce goes global and the global

workforce comes to us

The globalisation of labour is not a new phenomenon.

For at least 50 years, many companies have viewed

their potential labour pool as global. Companies exibly

manage labour from dierent countries in dierent

parts of their supply, production, distribution and sales

channels. Technology intensies the globalisation of

labour, by enabling employers and workers to more easily

connect and transact across geographies.

In the future, we should expect continued physical

mobility of labour. Indeed, the physical mobility of

labour is so mainstream that a survey of more than

200,000 individuals worldwide found that nearly 2 in 3

respondents were already working overseas or willing

to move abroad for work.

While the physical mobility of labour is nothing new, the

rise of the virtual global worker is a new and potentially

very disruptive force. Technology, especially digital talent

platforms like Upwork, enables talent to provide their

services to a global employer base and still remain in their

local geography to conduct the work. In particular, online

talent platforms allow companies (especially SMEs) to tap

into talent from geographies that are lower cost or hyper-

specialized in skills. As Bill Gates has observed, “We’re

going to tap into the energy and talent of ve times as

many people as we did before.”

Indeed, the relocation of global manufacturing and

its supply chains to geographies with cheap labour

may well be repeated in other areas of work, but this

time with remote service work. Economists have

estimated that 11% of the world’s service jobs can be

performed remotely.

As Figure 3 shows, over the past 15

years there has been strong growth in the labour services

purchased from abroad by Australians in computer and IT,

technical and trade, professional and nancial services.

In some categories, such as IT, services purchased from

abroad are growing at a much faster rate than our sales of

services to the world. In absolute terms, the amount sold

abroad by Australians does not exceed the amount we

purchased in any of the services listed in the graph.

The birth of online digital platforms will only intensify this

trend. Australians will now need to compete with virtual

talent from many other countries. Australian businesses

are already sourcing work remotely. Australia is not

among the top ve source countries for work paid by

Australian businesses on Upwork. Before allocating work

to Australians online, Australian businesses are sourcing

work (especially IT work) from India, Philippines, US,

Bangladesh and Pakistan.

Fig 3. Australia has substantially grown the services it has

bought and sold abroad

% growth of trade in services (1999-2014)

14 The New Work Order

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2.3 COLLABORATION

Many jobs, with many employers,

oen at the same time

When we imagine the archetypal worker, we think of a

full-time employee on an indenite contract. However,

this model of work has only been dominant for around

60 years. Again, we are witnessing the rise of the exible

worker. Since the 1990s, nearly 60% of the growth in jobs

across the OECD has been in jobs that are temporary,

part-time or self-employed (see Figure 4).

Such gures,

which typically account for only primary income, might

mask an even wider trend towards multiple sources of

secondary income. Indeed, recent survey data suggests

that up to 30% of the Australian workforce

are participating in exible work arrangements, where

they take a portfolio approach to their working life.

This force is unlikely to herald the death of the rm.

For many tasks, rms will remain the most eicient way

to organize resources. However, as technology lowers

the transaction costs and risks associated with nding,

verifying and paying for talent, the logic of the rm won’t

hold true for all tasks, and we’ll continue to see exible

forms of work on the rise.

Fig 4. Most jobs created in the OECD were temporary,

part-time and self employment

% of jobs growth in nonstandard and standard work,

1990 to 2015

“As the world has gone at, (Bill)

Gates said, and so many people

can now plug and play from

anywhere, natural talent has

started to trump geography.

Now I would rather be a genius

born in China than an average

guy born in Poughkeepsie.”

– Bill Gates, in ‘The World is Flat’

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Jobs are not only important to our

livelihood, they are also an important part

of our lives and a key contributor to our

happiness. The International Social Survey

Programme asks workers around the world

to rank eight dierent job characteristics

in terms of their importance to their overall

happiness at work. The characteristics are:

high income, exible working hours, good

opportunities for advancement, job security,

interesting work, independence, helping

other people, usefulness to society. The

survey reports that 20% of respondents in

OECD countries believe that having a high

income is very important. But nearly 60% say

that job security is very important, 50% say

interesting work is important and 30% say

autonomy is important. Similarly, measures

of job satisfaction tend to emphasize the

signicance of job security, meaningful work,

stimulating tasks and workplace culture.

The three trends shaping the future of work –

automation, globalisation and collaboration –

present opportunities as well as risks to Australian

workers. In particular they offer the opportunity

not only for higher productivity jobs, but also more

creative, independent and meaningful employment.

3. Opportunities in

the future of work

18 The New Work Order

3.1 LOWER BARRIERS

The barriers that once prevented people starting their

own business are falling, enabling more young people

to turn their own innovative ideas into careers. The

figure shows that the cost of starting a business around

the world has fallen dramatically over the last 10 years

as a result of more efficient regulatory regimes and

start-up procedures.

New rms are benetting from signicant reduction in

start-up costs, especially those related to IT, sales and

marketing. The growth of electronic communications,

cloud computing other low cost technologies have

materially reduced the expenses associated with

starting up a new rm and extended the possibility of

outreach to new customers. Technology reduces the

cost and time barriers to entrepreneurship at multiple

points along the startup lifecycle:

Fig 6. More than half of younger Australians are willing to

earn income as a service provider on digital platforms

% of survey answers to the question: “Would you consider earning

some extra money in 2015 through “on-demand” services through

apps/websites such as Airtasker, Freelancer… etc?”

Fig 5. Cost of business startup

procedures, global average

% of GNI per capita

1. Product development: the building blocks for digital

services and products have become so evolved,

cheap and ubiquitous that they can be easily

combined and recombined.

2. Market testing inexpensively and rapidly observe

customer behaviour responses online to beta

product versions.

3. Financing: requiring less capital intensity and sourcing

funding from a wider capital pool including crowds.

4. Marketing and sales driving marketing and sales

through online channels.

5. Customer service and feedback: collecting real

time customer feedback or observing customer

behaviour online.

In recognition of these lower barriers, young people

globally have high levels of condence about their capacity

to create their own job, to become entrepreneurs. A recent

global survey of 12,000+ Millennials (aged 18 to 30) found

68% of respondents believe they have the opportunity

to become an entrepreneur.

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3.2 MORE FLEXIBILITY

Recent research has highlighted the importance of work

exibility to job satisfaction. A University of Chicago study

of 4,500 workers found that job satisfaction was materially

higher for workers who had some discretion over their

hours and place of work. In fact discretion of the timing

of one’s work matters more for satisfaction than the

overall hours of work or income.

Another study found

that 35% of employees want more exible schedules

and 46% of employees say that exibility is the most

important aspect when looking for a new job.

