(This essay was published in Hong Kong Economic Journal on 29 March 2017.)

 

Knowledge will be the key resource of society in future. In rich countries, knowledge workers are already half the total workforce and are set to become the fastest growing part of the workforce. What will this mean for society, politics and the  economy in future?

 

The impacts are likely to be greater in the social sphere than the economic one.

 

The first thing to note about knowledge workers is that they are capitalists because their specialized knowledge represents their human capital. They are also capitalists in the sense that they are the majority shareholders of mutual funds and pensions.

 

Within their organizations, they have to work in partnership with others. They therefore see themselves as juniors or seniors to their colleagues rather than as bosses and subordinates. Historically there were distinctions between men’s work and women’s work for many types of jobs, but knowledge work is also unisex. The inherent and endowed gender-derived comparative advantages will matter less in a knowledge economy.

 

The key characteristic of knowledge is its borderlessness – knowledge travels effortlessly. Anyone who has acquired knowledge can in principle expect to become upwardly mobile. A knowledge society will necessarily be highly competitive for both organizations and individuals.

 

Organizations will have to be globally competitive even if they serve a local market because customers will have access to knowledge worldwide.

 

Knowledge workers will have to compete with a growing number of workers who possess the same knowledge as them, provided formal education is available to anyone who demands it. There is no escape. Government has protected the interests of its knowledge workers by setting up barriers through local licensing and restricting immigration. But this will become increasingly difficult in the future because technology will make it easier for transactions to be conducted on digital network-enabled platforms. In the end customers are themselves mobile.

 

Knowledge qualifies a worker to perform certain job-tasks, but it does not guarantee performance. Knowledge workers must face the challenge that there will be good and bad performances, failures and successes – anyone can acquire knowledge but not everyone can win. Outcomes will depend not merely on possessing knowledge (or technological knowledge alone).

 

Soft skills will matter, for example, cheerfulness, cooperation, perseverance, common sense, and the ability to deal with complexity and adversity. A classical term used to describe persons with such talents was virtuous and philosophers in the past believed virtue could be cultivated – akin to character building.

 

The Next Workforce

 

High knowledge workers – doctors, lawyers, scientists, clerics and teachers – have been around for a long time, but increasingly knowledge technologists – who work with their hands but use a lot of knowledge acquired through formal education (not apprenticeships) – will dominate the workforce.

 

They identify themselves as professionals even when a large part of their time is doing manual work. Knowledge is non-hierarchical and so they see themselves as professionals not as subordinates, and expect to be treated properly. Their strong identity with their work and professional knowledge makes them cohesive, often well-organized groups and autonomous associations.

 

The group identities they cultivate may lead them to become more attached to each other than to their jobs. They are mobile across employers but not across professions. They care more about the opinions of peers than those of employers.

 

These workers need formal education and continuing education because knowledge rapidly becomes obsolete. They identify with their knowledge, are highly mobile within their profession even if their skills are highly specialized. Money is important to the knowledge worker, but as professionals they do not see it as a substitute for performance and achievement, and consider their job as a vocation.

 

Upward mobility in a knowledge society has unlimited opportunities as long as education is accessible to all. Impediments to such mobility are viewed as a form of discrimination. While successful performance brings not just monetary rewards but social standing.

 

The price of upward mobility of the knowledge society is competitive stress, even at the learning stage, and this could create hostility to learning. Sustaining interest and enthusiasm for learning will be a challenge for enhancing competitiveness in a more competitive world.

 

New technological progress since the 1970s have been biased towards those with knowledge. As a consequence, the relative wages of better-educated workers have risen relative to less educated ones. This has been the primary driver underlying economic inequality and also the intense competition that students and young workers face today.

 

Charles Murray’s book Coming Apart more alarmingly has shown that the reason White Americans are not doing well has been the rising trend of broken families and single parenthood. Children that grow up in such families appear to be far more disadvantaged in the upward mobility race. The problem is especially severe among low and middle-income families. High-income families are much less inflicted with this problem and their children are doing better and getting ahead.

