Labor Market: Could The Collision Of Inequality, Automation And Demographics Trigger An Investment Boom?

Written by Staff

Demographics, automation and inequality have the potential to dramatically reshape the labor market in the 2020s and beyond.

The collision of these forces could trigger economic disruption far greater than we have experienced over the past 60 years.

These gathering forces already pose challenges for businesses and investors. In the next decade, they will combine to create an economic climate of increasing extremes but may also trigger a decade-plus investment boom.

Management consulting firm Bain has published a report detailing how the impact of aging populations, the adoption of new automation technologies and rising inequality will likely combine to give rise to new business risks and opportunities.

From Bain. Analysis by Karen Harris, Austin Kimson and Andrew Schwedel

In the US, a new wave of investment in automation could stimulate as much as $8 trillion in incremental investments and abruptly lift interest rates. By the end of the 2020s, automation may eliminate 20-to-25 percent of current jobs, hitting middle- to low-income workers the hardest.

As investments peak and then decline—probably around the end of the 2020s to the start of the 2030s—anemic demand growth is likely to constrain economic expansion, and global interest rates may again test zero percent.

Faced with market imbalances and growth-stifling levels of inequality, many societies may reset the government’s role in the marketplace.

Automation will reshape national economies, throw labor markets into turmoil and change the rules of the game in many industries. Aging populations will strain social systems as never before. But the 2020s will be a period of growth and innovation, too.

Eventually, beyond the time horizon of this report, the global economy will recover from the temporary imbalances created by demographics, automation and inequality. As the labor force develops new skills, productivity gains will benefit a broader segment of the population, and new industries will flourish.

Getting there is the challenge. How should leadership teams set targets or goals if longtime assumptions are no longer valid?

Clearly, there is no set formula for managing through significant macroeconomic upheaval. But there are many practical steps companies can take to assess how a vastly changed macroeconomic landscape might affect their business and how to position themselves for change.

In our view, the most important one is building resilience. Organizations that can absorb shocks and change course quickly will have the best chance of thriving in the turbulent 2020s and beyond.

Read more at Bain.

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