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Data and future predictions

Do you predict a future where machines have replaced humans?

While this is a popular view, it is not necessarily true and unemployment is not necessarily going to rise because of automation. However, the process of innovation makes for a very dynamic job market. Each day some jobs are lost and new ones are created.

The dynamics of the labour market are probably one of the most evident signs of how creative destruction operates. When a new idea, discovery, or technology is brought into the economy, new sectors rise and old sectors decline. In the rising sectors, jobs are being created while in the declining sectors jobs are being destroyed. Think back to an earlier example we discussed on this, in relation to the U.S. railroads industry. Employment first expanded to two million and then shrunk to 200,000 units, following the discovery of new ways to transport goods and people.

So, what of a fourth industrial revolution?

This may need to occur to guarantee long-term growth and ensure that the living standards of future generations continue to improve. If so, workers would have to be prepared to relocate from one sector to another. In other words, the very process that is required to sustain long-term growth also implies that the average job in the economy will be less safe.

In this context, it is interesting to look at the current status of the Australian job market. Using data from the Australian Bureau of Statistics, we can compute the number of jobs created and destroyed by looking at the annual change in employment across 19 industries, including agriculture, manufacturing, financial services and public administration. The diagram below reports the total of jobs created (“creation”) and lost (“destruction”) in every year since 1986.

Destruction and Creation

What we can draw from this data?

  • Creation is almost always greater than destruction. This means that in Australia, total employment has systematically increased over the period observed. The only exception occurred during the period 1991-92, when a strong recession determined a much faster rate of job destruction than job creation.

  • While the two lines are characterised by sizeable peaks and troughs, they both seem to follow an underlying positive trend. This means that, on average, both job creation and job destruction today are higher than three decades ago.

  • The total number of jobs created and destroyed (which we can take as a measure of how dynamic the market is) has increased by on average 2% a year (every year) since the mid-80s.

  • The number of jobs destroyed has increased by an average of 7% a year, while the number of jobs created has increased by an average of only 1.6% a year.

So, while Australia as a whole has continued to witness an increase in total employment, the number of people who have lost their job at some point in time has also increased.

The increase in job destruction implies less job safety for the average Australian. However, the good news is that Australia is not just destroying jobs. It is still creating new jobs at a sufficiently fast rate. This ensures a net increase in the number of jobs in the economy. In other words, while structural transformation is making jobs somewhat less safe, it is also making it easier to find new jobs if the old job is lost.

Your task

Listen to the Podcast “How Safe is Your Job?”.

Read the article “What jobs will still be around in 20 years?

In the comments, add your opinion on what you think jobs of the future will be.

References

Hajkowicz, S. (2016). Automation won’t destroy jobs but it will change them. Retrieved from: https://theconversation.com/automation-wont-destroy-jobs-but-it-will-change-them-55318

Australian Bureau of Statistics Data, Labour Force Australia. (August 2017). Retrieved from: http://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/6291.0.55.003Aug%202017?OpenDocument


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This article is from the free online course:

Exploring Economics: Will the Next Generation Be Worse Off?

Griffith University

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