In order for employees to balance the demands of the

workplace with the enjoyment of being with their friends

and family, companies need to allow them to work exible

hours and remotely. This way, employees can work when

they are most productive and have enough time to drop

their children at school or have lunch with a family member.

Technology enables individuals to work more exibly within

large organisations, where improving communications

facilitates a wider range of work practices.

Technology is also reshaping workplace flexibility by

growing the sharing and on-demand economy where

workers have unprecedented autonomy over their

hours of work. The sharing economy, or peer-to-peer

capitalism, enables individuals to share their under-

utilized assets to generate income.

Chad is an entrepreneur who

drives on Uber to support his

family in between working on a

project to minimise water wastage.

Karen drives on Uber to help

support her politics and law study.

She balances Uber driving with

theatre work and volunteering at

United Nations Youth Australia.

Aer being made redundant, Tanya

is now formalising her skills with a

Bachelor of Business, and driving

on Uber to support her studies.

Fig 7. Case studies of Uber drivers

Source: Uber

Some of the key barriers to this type of income generation

in the past are now overcome through technology.

Specically, an individual is able to easily locate an under-

utilized asset, build trust in the provider through third-

party reviews, and securely make payments that don’t

require in-person transactions.

On-demand platforms such as Uber, Freelancer and

Airtasker provide Australians with tools to exibly source

income and, sometimes, to access work where they

otherwise couldn’t (as a caregiver or disabled person) or

to li themselves out of unemployment. As Figure 6 shows,

Australians are already using on-demand platforms to

top-up their incomes. Australians and especially young

people also look set to source more income from digital

talent platforms, with 64% and 71% respectively indicating

they would consider earning additional income during the

coming year by providing services through a digital talent

platform like Airtasker or Freelancer.

Where formal structures have proven inadequate or

restrictive, these online tools are enabling workers

to top-up their incomes or sometimes ward off

unemployment (see Figure 7). These forces are in

their nascent stages and early data indicates they

will become a feature of our work landscape.

20 The New Work Order

3.3 WIDER MARKETS

AND MORE SPECIALIZATION

Adam Smith’s Wealth of Nations published in the

18th century explained that one of the key drivers of

human progress was the division of labour. By dividing

work into ever smaller tasks, economies are able to

consistently improve the eiciency of production.

Today, the rise of the knowledge economy and advances

in communications technology have accelerated the

division of labour, leading us into what some have called

‘the age of hyperspecialisation’. It’s now possible, for

the rst time in history, to transmit information around

the world almost costlessly. This presents an enormous

opportunity for productivity improvements and greater

scope to reach new markets. Technology has enabled

Australian businesses to access new markets to sell

their goods or labour services. Australians are already

capitalising on this opportunity. As Figure 8 shows, over

the past 15 years, Australians have nearly doubled the

income (in real terms) that they generate from their own

foreign employment.

Looking forward, Australians are well placed to continue

to sell their services abroad. As Figure 9 shows,

Australians graduate at both the university and vocational

levels at higher rates than the OECD average. The trend

of high skill graduation rates will likely continue. Analysis

of qualication levels among current 20-24 year olds in

Australia reveals an increasing proportion of students

are qualied at higher VET levels and above (Figure 10).

As a further indication of the future trend, the most

recent HILDA survey shows that approximately 60% of

parents of primary school students believe their children

will denitely or probably go to university.

These high

qualication rates and intentions bode well for the

pipeline of high skilled talent moving into the labour

force and competing for high skill jobs abroad.

Fig 8. Australian earnings from foreign employment

have nearly doubled over past 15 years

$ earned from foreign employment, real 2013

Fig 9. Australians graduate at higher rates than OECD peers

% of 25-64 yr olds, 2012 Australia and OECD

Fig 10. Young Australians are getting more educated

% of 20-24 year olds, qualication level

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4. Risks in the future of work

4.1 UNEMPLOYMENT, OR

EXITING THE LABOUR FORCE

Workforce-wide unemployment?

Around the world, governments, economists,

scientists and the media are currently debating the

potential impact of automation on unemployment.

A recent headline-grabbing statistic has been that

approximately 40% of Australia’s jobs are at high risk

of automation over the next 10-15 years (see Figure

11). The modelers behind these figures have been

at pains to explain that the figures don’t account for

new job creation. Indeed, whether or not new jobs

will step into the breach is hotly debated: will the

next wave of technological innovation replace labour

or spawn new jobs that complement technology?

Those who argue technology will replace labour

suggest that, for the first time, smarter machines

are capable of learning, adapting and moving into

non-routine tasks. Those in the other camp point

to the continual reinvention of the economy: 85%

of the jobs in 1900 had disappeared by 2000 but

we have not experienced mass unemployment.

Fig 11. Many existing Australian jobs are

at risk of automation in 10-15 years

% of jobs, level of risk of automation

Whatever the case, in the past in Australia, important

transitions in our economic base have not been

costless for all groups. While some of Australia’s

workforce has retrained and moved into new

occupations, a high percentage of unskilled workers

instead exited the workforce.

The distributional impact of this forecast, while less

popularly discussed, is no less dramatic or important.

Technology and automation does not aect all

occupations equally. In the past, technology has enabled

rms to replace lower-skilled workers with machines.

For example, secretarial functions in oices have been

partially replaced by computers and supermarkets now

use automated checkout machines. At the other end of the

spectrum, skilled workers have enjoyed eiciency benets

from the introduction of machines. Economists call these

two forces ‘skill biased technological change’ which

means that, over time, new technologies have caused the

employment and incomes of skilled workers to increase.

24 The New Work Order

The distributional impact of this forecast, while less

popularly discussed, is no less dramatic or important.

Technology and automation does not aect all

occupations equally. In the past, technology has enabled

rms to replace lower-skilled workers with machines.

For example, secretarial functions in oices have been

partially replaced by computers and supermarkets now

use automated checkout machines. At the other end of the

spectrum, skilled workers have enjoyed eiciency benets

from the introduction of machines. Economists call these

two forces ‘skill biased technological change’ which

means that, over time, new technologies have caused the

employment and incomes of skilled workers to increase.

Looking to the future, Figure 12 highlights the

percentage of Australia’s jobs in each occupation

that will be affected by automation. Economists

predict that smart machines will struggle to automate

problem solving, creative and social intelligence

tasks. Indeed, many cognitive tasks are often

complementary to technology because they draw

on information as an input, which is becoming

cheaper to access. By contrast, economists predict

that a higher proportion of lower-skill jobs, such as

labourers, machinery operators, and administrators,

will be affected by automation in the next 10-15 years.

While nearly half of Australia’s current labour force

is employed in high skill occupations (36%) or high

touch, interpersonal occupations (10%), a sizeable

proportion are employed in lower skill occupations.