 

Plutocracy is a possible danger as rich and educated parents can better prepare their children for such competition. Recent research into intergenerational mobility has emphasized, for example, the importance of early childhood education in the family (by Professor James Heckman) and neighborhood environments (by Professor Raj Chetty) in fostering human capital investments.

 

Personal and Spiritual Fulfillment in the New Society

 

Economic prosperity in the past two centuries has been sustained by continuous productivity growth. Market-driven capitalist economic development has also brought us better health, longer lives and greater freedom and mobility. The knowledge economy will be characterized by people spending fewer hours at work earning income and longer hours at acquiring knowledge and enjoying leisure.

 

Professor Robert Fogel has estimated trends in annual time use by the average American male household head in 1880 and 1995 and made projections for 2040 (see Table 1). Some use of time does not change much between the periods, such as sleep, meals and essential hygiene, chores, travel to and from work, and illness. But work time spent on earning income declined dramatically from 8.5 hours per day in 1880 to 4.7 hours in 1995; and it is projected to decline further to 3.8 hours in 2040. (Note these are average hours on a 365-day year that includes weekends and holidays).

 

Table 1: Trends in Annual Time Use: Average Hourly Division of the Day of the Average Male Household Head on a 365-Day Year

1880 1995 2040
Sleep 8.0 8.0 8.0
Meals and essential hygiene 2.0 2.0 2.0
Chores 2.0 2.0 2.0
Travel to and from work 1.0 1.0 0.5
Illness 0.7 0.5 0.5
Work 8.5 4.7 3.8
Sub-total 22.2 18.2 16.8
Residual for leisure activities 1.8 5.8 7.2

 

The consequence of this is that residual time available for leisure activities rose from 1.8 hours per day in 1880 to 5.8 hours in 1995, and is projected to increase further to 7.2 hours in 2040. Leisure activities are probably an inappropriate description of how people will spend most of their residual time. Some of that will certainly be spent in enjoyment and learning (most probably with others), some will be in caring for others, and some will be spent at work but not for pay. A better term would be voluntary work hours because their defining attribute is that they are without pay.

 

If we take into account that life expectancy has increased since 1880, then the total amount of hours in a lifetime has expanded for everyone. A share of that time is non-discretionary in the sense we cannot choose not to spend a fixed amount of time at sleep, meals and essential hygiene, and chores. But every person can experience an enormous gain from the increased amount of discretionary time available at their disposal over their lifetime (see Table 2).

 

Table 2: Estimated Trends in the Lifetime Distribution of Discretionary Time

1880 1995 2040
Lifetime discretionary hours 225,900(100%) 298,500(100%) 321,900(100%)
Lifetime earn work hours 182,100(80.6%) 122,400(41.0%) 75,900(23.6%)
Lifetime voluntary work hours 43,800(19.4%) 176,100(59.0%) 246,000(76.4%)

 

Lifetime discretionary hours for the typical American rose from 229,500 hours in 1880 to 298,500 hours in 1995, and are projected to increase to 321,900 in 2040. These are likely to be underestimated. Significantly, lifetime earn work hours will fall from 182,100 hours in 1880 to 122,400 hours in 1995, and are projected to decrease to 75,900 in 2040. Correspondingly, lifetime voluntary work hours have risen from 43,800 hours in 1880 to 176,100 hours in 1995, and are projected to increase to 246,000 in 2040.

 

In future, then, the average person will be spending only one-fourth of their discretionary time in making money and three-fourths of their time in unpaid voluntary work. Increasingly, the coming generation will be more concerned about their interests outside the work market. For them, personal or spiritual satisfaction will be as important as, if not more important than, material satisfaction.

 

Knowledge professionals may plateau economically in mid-life. They have reached their maximum achievements in income-earning pursuits. If these workers fail to develop a voluntary work life and community of their own, and some serious voluntary work interests, they are in trouble. Such interests will give them an opportunity for personal or spiritual development and achievement.

