Creativity and the future of work

A debate is underway amongst economists over the declining share of income being earned by labour as compared to capital since 1975. Nobel economist Robert Solow of MIT posited a while back that the relative shares would be stable over time, but new research by Loukas Karabarbounis and Brent Neiman from the University of Chicago shows that this is not true. The implication of this new data is somewhat scary since it raises the question of what everybody will do for work in an economy so automated that little is left for wages.

A productivity trap?

For supply chain leaders, the question is extremely personal since we are the ones who decide where to build assets and how much to invest in equipment. SCM World data shows that we are choosing to balance away from labour because of the flexibility, reliability and relative cost advantages of automation. Whether this means adding capacity in rich countries or building new plants in emerging markets, our supply networks are scaling output, but not adding many jobs.

At the company level, we have no real choice since customers shop on price, and yet at the level of the whole economy, we are creating a disposable income problem that threatens to gradually choke off demand. Henry Ford famously saw this quandary and solved it by raising wages to ensure that his employees could buy Ford cars. The analogy unfortunately breaks down in today’s global marketplace where customers are often thousands of miles away and, in any case, someone else always seems ready to undercut on price.

In traditional economic theory (Solow’s view), capital complements labour resulting in productivity gains, which is how Henry Ford cracked it. The worry with this new data is that capital is increasingly a substitute for labour, setting us on a path to widening income disparity between the haves and the have-nots. Is the productivity miracle we are experiencing really a trap?

I don’t think so. I see the power of not only mechanical automation, but also logical automation, steadily displacing workers in repetitive tasks everywhere from packing boxes to diagnosing disease. Jobs are destroyed yes, but only those that are repetitive enough to be automated in the first place.

No one seriously suggests capital equipment will ever develop empathy, creativity, humour or warmth. Getting paid in the future will depend less on finding a steady job and more on adding emotional value to business that’s happening anyway. This could be staff at Nordstrom, Kroger’s, or Lowe’s engaging a shopper to solve a problem. It could be an independent graphic artist selling images through AT&T for use on mobile devices. It could be a small company using high-tech medical diagnostic equipment to deliver in-home care to patients. Examples like these aren’t defined by cost, but by value and that is where the human touch can make a difference.

It’s all about platforms

Recent research we’ve been doing on the topic of design for profitability may hold the key. It seems that all industries do a better job connecting supply chain and product development if they focus on designing core product platforms with modular enhancements on top. Zara does it with clothing, Colgate-Palmolive does it with toothpaste and Samsung does it with mobile devices.

The platform ingests huge amounts of capital, both in terms of intellectual property and physical plant. By building variation onto the platform, innovation is easier, faster and cheaper. Innovation is where human creativity wins the race with machines. Gainful employment based on exploiting this edge could end up being what saves us.

App creators, for instance, on Android and iPhone platforms are such an emerging workforce with well over 1 million unique apps for sale on each platform. Low-tech examples include a small regional storage business sold to platform owner Iron Mountain or a local foodie rolling into the supply chain platforms of big CPG.

Supply chain leaders can’t create jobs for the sake of paying people but they can enable innovation by building platforms for new product development. The future of work may depend on it.