Initially, this may drive unemployment among

these groups and eventually, as in the past, reduce

participation in the labour market by these groups.

Fig 12. Occupations aected by automation

over next 10-15 years in Australia

Bubble size = % of workforce in that occupation, 2015

Fig 13. Most young people in Australia enter the labour

market in jobs that will be radically aected by automation

Bubble size = % of employed youth (15-24 yrs) in that occupation

“None of us could have known,

much less pronounce the job

descriptions of any of our

grandchildren.”

– John Galbraith, Harvard University

fya.org.au 25

Youth unemployment?

Globally, there has been signicant discussion around

the impact of automation on the general workforce.

There has been less of a spotlight on the special impact

on young people. In rst-time analysis for this report, we

look at the implications of automation for the education

and employment of young people. Specically, whether

automation aects the capacity for young people to secure

early work experience and junior roles and whether they

are enrolling in the right post-school courses.

In fact, young people are likely to be disproportionately

hurt by automation. Young people tend to get their break

into the labour market, or their rst few jobs, in occupations

that are forecast to be highly aected by automation. As

Figure 13 shows, around 70% of young people (15-24 years)

in Australia get their foothold in occupations that will be

highly aected by automation in the next 10-15 years.

Young people tend to get their rst jobs in elds like retail,

admin, and laboring. These elds are highly exposed to the

impact of technology. Economists have forecast that jobs

like checkout operators, receptions, personal assistants

and fast food workers will either be lost or radically

changed by technology. By contrast, young people tend

not to get their foothold in the workforce in occupations

that are less exposed to automation, such as managers

and professionals. Less than 20% of young people are

employed in these more secure occupations.

These early work experiences and junior roles oen help

young people ‘learn to work’. Tomorrow’s young people

risk losing the opportunity to gain crucial work experience,

employability skills and entry-level roles in the labour force.

Looking to the future, our young people are also not being

prepared and educated for the right jobs. In fact, over the

past ve years, nearly 60% of young Australian students

enrolled in elds of study that will be highly aected by

automation (see Figure 14). Specically, 58% of students

aged under 25 years in Australia enrolled in elds of study

that will be radically aected by automation in the next 10-

15 years.

If we focus just on VET students, the proportion

of students being trained in the at-risk occupations rises

to a signicant 71%. By way of example, more than half

of the jobs in the most common occupation for student

enrolments – technicians – are forecast to be radically

aected by automation in the next 10-15 years. Such jobs

include woods trades, horticulture, and printing. This

analysis suggests that our vocational education system

might be failing to appropriately prepare young people and

we need to seriously assess its utility in the future of work.

Fig 14. More than half of young Australian students are enrolled in occupations that are dying

% of jobs that will be aected by automation, width represents proportion of 15-24 yr students enrolled in VET and university courses, 2010-2014

26 The New Work Order

4.2 INEQUALITY

Globalisation and the primacy of technology has

enabled the rise of ‘superstar economics’ or winner

takes most. On the globalisation front, the most

innovative firms are able to use technology to

serve bigger markets, often across geographical

boundaries, and thereby take a greater share of

revenue. This concentrates the gains in a smaller

number of companies and individuals. On the

technology front, these large global companies are

increasingly driving value creation using technology

rather than labour inputs. A comparison of leading

information-technology and manufacturing

companies in the US, at their peaks, illustrates the

diminished role of labour in driving company value.

Many economists worry about these trends because of

their impact on inequality. In Australia, we have recently

experienced worsening inequality. Higher income

brackets, especially the top 10-20%, have enjoyed much

higher income growth than other income groups. As

a function of this, our gini coeicient (the measure of

inequality in the economy) has worsened over the past

15 years from 0.29 to 0.32.

Fig 15. Higher income groups in Australia

have enjoyed higher income growth

% growth in household income (1995-2010), real

THE DECLINING ROLE OF LABOUR

Detroit 1990:

The three largest companies had a combined

market value of $65 billion (real) with

1.2 million workers.

Silicon Valley 2014:

The three largest companies had a combined

market value of $1.09 trillion with

just 137,000 workers.

Over the 15 years to 2010, higher

income brackets enjoyed greater

income growth

fya.org.au 27

Given that the trend in our workforce is towards a higher

proportion of temporary and part-time roles, inequality

may increase. Analysis by the OECD has shown that the

income ratio of the 90th percentile income earner to the

10th percentile income earner in Australia is higher (3.14:1)

when all temporary, part-time and full-time jobs are

included and lower (2.981) when only full-time jobs are

included.

This is likely to reect the fact that nonstandard

work (part-time, temporary and self-employment) is linked

with lower jobs quality. Specically, the OECD has found

that nonstandard workers tend to be worse o in job

quality,

including:

1. Weaker human capital development due to lower training

2. Lower job security and higher job strain

3. Lower more unstable earnings: slower wage growth,

higher instability in earnings and larger wage penalties

Accordingly, the continued rise of temporary, part-time

and self-employment is likely to contribute to higher

rates of inequality. The proliferation of work on online

digital platforms will only intensify this trend. Neither the

employers nor the platforms, which explicitly claim to act

exclusively as an intermediary or matchmaker, are likely

to invest in the human capital of the exible worker.

4.3 INSECURITY

While many workers may appreciate the exibility of managing

a portfolio of opportunities, the movement of work outside

of formal rm structures is not without risk. Most notably,

many of our current workplace rights and protections are

attached to formal industrial relations settings. As people

transact directly with one another or manage their working

arrangements through online intermediaries, lawyers

and government oicials are concerned about the loss of

workplace protections like compassionate leave, maternity

leave, penalty rates, insurance, and workers compensation.

Given the complexity of legal classications of work, workers

could be forgiven for not understanding the nature of their

employment arrangement. Indeed, the law is untested on

many of these new platforms. In the US, law suits have been

led against Instacart (on-demand grocery delivery), Uber

(on-demand car transportation) and Homejoy (home cleaning

services), variously arguing that workers should be classied as

employees and receive overtime pay, workers’ compensation

and reimbursements for petrol.

As is currently occurring in the US, the public debate around

workers on digital talent platforms will likely to center on

how these workers are classied e.g., are they independent

contractors or employees? However, as people adopt

increasingly complex and sometimes ambiguous working

arrangements, some commentators have argued that we

need a fundamentally dierent industrial relations framework

and innovation in products and services that protect workers.

“We’re on the precipice of

major disruption to how we

work and the emergence of a

future we can’t even imagine.

The real question is how we

forge a fundamentally dierent

industrial relations system.”

– President, Business Council of Australia, 2015

28 The New Work Order

The challenges and opportunities in the future of work are not unique to Australia.

