Joe Davis, Vanguard's global chief economist, kicked off Morningstar's ETF conference with the cheery thought that 47% of all of today's jobs will be automated away.
And that's just in the U.S. That number rises to 69% in India and 77% in China. "The seminal issue is the future of work," Mr. Davis said. The combination of technology and human capital — how we harness technology to become more productive — provides an explanation of current economic trends and, surprisingly, optimism for the future.
Mr. Davis noted that the current economic environment has three paradoxes:
• Low inflation, but full employment;
• Low economic growth, but high stock valuations;
• Low volatility, but high uncertainty.
"There's an eerie calm in the markets, even though policy levels are at elevated levels," Mr. Davis said.
Thanks to technology, the speed of the economy has never been faster, Mr. Davis said. "We have instant access to information, and we see disruption all around us." One example: The Swiss are experimenting with a robot to deliver mail.
But policymakers need to pivot from using GDP growth as the sole measure of economic growth, Mr. Davis said. "My grandmother knew that her standard of living was markedly better than what her family experienced while she was growing up in Ireland," he said. "She knew opportunity was greater here. Productivity, progress, prosperity — in the long run, it's all the same thing."
Over the past several decades, economists have produced hundreds of studies about why productivity varies from person to person, company to company and country to country. According to Vanguard's research, monetary policy has relatively little effect on GDP, despite its impact on financial markets. "Low rates in Japan haven't helped growth," Mr. Davis said.
Similarly, demographics — an aging population — has very little negative impact on GDP. "Countries with an older population tend to be wealthier and more productive," he said. "If population growth and demographics were all that mattered, China and India would be the wealthiest and most productive nations in the world."
All those factors are dwarfed by how people use technology to increase productivity, he said. And that insight helps mitigate some of the terror from studies about future job losses. "Many jobs have multiple tasks, and the tasks within any occupation changes over time," he said. "Most studies assume that technology only threatens jobs, and doesn't complement them."
A doctor 100 years ago, for example, had relatively few tasks because of limited technology. "A doctor today has the ability to treat thousands of illnesses, and has many tools," Mr. Davis said. While this may have threatened barbers' livelihoods — they were traditionally given the task of bleeding patients — technology has vastly improved a doctor's productivity.
Those most threatened by productivity are those who do repetitive single tasks that can be easily automated. But those losses are dwarfed by demand for new jobs that involve creative, technological and emotional intelligence, Mr. Davis said. Society will still need people who interact with the public, think creatively and gather information. "Seventy percent of occupations have to think creatively," Mr. Davis said.
Jobs change, and people adapt. "Work has always been a race between education and technology," Mr. Davis said. The new world of work will produce new paradoxes: more automation combined with labor shortages; an aging population and a demand for work; and low inflation. "Digital technology is lowering the cost of producing everything," Mr. Davis said.