The 2010s overcame a precarious start to achieve a better economic outcome than many of us may realise. We enter a new decade with reweighted priorities and ongoing challenges but also reasons for optimism, writes Dr David Orsmond, recently appointed Professor of Economics at Macquarie Business School.
At the end of 2009, with the fallout from the global financial crisis ongoing and the European debt crisis building, one could be pessimistic about prospects for the 2010 decade. But after forceful actions by policymakers globally, the ship steadied albeit with many lingering concerns.
Tech explosion: the 2010s saw major advances in information and communications technologies such as Uber, Airbnb and Amazon.
Given that rocky start, the decade actually turned out fairly well for Australia: the economy grew by 10 per cent on a per person basis and average hourly wages rose by around 7 per cent more than inflation over the decade. ABS data show that these gains were widely distributed, with the share of total income that was paid to workers and the standard measure of overall income inequality (after taxes and government social payments) both broadly unchanged.
The likes of Uber, Airbnb and Amazon provide new opportunities but also threaten traditional business models.
The decade also saw major advances globally in information and communication technologies, and the World Bank projects that the share of the world living in extreme poverty halved (to around 8 per cent). None of that should be taken for granted.
But for many progress seems to be just another word for disruption. The likes of Uber, Airbnb and Amazon provide new opportunities but also threaten traditional business models. Technology shifts jobs away from routine and manual tasks that can be automated or moved on-line, such as driving agricultural harvesters and mining trains or data-processing in the services sector.
Community engagement: the decade was marked by an increased focus on trust in banks and companies and action on climate change.
The rise of the Chinese economy weighs on the local production of household and some other manufactured goods where we have little comparative advantage. And the associated rise in competition makes every day a challenge for managers and workers. All this adds to a sense of economic insecurity.
However, it is these sorts of disruptive processes that harness human creativity and provide the incentive to invest and maximise efficiency, which in turn has funded the long-run rise in our wages and employment in new activities. For reasons much debated, those productivity-boosting processes have actually slowed of late, with a corresponding weakening in the pace of wages growth over the decade. Reversing that trend is therefore a major future challenge.
Employers will increasingly seek workers who have the interpersonal skills and can deal well with complexity to complement the new information and other technologies.
The 2010 decade also saw a reweighting of community priorities. While people still want strong growth in wages, there was an increased focus on other metrics of our quality of life. These include social inclusiveness, housing costs, trust in banks and companies, and action on climate change.
As always, the spotlight is on the trade-offs involved: who pays the taxes and gets the benefits, how to balance profit incentives with social objectives, how to stimulate renewable technologies while containing energy costs, and so on. None of the answers are simple and governments the world over are trying to satisfy voters that they have struck the right balance among the competing views.
Interpersonal skills are key to the 2020s
Looking ahead, the economic landscape evolves in a clearer direction but at a more gradual pace than commonly perceived, which provides us with an opportunity to plan ahead on how to harness the upside while managing the disruptive downside. We can’t predict the economic events of the next decade in its details, but we already know much of its outline.
Specifically, employers will increasingly seek workers that have the interpersonal skills and can deal well with complexity to complement the new information and other technologies and will pay them accordingly. The rise of the middle class in emerging economies, as well as global ageing, will change consumption preferences and the mix of jobs required. Our energy sources will evolve in response to climate concerns. Global integration will continue to present a mix of promise and challenge. And some will fall on the wrong side of these structural changes through no fault of their own.
A clear-eyed and inclusive discussion today on how best to skill-up and prepare for these developments can help ensure the 2020s will be a decade of progress for us all.
Dr David Orsmond has been appointed a Professor of Economics at the Macquarie Business School. He previously worked at the Reserve Bank of Australia and the International Monetary Fund.