Governments around the world are motivated to ensure their young people are best equipped

to succeed. An international scan reveals that policies are targeted rst towards enabling

workers to nd opportunity and reward in the future of work and, where enablement reaches

its limits, are focused second on protecting workers from downside risks.

This report focuses on select international examples of some illustrative policy options and considers the case for

investment. No doubt, there are numerous additional examples of policies that can help mitigate the key future

risks and maximize the opportunities. The report has focused on international examples and has not exhaustively

reviewed federal and state policies in Australia.

5. Policies for driving increased

opportunity and reward

28 The New Work Order

fya.org.au 29fya.org.au 29

Globally, these policy options have generated dierent social and economic returns. Select, illustrative returns

are outlined below.

Promisingly, the GDP, employment, income and equity impacts of some of the illustrative

policy options can be signicant.

30 The New Work Order

Case for investment

In order to succeed in a global economy that is digitally

enabled, our workforce will need to be increasingly

digitally literate. Lack of clarity around the concept

of digital literacy has prompted a wide range of

contributions to the public debate on digital literacy

in schools. At one end of the spectrum, some claim that

students will learn what they need through mere exposure

as ‘digital natives’ who have grown up with technology.

At the other end, others claim that economic growth is

at risk unless we graduate swathes of science, technology,

engineering and mathematics (STEM) students.

A helpful framework for classifying the digital skills

required in our workforce recently emerged as part of

the UK Digital Skills Taskforce. In their submission, the

UK Forum on Computing Education classied four bands

of digital skills

1. Digital muggle: no digital skills required

2. Digital citizen: use technology to communicate,

nd information and transact

3. Digital worker: congure and use digital systems

4. Digital maker: build digital technology

The UK Forum classied what fraction of each of the 300+

occupations in the UK would require these dierent skill

levels in the next 2-5 years.

In rst-time analysis for this report, we have used the UK

framework and classication of skill level by occupations

to analyse the digital skill requirements of 405

occupations in Australia.

The analysis shows that more

than 90% of Australia’s current workforce will need to be

at least a digital citizen to perform their roles in a digitally-

enabled economy. More interestingly, approximately

60% of the workforce will ideally be operating at a digital

worker level or above.

5.1 Policies to enable

BOOST DIGITAL LITERACY, INCLUDING THROUGH

A NEW SCHOOL COMPUTING CURRICULUM

Australian governments could consider:

> Implementing a mandatory computing or digital technologies curriculum from primary school

> Ensuring access to digital infrastructure e.g. broadband in all schools and communities

Fig 16. Australia’s labour force has high digital

literacy needs in the next 2-5 years

# of employed persons, Australia

More than 50% of Australian

workers will need to operate

at the digital worker or

maker level or above in the

next 2-3 years

fya.org.au 31

Policy examples from abroad

We can look abroad for instructive examples of ambitious learning programs for students that target competencies

at these dierent levels of digital literacy.

Policy type /

target level Nation Detail

Computing

curriculum

Target level:

Digital citizens,

workers and

makers

United Kingdom National computing curriculum

> Description Mandatory, industry co-designed computing curriculum in all

supported primary and secondary schools.

> Objective Replace prior focus on teaching students how to operate

computers with understanding how computers work and how to make

computers work for them.

> “ICT used to focus purely on computer literacy...how to word process, how to

work a spreadsheet, how to use programs already creaking into obsolescence...

Now, our new curriculum teaches children…not just how to work a computer;

but how a computer works, and how to make it work for you.”

– UK Minister for Education, 2014

> Stages of curriculum

1. Stage 1 (5-6 year olds) Learn about algorithms as a set of instructions.

Create and debug simple programs.

2. Stage 2 (7-11 year olds) Create and debug more complex programs.

Learn to use internet and devices to collect, analyze and present data.

3. Stage 3 (11-14 year olds) Use 2+ programming languages to create own

programs. Learn how hardware and soware work together.

• Implementation From September 2014. Networks of master teachers who are

training teachers in up to 40 schools, matched funds for training from industry

giants like Google, IBM and Microso and training tools developed by industry.

Tools for

educators

Target level:

Digital citizens

USA Digitalliteracy.gov

> Government portal to make resources available to community practitioners

delivering digital literacy training

> Who: Federal government interagency working group

Targeted digital

technologies

training

Target level:

Digital workers

and makers

USA TechHire

> Initiative in 20 regions to get more Americans, especially disadvantaged

individuals, rapidly trained for and placed in existing technology jobs.

Three pillars:

1. Using online data of job availabilty and innovative hiring practices to

expand prospects for non-traditional hires

2. Fund ($100 million federal government commitment) and oer models

for training that prepare students in months, not years

3. Local leadership to connect people to jobs, and oer on-ramp programs

32 The New Work Order

Applicability in Australia

These dierent skill level requirements outlined in Figure

16 speak to the types of skills that need to be taught in

our education system. To ensure digital citizenry (using

technology to communicate and nd information), there

must be widespread access and usage of ICT as part

of the learning process. Postively, more than 90% of

students in all geographic regions and school sectors

have access to computers and the internet at school,

Australia scored strongly on international tests of digital

reading literacy, and ICT is embedded as a general

capability in the national curriculum. Access to aordable

broadband in homes and communities is essential to

function as a digital citizen. As an immediate priority,

the 10% of government schools without internet access

need to be brought online.

Australia’s eorts to ensure suicient numbers of ‘digital

makers’ are less promising. Concerns about insuicient

numbers of STEM graduates are well known, strongly

evidenced and do not need to be repeated here.

Case for investment

Over the past 10 years, the OECD has found that

the occupations with the highest proportion of

strong performers in problem solving (according

to the international survey of adult skills), were the

only occupations to enjoy increased share of total

employment.

Economists have predicted that, over

the next two decades, the jobs most unlikely to be

automated are those that involve creative intelligence,

social intelligence and problem solving. These skills

comprise a broader set of skills that have variously

been called 21st Century skills, enterprise skills

and employability skills.

PLACE ENTERPRISE SKILLS AT THE HEART OF LEARNING

Australian governments could consider:

> Embedding enterprise skills, especially problem solving, creativity and social intelligence,

in school curricula as general capabilities and in individual subject curriculum

> Training and promoting teaching methods that support problem solving capabilities

TechHire in the US is an innovative policy that exemplies the

new types of rapid training and retraining that governments

are investing to ensure employers’ STEM and digital needs

are met. While the focus on STEM is well deserved, it is

potentially unduly narrow. As Figure 16 shows, the Australian

workforce also needs around 5.4 million ‘digital workers’.

