The Future of Work: Risk Bearing and Risk Sharing - Pacific Standard

The Future of Work: Risk Bearing and Risk Sharing

The latest entry in a special project in which business and labor leaders, social scientists, technology visionaries, activists, and journalists weigh in on the most consequential changes in the workplace.
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(Illustration: Sira Anamwong/Shutterstock)

(Illustration: Sira Anamwong/Shutterstock)

The technological changes of the last generation have led to the unbundling of many production processes. Jobs that used to be both physically and contractually “inside” large firms can now be decomposed into tasks and put out to competitive bid anywhere in the world. What it means to “have a job’’ or “go to work” is changing.

John Ahlquist is associate professor in the School of Global Policy & Strategy at the University of Californiaz–San Diego. He is co-author of In the Interest of Others along with numerous scholarly articles.

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But our key economic surveillance tools, along with the public policies designed to maintain social stability and protect people from illness, injury, aging, and recession, are bound up in a mid-20th century understanding of employment. For example, in the United States many health and safety regulations apply differentially to firms depending on the number of employees they count. Health insurance and unemployment insurance along with any kind of vacation are tied up in a job with a single, specific employer.

The rise of contract work and trade in tasks requires the development of a workforce possessing the necessary skills, able to respond to market signals about where to devote their efforts. Under the right conditions, workers may also benefit from greater autonomy and flexibility. But the flexibility and opportunities afforded by our re-organized production processes make effective risk-sharing policies more necessary than ever. Without an effective mechanism for pooling and sharing economic risks, new technologies and business practices will fail to live up to their potential for both workers and investors.

The future of work requires fluid re-allocation of effort across tasks, perhaps for several bosses or clients. Existing public policies tying important benefits to specific employment relationships make it more difficult and expensive for workers to take advantage of new, uncertain opportunities. Workers will be less likely to take a risk on a new activity if doing so requires giving up health insurance or the ability to weather a recession. Older workers, those with dependents, and those without substantial wealth reserves will be the most constrained. Companies attempting to leverage the newest technology will be hamstrung in finding workers. Some ideas will simply not be implementable. Access to important forms of social insurance should be divorced from specific employment contracts.

Similarly, contracting for tasks on a short-term basis presumes that there exist workers with the skills necessary to do the job. As more jobs are decomposable firms have reduced incentives to provide training in-house. Where will worker training and expertise come from? Who will bear the risks of investing in skills that may become obsolete? With reduced firm-level investment in training and skill development a greater burden again falls on resource-constrained workers. Firms themselves face a “common pool” problem: they all benefit from a well-trained workforce but would prefer that someone else fund that education and take the risk of betting on a specific skill set. Common credentialing standards, broad education, and re-training initiatives coupled with income supports will lubricate an active trade in tasks.

Finally, aging populations across much of the world limit workers’ abilities to adapt to more flexible and risky employment relationships. Older workers have shorter time horizons and are more exposed to a variety of risks. An older workforce is also more likely to be composed of workers with dependents. Supporting worker adaptation in an aging workforce is likely beyond the scope of any particular firm or contract. A re-invented social contract will bring forward many new initiatives that would otherwise languish.

There are a variety of policy options available, but no clear program to rally around. Universal health care is already the norm among advanced industrial democracies, even if the U.S. lags. Scandinavian economies have long maintained aggressive skill training and technical education programs for displaced workers. Proposals for basic or guaranteed minimum income, independent of employment status, have seen a resurgence among liberals, conservatives, and libertarians. Switzerland will hold a referendum on one such proposal in 2016. All these initiatives share a fundamental weakness: they operate at the national level whereas trade in tasks involves workers the world over who are, themselves, moving from one place to another.

Workers are being asked to shoulder ever more risk and uncertainty yet our policies are not adapting. Existing risk-sharing policies were not the result of enlightened benevolence. They emerged from extended and sometimes violent political struggle. As jobs are decomposed it becomes harder to tell where you fit in the larger production process. Turnover is high and time horizons are short. Workers are geographically fragmented and politically isolated. Firms face their own collective action and common pool resource problems. My worry is that the very changes that make the social welfare function of government all the more important are also the changes that undermine the political possibilities for the needed reforms.

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For the Future of Work, a special project from the Center for Advanced Study in the Behavioral Sciences at Stanford University, business and labor leaders, social scientists, technology visionaries, activists, and journalists weigh in on the most consequential changes in the workplace, and what anxieties and possibilities they might produce.

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