The On-Demand Economy and the Global Skills Gap

Today, the majority of the world's population uses a cell phone. In addition, what is known as the "internet of things" is connecting us to our appliances, our cars, and our buildings through wireless artificial intelligence. This has major implications for our economy.
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The world is changing at an unprecedented pace. The Internet and related technological advancements are transforming businesses, industries, government administration, and nearly every aspect of our daily lives. And while the spread of personal computers took decades, cell phones, and now smartphones, have proliferated over just a few years.

Today, the majority of the world's population uses a cell phone. In addition, what is known as the "internet of things" is connecting us to our appliances, our cars, and our buildings through wireless artificial intelligence. This has major implications for our economy, as automatization boosts efficiency and productivity while displacing workers from traditional industries.

It has also led to the expansion of the so-called "sharing economy," which is a boon for consumers but which disrupts old forms of employment. Uber challenges taxi unions, Airbnb undercuts the hotel industry, ZipCar undermines car rental agencies, and Netflix-style streaming services shake up the dominant television and film producers and cable-bundlers. While there is still much to explain from a sociological point of view about how we have come to trust each other to provide such services without the benefit of a credible brand or company, it is clear that we are increasingly acting as our own little corporations.

The impact on labor markets -- and thus the type of education and training necessary for success -- has yet to be fully understood. But we know that the conventional contract between worker and employer has all but broken down. Corporations can no longer offer the type of life-long job security they once did, and as a result young workers will likely change jobs more than a dozen times in the course of their career. Nearly a third of U.S. workers are already mobile, and the consulting firm Pricewaterhouse Coopers (PwC) estimates that by 2020 global worker mobility will increase by 50 percent.

As a result, the competition for talent is everywhere more intense, even as the future of work is more uncertain. A student in Brazil is competing with students in Singapore or Morocco.

At the same time, companies are finding it harder to find the kind of advanced talent they need for their high-tech, globally oriented businesses. PwC research also found that nearly two-thirds (63 percent) of global CEOs worry about not being able to find employees with the necessary skills and innovative mindset to fill their open positions. McKinsey estimates that there will be a shortfall of some 85 million qualified workers by 2020.

Here is where the rise of freelancing and the sharing economy, often using smartphone apps as platforms, comes into play. Fifty-three million Americans -- 34 percent of the labor force -- are now doing some freelancing, and the number is quickly growing. As The Economist points out, this increasing informality will "challenge many of the fundamental assumptions of 20th Century capitalism."

In particular, it challenges the original rationale of grouping workers into firms in the first place. Bringing economic activity under the umbrella of large companies reduced transaction costs, overcame coordination problems inherent to industrial production, and connected supply with demand. But now, anyone with a smartphone can offer their goods and services to potential customers around the world at the swipe of a finger. (Companies too benefit, as they are able to contract out routine data entry and other menial work to freelancers and thus focus on their core competencies.)

But this type of connectivity is not so much the benign-sounding "sharing economy" as it is a process of "ruthlessly optimizing everything around us and delivering it at the touch of a button," writes TIME's Joel Klein in a recent piece. And meanwhile, our public policy has fallen behind the times, with labor markets regulated and structured for a much different economy -- one based on job security, generous pensions, and employer-provided benefits.

All of these trends taken together -- connectivity, mobile entrepreneurship, the breakdown of traditional corporate relationships, and the global skills gap -- means that our students face unexpected pressures as well as unimagined opportunities. They will have to adopt innovative, problem-solving mindsets, and prepare themselves for a life full of negotiating constant career shifts.

This is a tall order for our outdated education systems, and those students who fall behind will struggle to compete with an international labor pool. But those schools, cities, states, and countries that can adapt to the on-demand economy can reap the rewards of growing productivity and technological advancement.

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