These will not necessarily be STEM employees, although

some will be. Instead, they are workers who understand how

to make technology work for them. To grow this skillset, it

is worth considering a mandatory computing curriculum in

primary and secondary schools. To this end, governments

could endorse the newly-developed Digital Technologies

curriculum

and consider a mandatory rollout in schools from

early primary school stages. This report disagrees with the

recent Review of the Australian Curriculum that recommends

Digital Technologies only be introduced from Year 9. Without

doubt, the development of the curriculum is only the rst step

and will require both high quality initial teacher training and

professional development within the existing workforce to see

the intended impact in the classroom.

Such skills include condence, communication, creativity,

project management, enthusiasm for learning, critical

thinking, team work, digital literacy, nancial literacy and

global citizenship. For our young people to secure the jobs

of the future, be they manual or cognitive, they will need

to exhibit skills in these areas.

> For non-routine manual jobs, key skills in the jobs of the

future that are at low risk of automation include basic

problem solving, communication, and interpersonal skills.

> For non-routine cognitive jobs, key skills in the jobs of

the future include complex problem solving, judgement,

creativity, social intelligence and persuasion.

fya.org.au 33

Applicability in Australia

Positively, Australians perform well in problem solving

by international comparison, with a higher proportion

of top problem solvers compared to the OECD (16%

vs 12%) and fewer who are below prociency (16% vs

21%).

A substantial proportion of our problem solving

performance is predicted performance in reading,

mathematical and scientic literacy. This is not the

case in all countries and suggests that the pedagogical

methods with which we teach these foundational skills

also promotes problem solving skills. Other policies to

promote problem solving capabilities include shiing

pedagogical methods in schools and universities away

from volume-based rote learning to inquiry-based or

experiential learning. International academics have

also advocated for ways to ensure than performance

assessments test higher order thinking.

While

we are sympathetic to concerns about curriculum

overcrowding, the suggestion to remove general

capabilities around creative and critical thinking

from the national curriculum is not sound.

Fig 17. Australian students perform well

in problem solving, PISA, 2012

% of students, by level, Australia and OECD average

Policy type Nation Detail

Cross-curricular

problem solving

Japan Integrated Learning

> New curricula reduced content load by approximately 30% and increased

time for ‘integrated learning’, where students engage in cross-curricular,

problem solving projects. New national assessments in grades 6 and 9

focused on ability to students to apply knowledge in real-world scenarios.

> Implementation Education Ministry introduced guidelines and study lesson

examples, draed with private-sector employees.

Curriculum

redesign

Canada Critical thinking, problem solving and decision making

> Alberta undertook curriculum redesign project to better enable students

to succeed in knowledge-based economy, with a focus on critical thinking,

problem solving and decision making

Curriculum

redesign

Singapore 21st century competencies

> Identied 21st century competencies critical and inventive thinking,

communication, collaboration, information skills, global awareness

and cross-cultural skills

> Developed 21st centuries competencies framework that guides

development of national curriculum and school-based programs

Policy examples from abroad

34 The New Work Order

Case for investment

The twin forces of globalisation and technology have

prompted governments worldwide to encourage

entrepreneurship for both employment and innovation

objectives. Regarding globalisation, the model of winners-

take-most has compelled governments to encourage

innovation among their workforces, in the hopes of

their nation joining the ranks of ‘winners’. The combined

impact of globalisation and automation has also

prompted governments to encourage self-employment

activities for those who have been displaced or are

otherwise struggle to enter the labour market.

Policy examples from abroad

While discussions around barriers to entrepreneurship

oen center on nancing, entrepreneurship begins

well before funding needs arise. Policies should

target dierent barriers, including the need to 1)

Stand Up (promote attitudes and skills for mobilizing

entrepreneurs) 2) Start up (gathering resources and

know-how to start a business) and nally 3) Scale Up

(enable businesses to scale, chiey through nancing).

Dierent policies target the dierent entrepreneurship

skills and resources required for employment-based

and innovation-based entrepreneurship.

DRIVE BOTH EMPLOYMENT-FOCUSED AND INNOVATION-FOCUSED ENTREPRENEURSHIP

Australian governments could consider:

> Promoting entrepreneurship as a viable career option to school and tertiary students

> Providing strong start-up incentives for young people including income support, grants,

loans with preferential terms, tax exemptions and guidance/coaching

> Making publically-funded education places in VET and university available to students

wishing to undertake entrepreneurship education in facilities run by entrepreneurs

> Using public expenditure to drive demand for employment among key groups at risk

of non-participation

> Providing the option for superannuation accountholders to invest some of the

superannuation in a Venture Capital (VC) & Private Equity (PE) innovation stream

> Relaxing the constraints around crowdfunding

fya.org.au 35

Policy category Policy type Nation Detail

Stand Up

Promote

attitudes

and skills for

mobilising

entrepreneurs

Awareness

raising

Development

of skills

Germany

France

Raising student awareness of self-employment as a career option:

> Germany “Junior” Project involve entrepreneurship simulation

for students 15-20 years including selling equity and product

development. Results indicated increased positive attititudes

to entrepreneurship and identication with future career path.

Development of qualitites that are required for entrepreneurship,

such as creativity, risk taking and personal responsibility:

> France: CREA training program designed to foster

entrepreneurial skills and culture. Students work with

entrepreneurs on implementing their business plans.

Start Up

Gather

resources and

know-how to

start a business

Employment-

driven

European

Comm

Across a range of European countries, start up incentives that

have been deployed by governments to target self-employment

(chiey among the unemployed) included

> non-repayable monetary incentives,

> loan programs with preferential terms,

> exemptions from tax, and

> training and coaching especially in business planning,

nancing and management.

Evaluations of start-up incentives have found that most of the

businesses created enjoy relatively long survival rates but their

contribution to employment beyond the target individual is low.

Caveats: Income security measures were found to be more

important than loans or subsidies for the business. In order to

reduce deadweight loss, the most targeted policies established

conditionality around length of unemployment, age, low

likelihood of alternative options.

Innovation-

driven

Germany

Finland

One of the most common and evidenced-based policies for

encouraging innovative startups is entrepreneurship education.

An analysis of 40+ studies in entrepreneurship education

demonstrated links with:

> the acquisition of knowledge and skills relevant to starting

a business

> positive entrepreneurship outcomes and measures, including

taking steps towards starting a business, starting a business

and nancial success.

Entrepreneurship education is less eective, and its eects fade out,

if self-employment rather than high-potential innovation is targeted.

International examples

> Finland: Universities transitioned from educating

entrepreneurs, not just professionals. The opportunity

to exibly use their budgets provided Finnish universities

to invest in accelerator programs.

> Germany EXIST program Support students from higher

education institutes who want to translate an idea into

a business plan and includes funding for the seed phase.

