The State Of Work | #143
June 5th, 2021: Greetings from Hualien, Taiwan. We left Taipei because of our lease ending and moved down to the East Coast of Taiwan. We’ve been stuck inside because of an evolving Covid situation and lockdown here but this view has been an amazing companion.
We are hoping things open up a bit in a month or two. It’s been a bit of a mental roller-coaster the past few weeks returning to “lockdown mode” 14 months after our first and after we thought we were free and clear of Covid. It has been frustrating to watch Taiwan make many of the same mistakes that other countries made when cases first broke out but it seems as if they’ve gotten a handle o the situation after a few weeks and preventing an even worse situation. If you want to read a good breakdown of what went wrong in Taiwan I recommend this article which is a great example of underestimating complexity.
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#1 The Changing Nature Of Our Labor Economy
David Deming has been one of the more interesting Academics studying the changing nature of work. Several years ago he published research showing that the share of employment and the wages of “high social” jobs were increasing1. His findings were a challenge to the idea that STEM skills are the most important thing to succeed in today’s labor economy.
The headline that many ran with was that we needed to shift to thinking about teaching “soft skills” to young people to prepare them for the future of work. This might make some sense but underestimates how much we can know what the future makeup of the labor economy looks like.
The headline I would have ran with (and been fired, of course) would have been “The nature of our labor economy determines our opportunities more than we think.” The jobs we see around or us that we saw our parents have will certainly not be the jobs that are available tomorrow.
If step back and look at the last forty years we see that the jobs that exist have been shifting in two directions. This is due to the disappearance of “middle-skill” jobs which MIT Economist David Autor has detailed in his research2. These were the jobs at the center of the “great boom,” the 1945-1980 period that helped solidify our belief in a stable, corporate job as the key to a middle-class life.
Across the population, there has been a growth in the type of high-wage, high-skill jobs that Deming highlighted as well as low-wage, low-skill jobs. This has been a windfall for people with education and the resources to orient their lives around work, go into debt to acquire educational credentials and move to the innovation regions where high-wage opportunities are abundant.
For the people without the desire to move or go into debt, it has led to a general under-employment in the sense that the same people forty years ago would have been doing more challeging work. Here is Autor:
While workers are vastly more educated and jobs are vastly more skill-intensive in today’s cities compared to five decades ago, non-college workers in these places perform substantially less skilled work than they did decades earlier.
This is pretty wild. We’ve dramatically increased the education level of the country and built a booming knowledge economy but for many, they are doing work below what they are capable of.
I’m not sure what the “solution” to this is but it seems worth questioning some of our strongly-held beliefs around work such as “work hard and you’ll earn your worth.” We should update this to “get the right credentials, be willing to move to booming areas, and learn the social codes of the knowledge economy. then work hard and you’ll be okay.”
The takeaway here is that the modern labor economy is demanding a lot more out of people than it did in the past. Deming recently published another paper3 highlighting three key shifts:
#1 Increasing share of wages paid to “management” tasks
We have shifted from an economy where a production manager might direct the work of many workers in a manufacturing or operations environment to one where we have many pseudo-managers in the knowledge economy. Anyone in the knowledge economy knows that you are less likely to get promoted to a position directing the work of others than simply getting a new title or lateral move doing the same work of organizing information in a way that it can be understood and acted on by others. This is “management” in the new economy.
#2 Increasing share of jobs requiring decision making
He found this trend across the entire economy even after removing all management professions and that decision making intensity was increasing within jobs rather than simply a change in the makeup of the jobs.
For the average person this means that knowledge economy jobs will become more cognitively demanding and require people to make increasingly complex decisions, mostly through technology, software and analytics to help us guide our decisions. If you aren’t comfortable with technology and computers, you’d be wise to fix that.
#3 People working a lot longer until they reach “peak" earnings
Deming found that in the 1960s lifetime wages peaked sometime in a person’s early 30s. Now one’s earning are likely to jump a lot more earlier in one’s career and also continue to rise until one’s 50s or 60s.
To me this says two things. One, the payoffs to finding a good job is much higher earlier in one’s career than in the past and two, today’s demanding jobs require consistent and ongoing learning, something they didn’t demand as much in the past. Deming highlights how this jumped in the 2000 data:
By 2000, U.S. age earnings profiles had shifted outward dramatically, with a higher peak that occurs much later in the life-cycle. In 2000, full-time workers age 50-54 earned about 90 percent more than full-time workers age 20-24. In 2017, earnings growth peaked at nearly 100 percent and workers age 55-59 were earning substantially more than workers in their 30s.
This is a pretty dramatic shift! In the 1950’s Donald Super developed a model of life stages and put a lot of emphasis on finding a good job in your 20s and 30s and then shifting to “maintenance” mode in your 40s:
You can still see the remnants of some of this thinking when you see people talking about finding a job where they can coast but the reality is that for the modern knowledge worker, continuous learning will be the norm.
When he broke down this trend by degree of decision makign and cognitive skills, he found that this trend was most pronounced in “high-decision, high coginitive skill” jobs.
In today’s economy the kind of jobs that will lead to the biggest rewards are much more demanding and challenging than they have been in the past. The hard thing about this is that this kid of work will demand much more attention and energy than similar status jobs might have in the past and its not clear for what this means for families, life satisfaction, and our communities.
I’ll definitely be trying to make sense of it as things evolve :-)
#2 Some Millennials Are Broke, Most Are Fine
Conventional wisdom says that the millennial generation is not doing well. You’ve likely seen the graphs showing that only 50% of people will do better than their parents or charts comparing wealth by generation. I’ve been guilty of sharing these charts but I’ve come to think that data is not the right picture.
If you adjust for inflation and household size, a lot of these effects disappear4. A different look at the data says that for the top 50% of millennials, they are absolutely crushing it while the worst off millennials actually are worse off than previous generations.
This is the point that Nick Maggiulli made in his recent deep dive into these trends. He was skeptical of much of the news and data around the current generations struggles so went to see what he could find5. When he adjusted wealth for household size and inflation he found that things are pretty similar to previous generations.
Before you start throwing objections at me, Nick agrees with you. He argues that for many young people that despite their wealth they feel that the system is increasingly rigged. The costs of housing (especially in those expensive metros where the good jobs are), childcare, and education have skyrocketed. While people have the same amount of wealth as previous generations, there is likely a psychological sticker shock component to all these rising costs.
in addition, a decet percentage of the millennial generation are much worse off than previous generations. This is due to taking out a lot more debt earlier due to the exploding costs of college. If you look at the adjusted net worth by income percentile and degree status, you find that the 10th ad 50th percentile millennials with some college experience are deep in the hole.
I’m glad Nick posted this. It shifted my thinking and adding nuance to what I previously thought was true.
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