The conversation about the future of work in the United States is generally pretty bleak. But unlike many pundits, we at Thumbtack believe quite the contrary, that the future of work in this country is bright. Technology can continue to create more jobs than it eliminates — just in different industries and different ways. That doesn’t mean the economic transformation it’s bringing will be easy. A generation from now, the job market will look very different than it did a generation ago.
The jobs of the future.
The jobs being created today are not in the same industries or occupations that they were 50 years ago. Back then, around one-in-four workers were employed in the manufacturing industry — today, that number is fewer than one in twelve. Instead, the jobs on the rise are overwhelmingly in the services sector. In fact, the Bureau of Labor Statistics (BLS) estimates that 91 percent of jobs added over the next decade will be in services. That includes positions like nurse practitioner, statistician, massage therapist, interior designer and dog trainer.
This trend away from manufacturing and towards service jobs will only increase as the use of automation expands — and it’s expanding fast. While estimates vary, even the most conservative numbers indicate that well over 10 million workers (more than the entire working population of Texas) could lose their jobs — and not just those working in manufacturing.
Whether or not a job can be done in a more cost-effective way by a machine boils down to whether the work consists of mainly routine or non-routine tasks.
Routine vs. non-routine work.
The divide between routine and non-routine work is not just a question of skill. For example, being an electrician involves solving a diverse set of problems every day (after all, few houses have the same wiring setup) and, more generally, being able to perform a varied set of “non-routine” tasks. Accounting work, on the other hand, generally consists of a routine set of tasks, with relatively little variation in the scope of their daily work. For this reason, a commonly cited Oxford study on the risk of automation estimates that electricians have only a 15 percent chance of being replaced by machines, while accountants have a 94 percent chance.
The example above shows that, contrary to what many believe, even jobs that require advanced degrees and are what economists call “cognitively intensive”are at risk of automation. After all, electricians aren’t required to hold a college degree, but are far less likely than accountants to be replaced by machines.
If we classify all occupations based on two factors — whether they’re routine or non-routine and “cognitive” or “manual” in nature — the importance of non-routine jobs in the future of work becomes even more clear. Between 2000 and 2018, non-routine cognitive occupations (for example, a graphic designer) rose from 46 million jobs to 62 million, an increase of 34.3 percent. At the same time non-routine manual jobs (for example, a personal trainer) saw almost identically robust job growth, rising from 20 to 27 million, a total increase of 30.9 percent.
While non-routine work grows, the number of routine jobs in the U.S. economy continues to decrease. The number of jobs that are both routine and cognitive, such as clerks, customer service representatives, and sales representatives, has dropped from 36 million to less than 34 million, a dip of 6.9 percent. At the same time, manual routine jobs, such as brickmasons and machinists, dropped from 32 million to 31 million, down 4.4 percent in total.
Changes from globalization.
The other major factor that will continue to impact the evolution of the economy is international trade. As globalization takes more U.S. jobs overseas, work that must be done in-person (like plumbers and dance teachers) and therefore can’t be offshored, continues to grow. Because of this the number of American jobs in non-tradable jobs rose from 73.5 million in 1990 to 99.4 million in 2012 (a jump of 35 percent) and now comprises 73.6 percent of the workforce, while the share in tradable ones has fallen from 32.4 percent to 26.4 percent.
Small business entrepreneurs will create the jobs of the future.
With lots of things up in the air, the big question around the future of work is: Who will create the jobs of the future? Put simply, entrepreneurs. Virtually all net new job growth today is attributable to new firms (rather than larger, incumbent businesses) and this is particularly true in the services sector. Interestingly, these new firms are likely to stay small, since, as shown below, the industries expected to fuel job growth in the next decade are comprised primarily of businesses with fewer than 500 employees.
How technology can empower workers.
One of the reasons that small businesses are growing so steadily: technology. New online platforms and tools are effectively replacing the traditional functions of the firm, chipping away at the economies of scale that made large firms more efficient for so long. Today, technology companies are able to provide a lot of these services — from accounting and HR to lead generation — in a high-quality, yet cost effective way. Ultimately, these services make it possible for more Americans to pursue their dream of becoming their own boss without having to worry about how they’ll be able to, say, manage their bookkeeping.
At Thumbtack, our mission is similar: to empower independent workers and small businesses by addressing their number one concern, finding enough customers. In other words, our job is to build a platform and matching algorithm that delivers professionals the steady stream of customers that they need to draw a dependable income. In this way, our technology doesn’t replace workers from their jobs or simply drive market prices down. Instead, our technology benefits both by helping small businesses find workers, increasing options for consumers, and reducing “friction costs” by making it easier for customers and professionals to get things done.
Challenges to the future of work.
We at Thumbtack are very optimistic about the future of work. But that doesn’t mean the transformation our economy is undergoing won’t come without challenges.
First, as self-employment and entrepreneurship become more common, so will the challenge of income volatility. About 71 percent of self-employed workers experience a significant spike or dip in their household income at least one month a year. That’s 26 percentage points higher than households where nobody is self-employed.
Second, because the benefits infrastructure in the U.S. today is organized around firms instead of workers, self-employed workers are 14 percent less likely to have health insurance and 81 percent less likely to contribute to tax-advantaged retirement saving accounts (like a 401k). While the Affordable Care Act has helped to decouple benefits from employment, there is still much worked needed on this front.
Third, lifelong learning is becoming increasingly important. The millions of workers who are (or will be) displaced by automation will need retraining in order to enter new industries and also partly because workers in the jobs of tomorrow will require continuous education to remain competitive. The good news is that many workers already realize this: 54 percent of workers say training and skill development is essential to their career development. The bad news is that the Trump Administration’s 2019 budget proposal would cut federal funding for job training by 40 percent.
Finally, as the economy becomes more centered around non-tradable, non-routine jobs, growth will be geographically uneven, centered in large urban areas, and around innovative universities and medical facilities. Highlighting this, from 2010 to 2014 five metro areas — New York, Miami, Los Angeles, Houston and Dallas — had as many new businesses form as in the rest of the country combined. This problem of inequality in where economic opportunity develops is made worse by declining rates of geographic mobility. Americans aren’t moving like they used to: the share of Americans moving across county or state lines has fallen by nearly 100 percent in the past 50 years.
The future of work can be bright.
The future of work is in good hands — those of talented professionals. While, to be clear, challenges remain, we believe the economy of tomorrow will be the best one yet.
Perhaps nothing is more convincing of this than the story of Jonathan Johnson, who owns a photo booth rental company and is a Top Pro on Thumbtack. After learning that his accounting job was being outsourced, Jonathan decided that, instead of trying to find another job in an occupation with an unsure future, he would give his dream of owning a small business a chance. Four years later, SnapSeat Photo Booths — which started as a single photo booth in the back of Jonathan’s Subaru — is a thriving business, with four employees, four booths, and an impressive roster of corporate clients.
The future can be very bright, indeed.
Jobs of the future.
Who are the professionals of tomorrow? Well to start, they’re: Personal trainers, local movers, handymen, massage therapists, dog trainers, outdoor landscapers, makeup artists, house cleaners, event caterers, carpet cleaners, photo booth rental pros, dog groomers, DJs, interior painters, portrait photographers and so much more.