36 The New Work Order

Policy category Policy type Nation Detail

Scale Up

Enable

businesses to

scale, chiey

through

nancing

Venture capital USA > Pension Fund commitment Approximately 2% of US

pension funds are committed to venture capital. Large

pension funds in the US, such as the Californian Public

Employees Retirement Scheme (CalPERS) routinely invest

a not insigncant portion in venture capital funds.

> Government co-investment and tax incentives to attract

venture capital investment. Yozman program in Israel to

attract foreign VC included co-investment, tax incentives

and generous option for private investors to buyout

Government’s interest after five years.

Crowd-funding Canada

> Globally, crowdfunding is emerging as an alternative

source of financing for startups and SMEs (growing by

50% annually since 2009, albeit still representing a small

share of total financing for SMEs)

> Both UK and Zealand implemented regulatory regimes mid last

year to permit startups and SMEs that are not publically listed

to issue some form of equity in their enterprise to large crowds.

Canada is currently nalizing its regime.

Applicability in Australia

Start Up

In some countries, especially European countries,

the

loss of some low-skilled work has been partially remedied

by eorts to boost self-employment or employment-

focused entrepreneurship. Similarly, the establishment

of the New Entreprise Incentive Scheme in Australia is

to be commended.

Further programming that provides

start-up incentives is recommended. Such programming

in Europe has been found to be more eective in

reducing unemployment and in slowing the return

to unemployment than other labour market policies.

Given the overwhelming rate of enrolment by young people

in elds of study that will be highly aected by automation

over the next 10-15 years, Australia needs to consider whether

our education system is adequately preparing students for

the future of work. In particular, our vocational education

system is training the vast majority of its students (71%)

for occupations where at least two-thirds of the roles will

be highly aected by automation in the next 10-15 years.

This analysis suggests that our tertiary and VET education

systems need reform. In the context of this education and

future jobs mismatch, it may be worth exploring whether our

tertiary institutions should be more directed at encouraging

entrepreneurship, including self-employment. In particular,

governments could explore the feasibility of making accessible

HECS, FEE HELP, and government-subsidised training in VET

to students who participate in entrepreneurship education

facilities run by successful entrepreneurs.

Governments could also consider using targeted public

expenditure to drive demand for jobs, including for self-

employed persons and groups at risk of stepping out of

the labour force or not participating.

Scale Up

One of the key ingredients for scaling a startup is nancing.

Australia has a deservedly poor reputation for nancing

late-stage startups. The venture capital market remains

underdeveloped in the 2014 nancial year, only $120 million

was raised and none of these funds were for late-stage

opportunities.

Some commentators have suggested

mandating a minimum percentage of superannuation

funding for venture capital investment. However,

government mandates around investments are generally

unsound and distortionary but there is merit in government

providing the option for account holders to invest some of

their superannuation in an innovation stream that would

bundle domestic venture capital and private equity.

In the absence of improved venture capital, Australia

should move quickly to facilitate equity crowdfunding.

Regulation in Australia currently limit the use of

crowdfunding by startups. Specically, companies are

generally prohibited from publically oering equity and

debt and shareholder numbers are capped at a relatively

small number.

If Australia relaxed regulations and

enjoyed similar rates of equity crowdfunding as seen last

year in the US (despite being available only to accredited

investors) and Europe, startups could benet from around

$20 million per year in additional funding.

fya.org.au 37

38 The New Work Order

Case for investment

Given recent shis in who is reaping the rewards of

economic growth (with labour’s share of total income

in Australia declining), low wages growth and consumers

capturing much of the internet’s value in higher ‘consumer

surplus’, it may be timely to consider a shi in the tax base.

Policy examples from abroad

Other countries have taxed labour at lower rates,

especially at the low income end, and taxed consumption

and capital gains at higher rates. Redistributive measures

are also being considered in other countries, with a

preference for ‘active’ rather than ‘passive’ spending.

The OECD has found that well designed redistribution

does not necessarily detract from economic growth.

In particular, active spending, which is attached to

employment, such as in-work benets and childcare

spending is associated with higher growth than passive

spending, such as unemployment benets.

5.2 Policies to protect

REFORM THE TAX AND TRANSFER SYSTEM IN FAVOUR OF LOW-INCOME LABOUR

Australian governments could consider:

> Reducing the tax wedge, or the dierence between employer payment and take-home

pay, by lowering the tax rate on low-income labour

> Osetting income tax rates reductions with higher taxes on capital gains and select consumption

> Increasing initiatives to ‘make work pay’ for low-income workers, including tax credits

Fig 18. Share of income for labour is falling

% of total income share for value added estimates

of multi-factor productivity, 1990-2014

fya.org.au 39

Applicability to Australia

Tax reform is again being debated on the national stage

in Australia. As part of this debate, it is appropriate to

consider whether the tax burden is eiciently and fairly

allocated. At present, the tax wedge for labour in Australia

(proportion of an employee’s take home pay relative

to the costs paid by the employer) is substantial, albeit

lower than the OECD average.

This wedge has remained

unchanged over the past 15 years (at around 28%),

despite changes in labour’s share of total income. One

potential policy measure that has been encouraged by

the OECD is a reduction in the tax wedge. Adapting the

‘making work pay’ policies of select OECD countries,

some Australian economists have suggested altering

the mix of income received via wages and tax credits.

Fig 19. Tax wedge in Australia has remained

constant over the past 15 years

Dierence between cost to employer

and take-home pay of employee

Policy type Nation Detail

Tax credits USA and

multiple OECD

Making Work Pay

> Credit for people who pay no tax on their labour income to boost their aer-

tax income. Increases the incomes of low-income workers through the tax and

transfer system reduces disincentives for individuals to enter labour market and

to increase eorts once in the labour market. Now oered in 17 OECD countries.

> Objectives both redistributional and employment.

Subsidies France

Netherlands

Employment subsidies

> Reduce costs of hiring labour, especially disadvantaged or low skill groups,

for private sector business.

> Caveats/Criteria: Need to be closely targeted for employment gains to be

sustained. Employment support in private sector leads to better integration

than direct job creation in the public sector.

Progressive tax OECD More progressive taxation for lower income workers This type of tax has

been found to reduce unemployment and increase the employment rate.

These benefits have been found to be most concentrated among low-skill

and younger workers.

40 The New Work Order

While the the platforms indeed exhibit great promise,

they oen operate outside of existing industrial relations

structures. Debates are raging worldwide about how

to legally classify workers on these platforms and who

is required to ensure basic workplace protections, such as

insurance and leave entitlements. One response, pursued

recently in a non-binding decision by the California

Labour Commission regarding an individual Uber driver,

is to classify workers as employees of the digital platform.

