Work has been a central concern of Harvard Business School since the first days of this campus. On June 4, 1927, with construction complete, faculty and students gathered for the dedication ceremony. The campus was much smaller then. Only Baker Library, Morgan Hall and the six HBS dorms stood. Spangler, Aldrich and Klarman lay far in the future. The dedication address was given by Owen Young, then chairman of GE. In his speech, he addressed what he saw to be the most important work issue of that time: low wages for workers. He said, “Slowly we are learning that low wages for labor do not necessarily mean high profits for capital… No man is wholly free until he is both politically and economically free… No man with an inadequate wage is free.” Young urged the students to accept their responsibilities as future leaders of business not only to secure profit, but to create economic freedom for their employees. His words were true to his company’s approach: GE raised wages, instituted a pension plan, shared profits with employees and gave hospital coverage as early as the 1920s and 1930s, before many other companies followed suit.
If Young were giving this address today, what would he say? There’s no doubt that he’d still be concerned by wages, particularly given slow growth in average earnings over the last 50 years. Average seasonally-adjusted wages in the US rose from $20.27 per hour in 1964 to $22.65 per hour in 2018 in real terms, according to the Pew Foundation. But Young might also choose to speak about changes that could lead to mass unemployment and fundamentally alter the relationship between manager and employee. Two forces that will impact work the most are automation and the rise of flexible work.
First, advances in artificial intelligence and robotics could automate many tasks, especially in manufacturing, retail and data collection and processing. A recent McKinsey study estimated that the equivalent of 61m full time employees’ worth of labor in the US is automatable. The figure is even higher in China, at 395m. This doesn’t just apply to low-skilled jobs – for example, Goldman Sachs has automated most of its US cash equities trading desk, cutting staff from 600 traders to just two, and it has analyzed the mergers and acquisitions process with a view to automating parts of the process.
Second, the rise of contract jobs offers more flexibility but risks eroding traditional benefits and security. Alternative work arrangements are rising rapidly. A recent paper by Lawrence Katz and Alan Krueger, economists at Harvard and Princeton, found that people in alternative work (temporary help agency workers, on-call workers, contract workers, and freelancers) rose from 10.1% of the US workforce in 2005 to 15.8% in 2015. Those working for Uber and other labor platforms still make up a small share of the overall workforce but are growing fast. JP Morgan estimates 0.9% of adults earning income in mid-2016 worked for platforms such as these, which is an eight-fold increase from 0.1% in late 2012. In most cases, these are held as a second job. This type of employment relationship offers opportunities and costs: these jobs tend to have lower levels of employment protections and benefits than permanent jobs, but they also give the worker greater ability to set their own working hours and an ability to take a second income to smooth irregular earnings in their main job.
The course of our careers will be shaped by these forces. Many of us will be in positions where we can shape business and government’s response. There are no easy answers. Many of the current solutions being discussed – universal basic income, a jobs guarantee, a robot tax – are undeveloped and have major flaws. But it is critical for us to talk about these issues as a student community and it is critical that we form personal views on the solutions. This will guide the level of automation we use, how heavily we rely on contract workers and which policy solutions we should advocate for. It will impact employment relationships, affect our approach to leading teams and heavily influence what it means to create meaningful work for others.
To dig into these topics, Rob Malan and I (both MBA ‘19) are leading a speaker series, with other students and the Managing Future of Work Project. Our speakers already lined up include Larry Summers on October 25. Our aim is that these discussions will help students form a view on these monumental coming changes and equip us all for leadership in the future of work.
Young’s message to Harvard Business School students 91 years ago was to accept their responsibilities as business leaders. Today, we should think about these words, consider our part in the future of work and, following Young’s example, seek to maximize economic freedom for those we will work with.
Kieron Stopforth (MBA’19) is a Fulbright Scholar. He previously worked for Bloomberg New Energy Finance and interned at Google DeepMind. Kieron is co-leading a speaker series on the future of work at HBS. To sign up for the speaker series mailing list, contact Kieron at [email protected]