Korn Ferry published a report in 2018 that the talent shortage crisis is looming over organizations and economies. It is even predicted that by 2030, 85.2 million jobs could go vacant. The issue happens because of mismatches between technological advances (e.g., artificial intelligence, machine learning, and automation), and the skills and experience workers need to leverage these advanced tools. It’s contradictive if we compare the numbers of world population today is already reach more than 8 billion people! Further question is: who is the most responsible to restore this circumstance?
Max Roser, the Professor at University of Oxford, addressed in his recent article that the history of technology started since 3.4 million years ago when our ancestors used the stone tools, followed by controlled fire for cooking and musical instruments. The inventions of agricultural, writing, and the wheel in period between 10,000 BCE to the year of 1000s became the first sign of faster (but still relatively slow) technological change. From 1800 onwards, more major inventions of technology rapidly followed until now when the AI systems become more powerful and widely used.
“Creative destruction” was an idea by Joseph Schumpeter to refer that in capitalistic society the traditional method is continually replaced by a newer and better alternative. “Creative destruction” changes how business’ operation and customers’ demand. For instance, the video rental stores have been overthrown because nowadays people prefer enjoying Netflix and other streaming platforms. Another example, people like alternative shopping through e-commerce like Amazon, because it’s more convenient; less travel and quite fast.
However, John Maynard Keynes had critiqued the capitalism for struggling in high unemployment and no growth concerns (Jahan & Mahmud, 2015). I think the idea of “destructive creation” could also coined as a play of Schumpeter’s famous term. There always a negative effect from innovation. Technology innovation in AI and machine learning are being the driving forces of automation, also lead to worker gap. The world might not prepare for what is coming as the result of technology innovation. Thus, the talent shortage happens. Some people might throw the fault toward the HR for missed planning or preparing for the market competition, but is it?
Unfortunately, the process of workforce planning comes after the organization’s strategy defined. Gibson (2021) has the strong argument that without a direction (strategy), the organization will likely get to the wrong place at significant cost. Even so, who can guarantee that the organization has made the right business strategy? Not to belittle its importance, but a McKinsey survey in 2017 found that 70% of executive leaders did not trust and like their company’s strategy process (Rumelt, 2022). Moreover, many organizations made a disruptive and painful decision by restructuring and routine layoffs, as part of their strategy to keep up with market competition and overcome with difficulties (Sucher & Gupta, 2018).
As we know that technology has become increasingly powerful and growth, we could be afraid that it’s going to end up as destructive creation. We could also doubt the government and company’s strategy intentions in AI and machine learning investments. If many claim that technology advancement has good purpose for supporting aspects of life, then why it created another hole of talent scarcity issue? Why, in many scenarios, do people need to be forcedly given up their jobs, replaced with new system, and left with separation allowances without trying to up or re-skill them?
Government and company are the main actors who have responsibility in restoring this talent scarcity condition. I must agree with Roser (2023)’s argument that technology is controlled by whom has the powerful position, with government as the policy maker and company as the economy runner. The government should not only make the policy about data security and protection, but also to create practical solution as the implications of AI toward the impacted labor market. For instance, the Upskilling Initiative by U.S. Department of Commerce was just launched in September 2022. I think it’s behind the fact that according to U.S. Bureau of Labor Statistics the unemployment rate was at 3.5% and 5.7 million people unemployed at the same period. If necessary, government could slow down the implementation of AI to balance and solve other issues.
Graph: Unemployment Rate in U.S. (1991-2024)
Source: World Bank’s U.S. Unemployment Rate and Max Roser’s Timeline of Technology (2023)
In the other hand, company should not only focus on the efficient financial (profitability) and the effective operational process, but also to consider the people. From the graph above, in early 21st century, the numbers of unemployment rate rose at the peak of 6% in 2003 – as the effect of smartphone inventions. Wenger (2002) shared macroeconomic analysis that labor demand (job opening levels) decreased as the numbers of labor market increasingly out of synch. The numbers of workforce increased as the population grew, but the automation started to be popular and created gap. In 2010 and 2020 (during the pandemic), the economic recession happened, and companies were driven to make efficiency.
Company needs to put aside the ambition of becoming the “first” in market, or following the hype. When company hired employees, it is not expected to put them as the vulnerable deduction if it comes to business efficiency. Just like what happened to tech companies’ great layoffs in late of 2022. Jeffrey Pfeffer, Stanford’s Graduate School of Business Professor, explained during the interview that layoffs are the result of imitative behavior (Witte, 2022). Recession and over hire might have happened, but the greater force because the other tech companies were doing it.
Moreover, if organization want to invest in AI and other advanced technology (i.e., machine learning or automation), company needs to scrutinize of what solutions that it could give to blue-collar employees for they are the most impacted. Instead of using workforce reduction as the strategy, they need to up/re-skill and shifting to new, alternative jobs. The workforce planning should not only follow but supposed to be part of business strategy. People are the important asset for organization. Professor Pfeffer further explained that software company SAS Institute has never done layoffs – it hired during the recessions because it’s the best time to pick up talent (Witte, 2022).
Although many believe that technology not necessarily causing mass unemployment. It is believed could create new jobs for society. But to adapt with those, society must learn and develop new skills. Otherwise, it will increase the inequalities and disparities among the workforces. Both government and company have authority – and I would also say “guilty” – in making decision on which direction it will go. In my sense, this talent scarcity and unemployment issue will be vicious circle, unless the authority power do something to interrupt and prepare the society before making another ambition of technology advancement.
References:
Franzino, M., Guarino, A., Binvel, Y., Laouchez, J.-M. (2018). Future of work: the global talent crunch. Korn Ferry Institution. Retrieved 2023, from https://www.kornferry.com/insights/this-week-in-leadership/talent-crunch-future-of-work.
Gibson, A. (2021). Agile workforce planning how to align people with organizational strategy for improved performance. Kogan Page.
Jahan, S. & Mahmud, A. S. (2015). Back to basics: what Is capitalism? - free markets may not be perfect but they are probably the best way to organize an economy. International Monetary Fund Publications. Retrieved 2023, from https://www.imf.org/en/Publications/fandd/issues/Series/Back-to-Basics/Capitalism
Roser, M. (2023). Technology over the long run: zoom out to see how dramatically the world can change within a lifetime. Published online at OurWorldInData.org. Retrieved 2023, from https://ourworldindata.org/technology-long-run
Rumelt, R.P. (2022). Getting strategy wrong-and how to do it right instead. McKinsey Quarterly Article. Retrieved 2023, from https://www.mckinsey.com/capabilities/strategy-and-corporate-finance/our-insights/getting-strategy-wrong-and-how-to-do-it-right-instead
Schumpeter, J. A. (1976). Capitalism, socialism, and democracy (pp. 81-86). George Allen & Unwin.
Sucher, S. J. & Gupta, S. (2018). Layoffs that don’t break your company. Harvard Business Review Magazine (May – June 2018). Retrieved 2023, from https://hbr.org/2018/05/layoffs-that-dont-break-your-company
Wenger, Jeffrey. (2002). Unemployment and the U.S. jobs deficit. Economic Policy Institute. (Economic Snapshot). Retrieved 2023, from https://www.epi.org/publication/webfeatures_snapshots_archive_10022002/
Witte, M. (2022). Why are there so many tech layoffs, and why should we be worried? Stanford scholar explains. Stanford News. Retrieved 2023, from https://news.stanford.edu/2022/12/05/explains-recent-tech-layoffs-worried/
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