 

Politics in the New Pluralist Society

 

Modern social and political theory preaches that there can be only one power in society: the centralized government. Society has come to believe that government could and should take care of every problem and every challenge in the community – a thesis that was almost universally accepted in the 1960s. The trend towards the total monopoly of power by one institution, the government, dominated in the first half of the 20th century.

 

But this power-centralizing trend is now on the reverse. Moisés Naím in The End of Power observed “From boardrooms to battlefields and churches to states, why being in charge isn’t what it used to be.” The knowledge economy has created a new pluralist society of specialized knowledge workers who have their own personal and spiritual convictions and interests.

 

Part of their power comes from being well organized and well connected. An early example of non-government organizations that are well organized are large business enterprises and they are well connected through the market economy. Universities have become more autonomous and they are the citadels of knowledge production. More recently there has been the appearance of the third social sector of (mostly nonprofit) community organizations.

 

The strength of the modern pluralist organization is that it is a single-purpose institution –   strength that has to be preserved if society is to make progress. Greater specialization through division of labor has been essential for driving their productivity growth. All these organizations have to be run autonomously and focus on their own tasks and missions, whether as universities, hospitals, churches, businesses, charities, associations, and so on.

 

History has shown that the task-centered autonomous institution is the only one to perform well in the past 150 years. Whenever an organization goes beyond a narrow focus, it ceases to perform. The all-doing government has increasingly failed because it has been tasked to do too much and lacks focus.

 

The market has facilitated business organizations by mediating conflicts through the price mechanism. Prices provide both a signal and an incentive for channeling resources to those uses the community wants. Among non-profit organizations, though, politics is often the only mechanism for mediating conflicts, unless the source of funding comes primarily from the client. Non-material interests often do not have a common currency because they are not traded in markets. Very often it is sensible to fund through vouchers spent by clients rather than direct subventions to organizations if the government is the primary funding source for non-profits.

 

Single-cause interest groups are dominating the political process and are subordinating the common good to their own values and their own aggrandizement and power. How to balance the common good and the special purpose of the non-profit organization is a question that has to be answered if the new pluralism is not going to destroy the community.

 

Earlier pluralist societies imploded because no one took care of the common good. To avoid this, the leaders of all institutions will have to learn to be leaders beyond their own walls and become leaders in the wider community.

 

Warning Signs for the Future

 

In becoming more knowledge intensive, the next society will also have to become more specialized and pluralist. It is likely that it will be splintered into numerous institutions, each more or less autonomous, each requiring its own leadership and management, each having its own specific work. This will be the source of its strength. Pluralism is needed. The challenge is to protect this strength from its own destructive forces.

 

History has shown us the destructive powers of divisive interests. Agriculture has declined since industrialization. This decline led to widespread protectionism for agriculture. Manufacturing has and will also continue to decline and is facing similar protectionism, especially through subsidies, quotas, and regulations. One would expect the transition to the knowledge economy to similarly be accompanied by greater regulation of the economy to protect the declining sectors. Can we learn to avoid the follies of the past?

 

As knowledge technologists become dominant in society, they will become a political force. They have invested heavily to acquire a specialized skill and become a human capitalist. They will be keen to protect the value of their investments. But in facing competition from around the world, they will not be averse to protective regulation and legislation. In so doing, they would weaken the market mechanism for mediating conflicts among groups and organizations.

 

In a globally integrated world, the leadership must see beyond not only the walls of their own organizations, but over national borders. The tribe in the twenty-first century has to be the global tribe. It is more than social responsibility defined as doing no harm to others in the pursuit of one’s own interest. The new pluralism requires civic responsibility, which means giving to the community in the pursuit of one’s own interest.

 

It is not apparent what kind of new politics is needed to balance the common good against the pursuit of personal interest. Meanwhile politics has taken a direction for the worse. It will take time to sort things out.

 

References

Robert W Fogel, The Fourth Great Awakening and the Future of Egalitarianism, University of Chicago Press, 2000.

Moisés Naím, The End of Power, Basic Books, 2014.

Charles Murray Coming Apart: The State of White America, 1960-2010, Crown Forum, 2013.

 

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