The challenge with this approach is that it applies

regulatory regimes designed for the economics of full-

time or larger-scale activity to a small, semi-professional

provider. Activity in the collaborative and on-demand

economy oen blurs the line between the professional

and the personal. Typically, participants are not active

on the platforms in a full-time capacity

and providers

are oen using their private assets in the transaction

(e.g. their home in Airbnb and their car for Uber). Such

providers are oen not professional hoteliers or drivers.

Numerous legal academics have cautioned against

imposing regulatory structures designed for traditional

providers on the smaller, semi-professional providers that

typically comprise these platforms. As one US academic

has argued, “There is a real danger that misalignment

between newer peer-to-peer business models and older

regulations will impede economic growth.”

As a nation, we have spent the best part of 150

years embedding worker protections that we consider

essential to a modern, fair economy. Governments

and international bodies globally are now debating

how to respond to the rise of the collaborative and on-

demand economies in order to ensure these hard-fought

protections are not lost. Clear alternative models have not

yet emerged and the on-demand economy remains either

in a regulatory grey zone or mired in individual court

battles over workers’ legal status.

Case for investment

The collaborative and on-demand economy raises

a number of questions for the protection of workers.

On the one hand, workers benet from digital platforms

that enable them to reach new markets and geographies.

For workers, these platforms reduce the barriers to entry

for workers who want to inexpensively and securely sell

their goods and services to both other individuals and

businesses, and channel exible generation of top-

up income. They also drive entry back into the labour

force for unemployed workers and encourage micro-

entrepreneurs who might not otherwise bear the risks

involved in an all-or-nothing startup. For consumers,

these platforms provide new consumption experiences

and ways to improve the customer experience using

third party reviews and immediate feedback. Given

the importance of providing avenues for employment-

focused entrepreneurship in the future of work, we

must be careful to ensure that regulation does not

crush the promise of these platforms.

ENSURE PROTECTIONS COVER AND ADAPT TO NEW FORMS OF WORK

Australian governments could consider:

> Creating an intermediate category of labour between independent contractor and employee

> Appointing an advisor to government on the freelance economy

> Encouraging or requiring online digital platforms to self-regulate

> Promoting the creation of workers benets and protections that match the ‘unit-level’

of tasks in the freelance economy

fya.org.au 41

“Applying a regulatory regime

developed for full-time or large-

scale professional providers

to smaller, semiprofessional

providers could create barriers

to entry, stiing peer-to-

peer exchange as well as the

grassroots innovation that the

sharing economy facilitates.”

– University of Chicago Law Review, 2015

Policy type Nation Detail

Union for

independent

contractors

USA > Peers.org, a membership organisation with approximately 250,000

independent contractors for on-demand rms.

> Creates products and services to support workers in collaborative economy.

Intermediate

category of

labour

Canada

Germany

> Dependent contractor is a legal category for some workers in Canada,

Germany and Spain and was created with reference to economic

dependency, where a very small business (oen a single person)

depended to a large degree on one client/income source.

> While not applicable to on-demand economy, because workers do

not earn high proportion of income from single client, this category

demonstrates the potential for intermediate labour categories between

employee and contractor.

Freelance

Ambassador to

Govt

United Kingdom > Late in 2014, David Cameron appointed an Ambassador to the Government

for the self-employed, nicknamed the “Freelance Tsar”, to advise the

Government on how best to support workers in nontraditional working

arrangements.

Disclosure USA > Platforms in Pennsylvania must clearly advise drivers in writing of the impact

of commercial driving on their personal insurance, whether the platform has

alternately covered them and how to le.

Insurance

coverage

USA > Platform must hold commercial liability insurance policy of a minimum

$1 million per-incident coverage in California.

> Platforms in Pennsylvania must hold commercial liability insurance that

varies coverage at dierent points of driving transaction.

Training

provision

USA > Platforms must provide driver training in California.

Policy examples from abroad

42 The New Work Order

Applicability in Australia

Australian state and federal governments need to

thoughtfully consider how to simultaneously encourage

and protect workers in the collaborative economy. As a

rst step, Australia could consider a similar appointment

as David Cameron’s “Freelance Tsar” in the UK, to serve as

an advisor to governments on this issue. In its upcoming

Inquiry into the Workplace Relations Framework, the

Productivity Commission could consider the collaborative

and on-demand economy and make recommendations

on regulatory approaches, including self-regulation.

Specically, the Productivity Commission could consider

the possibility of an intermediate category of labour.

Some international legal academics are suggesting a new

intermediate category of worker be established, between

employee and independent contractor, to cover workers

in the collaborative economy.

Some international regulatory examples, like provision

of driver training and the platform’s provision of

commercial experience, seem reasonable and could

be adopted in Australia. In fact, the digital talent

platforms cold consider supporting the established of

an independent benefits platform, as advocated by the

CEO of Peers.org. Workers would select protections and

make payments in a pro-rated manner that matches

the units of work that they perform. The costs of such

a platform could be shared among the employers,

workers and the platforms themselves.

“Right now we have a binary

world of contractors versus

employees. Creating something

more responsive and exible

would provide more options

for companies and workers.”

– Shelby Clark, CEO Peers.org

In other areas, the path forward is less clear. Rather

than impose all existing regulatory regimes on these

platforms, some international legal academics have

instead recommended that these intermediaries and

marketplaces engage in self-regulation.

While self-

regulation has been primarily proposed in the context

of consumer protection, there may also be potential in

workplace protections. Given the likelihood that state

and federal governments in Australia will otherwise

move towards a regulatory position, which may or

may not optimally support the sector, the industry

could opt for sanctioned self-regulation (see Box for

types of regulation). Similar to the way in which many

of these platforms have built in controls for consumer

protection, they could build in controls and processes for

worker protection. By way of example, a self-regulating

organisation could provide clear explanation and

disclosure of employment status, require its platforms to

purchase commercial liability insurance and provide clear

explanation of easy, inexpensive ways for its providers to

purchase workers compensation.

The future of work presents incredible opportunity for

young Australians but also substantial risks. Careful policy

design can help us amplify the opportunities and mitigate

the risks. We can help equip our young people with the

skills and expertise for the jobs of the future, not the past.

In so doing, we can ensure that more young Australians

see the future of work as a bright future in which they

can nd opportunity and reward.

FOUR TYPES OF SELF-REGULATION

1. Voluntary self-regulation:

No government involvement or mandates

2. Coerced self-regulation:

Industry formulates rules due to threat

of government regulation

3. Sanctioned self-regulation:

Industry formulates rules subject

to government approval

4. Mandated self-regulation:

Government requires industry to

establish a self-regulatory framework

fya.org.au 43

Unless stated otherwise, this report classies young people as aged

15-24 years.

Author calculations by multiplying the change in the share of total

employment in these occupation by the current size of the labour force

Author calculations using ABS labour force data, catalogue

6291.0.55.003

Author calculation using ABS Catalogue 6291.0.55.001, June 2015 gures.

Durrant-Whyte, H. McCalman, L. O’Callaghan, S. Reid, A. and

Steinberg, D. “The Committee for Economic Development of Australia”

(CEDA), (2015), Australia’s Future Workforce, Ch. 1.4, pp. 60. Available

from <http//adminpanel.ceda.com.au/FOLDERS/Service/Files/

Documents/26792~Futureworkforce_June2015.pdf>

Data sources: NCVER enrolment data by occupation by age from

NCVER Collection “VET students by industry”. Available at http://data.

ncver.edu.au/resources/vsi.html#Occupation; university enrolment

data from Department for Education, (2015). Higher Education

Statistics Student Data 2010-2014. Available at http//www.education.

gov.au/student-data and data on jobs aected by automation from

Durrant-Whyte, H. McCalman, L. O’Callaghan, S. Reid, A. and Steinberg,

D. “The Committee for Economic Development of Australia” (CEDA),

(2015), Australia’s Future Workforce, Ch. 1.4

Methodology The number of VET student enrolments and the number

apprentices & trainees in-training by occupation and age have been

obtained from the NCVER. This data is for the 2010-2014 period. For

each occupation, the enrolments, apprentices and trainees within the

under-25 age bracket have been summed to give the number of young

students in-training for each occupation. The number of university

enrolments by age across the same period have been obtained

from the Department of Education & Training and the number of

students in the same under-25 age bracket have been added to the

‘Professionals’ occupation major group. The chances of automation

for each occupational major group have been obtained from the

Centre for Economic Development of Australia and the percentages

have been applied to the number of young students in-training in each

occupational major group. This gives an indication of the number of

young students in-training in each occupational major group that will

have their jobs aected by automation within the next 10-15 years.

By collating these numbers across each of the eight occupational

major groups (dened by ANZSCO) the total number of enrolments,

apprentices and trainees has been found. This analysis has been

conducted for both Australia and NSW. The results show 57% of the

enrolments, apprentices and trainees in NSW are in occupations that

have at least a 63% chance of being aected by automation. The

corresponding gure for Australia is 58%.

Farrell, D., Laboissiére, M, Pascal, R, Rosenfeld, J, de Segundo,

C and Stürze, S (2005), McKinsey & Company, ‘McKinsey Global

Report’, Part I The Emerging Global Labor Market The Demand for

Offshore Talent in Services.

OECD, (2015), In It Together Why Less Inequality Benets All, OECD

Publishing, Paris

Edelman, D. J. (2014), “Freelancing in Australia Study – Results Deck”,

A National Survey of the new Workforce, sld 7. Available from <http//

www.slideshare.net/oDesk/freelancing-in-australia-a-national-survey-

of-the-new-workforce-40284354>

MGI, (2015) Online Talent. A labor mark that works. McKinsey Global

Institute.

Author calculations using ABS labour force data, catalogue

6291.0.55.003

Methodology The proportions of young Australians (aged 15-24)

to all Australians employed in each of the 8 occupational major

groups have been derived from ABS data. These proportions have

then been applied to the distribution of the NSW workforce across

the 8 occupational major groups to give the number of 15-24 year

olds employed in NSW in each of the 8 major groups. The chances of

automation for each occupational major group have been obtained

from the Centre for Economic Development of Australia and the

percentages have been applied to the number of 15-24 year olds

employed in NSW in each of the 8 major groups. This analysis gives an

indication of proportion of 15-24 year olds employed in NSW that will

have their jobs aected by automation within the next 10-15 years. The

results show that 68% of the NSW workforce aged between 15 and 24

are in occupations that have at least a 63% chance of being aected by

automation within the next 10-15 years.

Paris School of Economics. The World Top Incomes Database. http//

topincomes.parisschoolofeconomics.eu/

OECD, (2015), In It Together Why Less Inequality Benets all, OECD

Publishing, Paris, pp. 48. Available from <http//www.keepeek.com/Digital-

Asset-Management/oecd/employment/in-it-together-why-less-inequality-

benets-all_9789264235120-en#page50> [Accessed 13 July 2015]

For returns on startup incentives, see European

Commission (2014) Activating jobseekers through

entrepreneurship. Available at http://ec.europa.eu/social/main.

jsp?langId=en&catId=89&newsId=2177&furtherNews=yes

For impact of online talent platform, see McKinsey Global institute

(2015) A Labor Market that works, Available at http//www.mckinsey.

com/insights/mgi/research/labor_markets

For impact of tax credits, see http://www.nber.org/papers/w11729.pdf

For impact of entrepreneurship education, see European Commission

(2015) Entrepreneurship education: the road to success. Available

at: http://ec.europa.eu/enterprise/policies/sme/promoting-

entrepreneurship/education-training-entrepreneurship/index_en.htm

Autor, D. (2010). “The Polarization of Job Opportunities in the U.S.

Labor Market Implications for Employment and Earnings”, Center for

American Progress and the Hamilton Project

Author calculations using ABS Catalogue 6291.0.55.003 and

subtracting the average total growth in the labour force from the

growth in number of jobs in each ANZSCO major occupation category.

BCG and The Network (2014) Decoding Global Talent. Available

at https://www.bcgperspectives.com/content/articles/human_

resources_leadership_decoding_global_talent/?chapter=2#chapter2

Friedman Tim (2005) “The World is Flat” Farrer, Straus and Giroux

Farrell, D. Laboissiére, M. Pascal, R. Rosenfeld, J. de Segundo, C. and

Stürze, S. (2005), McKinsey & Company, ‘McKinsey Global Report’, Part

I The Emerging Global Labor Market The Demand for Oshore Talent

in Services. Available from <http//www.mckinsey.com/insights/

employment_and_growth/the_emerging_global_labor_market_

demand_for_oshore_talent> [Accessed 21 July 2015]

Yahoo. May 5, 2014 “Aussies outsourcing online”

OECD, (2015), In It Together Why Less Inequality Benets All, OECD

Publishing, Paris

Edelman, D. J., (2014), “Freelancing in Australia Study – Results Deck”,

A National Survey of the new Workforce, sld 7. Available from <http//

www.slideshare.net/oDesk/freelancing-in-australia-a-national-survey-

of-the-new-workforce-40284354>

End notes

44 The New Work Order

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at http://www.publicpolicy.telefonica.com/blogs/blog/2013/06/13/

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Strategic Economic Decisions (2015) Intelligent machines and the

future of employment Number 135