Poverty and the New Economy - The Shifting Social and Economic Landscape

povertyreduction
new-economy

(Derek Cook) #1

Poverty and the New Economy: The Shifting Social and Economic Landscape

The global economy is undergoing significant change with particular impacts on western industrial societies. The forces of change are simultaneously demographic, political, social and technological. In the advanced economies, an aging population is having important social and economic effects, including an increasing dependency ratio which may create challenges for the continued financing of social welfare programs. At the same time, this may increase the demand for technological innovation to substitute capital for a declining labour force as well as increasing pressures for international migration to limit the deceleration of labour force growth.

The rise of a truly global workforce is occurring in the context of an emerging polycentric global order where power is increasingly shifting from West to East, and from North to South. This new polycentric order has simultaneously been associated with processes of globalization and trade liberalization that have shifted production to lower-wage countries, challenging the ability of advanced economies to sustain a post-war standard of living. Shifts in the global economic and political order are also accompanied by rising social inequality which risks undermining social cohesion. The rise of this new inter-connected global economy has been facilitated by technological advances in communications as well as artificial intelligence which are transforming processes of both production and consumption.

For the economy as a whole, this emerging new economy poses both opportunities and risks. New communication and production technologies are challenging traditional industries and employers, opening up previously constrained markets to new entrants. Similarly, an increasingly global labour force that can engage digitally opens up new employment opportunities to those who may have previously been excluded. This process is accelerated by the unbundling of work into discrete tasks that can be digitally contracted, opening up new types of employment. New production technologies also open opportunities for the re-shoring of industries that had previously moved out of traditional production centres as the need for spatial proximity to the workforce diminishes, and as opportunities for automation present themselves.

The economic impact of these changes include shifting patterns of production and consumption along with growing inequality arising from a global rebalancing of wages. Associated with these changes is a rise in precarious employment within advanced economies, with significant implications for the health and well-being of the current and future workforce. Precarious (non-standard) employment includes part-time or temporary / contract work which typically lacks benefits and predictability while providing below average wages. While it provides increased flexibility for employers and to some extent employees, it also poses significant challenges to providing adequate social protection for workers and the broader society. This is raising concern about the quality of employment and the degree to which it can meet the social and economic needs of the workforce in the future.

There are associated social impacts that arise with this shifting techno-economic landscape. First, there is the real risk of job displacement or obsolescence as certain jobs or even entire occupations are rendered redundant by the processes of automation and artificial intelligence. A related risk is that of job estrangement, where the job remains but the tasks have been transformed due to technological advancement, reducing the quality of the employment. While this may result in up-skilling in certain situations, more often than not down-skilling of the job has been the result. This may reduce job satisfaction, compromise workplace health and safety, including mental health, or lead to degraded wage rates over time.

The shift to more flexible forms of employment is associated with this restructuring of the workforce. While flexible employment may provide short-term benefits, many analysts suggests it reduces long-term firm competitiveness due to reduced human capital. The impact on workers is more pronounced. Those engaged in precarious work tend to report poorer overall physical and mental health, have difficulty maintaining an appropriate work-life balance, are less engaged with their communities and struggle to meet basic needs. Further, our income security programs are designed around traditional employment relationships and do not provide adequate social protection for this growing class of worker. Finally, the ability of workers to advance their interests in this new economy is diminished due to declines in unionization and the weakened bargaining power of labour.

It is in this context that new economic models and business practices are emerging that are working to address the challenges of this new economy. In a 2012 report by Policy Horizons Canada, it is noted that firms are increasingly attuned to the economic risks associated with declining human, social and natural capital, stating: “Governance inefficiencies in effectively dealing with these issues are pushing firms to fill the void and mitigate risk in supply chains. New strategies for sustainable use of resources (e.g. collaborative consumption, virtual telepresence and urban mining) are already emerging, providing opportunities for the development of new types of business models and re-conceptualizing the profit motive traditionally linked to firms.”

In light of these trends, there is some optimism for the emergence of a new economy where new business practices or forms of economic activity generate quality employment that provide greater opportunity for those at the margins of society. This emerging new economy has 3 important streams:

  • Shared value : The shared value approach to business focusses on the importance of traditional business generating social (community) value as well shareholder value. This is accomplished through inclusive business practices such as social / ethical procurement, living wage policies, diversity-focused human resource practices, etc… This includes the emergence of the B-Corporation which provides certification of adherence to strict social and environmental standards.
  • Social enterprise : Social enterprise includes both for-profit social purpose businesses and non-profit entrepreneurial activities that create quality employment that contributes to reducing poverty and inequality. Cooperative enterprises, including worker cooperatives, are also included in the social enterprise universe and can be powerful engines for poverty reduction.
  • Sharing economy : The sharing economy includes sharing enterprises in the formal economy as well as informal economic activities that may or may not generate monetary income but provide material benefit, particularly for those at the margins of the economy and society. Examples of informal activities include tool libraries or the development of local currencies or barter systems.

Through such strategies, there is the opportunity to capitalize on new technologies to create a more inclusive economy that builds human, social and economic capital. The effective application of such strategies may have a significant effect on the risk and incidence of poverty in Ontario and Canada. Moving towards this new economy will require the coordinated effort of policy-makers, industry leaders and civil society to address a series of challenges. Some principal challenges include:

  • Transforming the legal / regulatory framework with respect to work.
  • Ensuring a fair and living wage in the face of downward wage pressures arising from globalization, technological change and the growth of precarious employment.
  • Facilitating effective labour market integration and skills development in the face of a global and mobile workforce along with transforming production technologies and processes.
  • Rethinking social protection in an economy where permanent jobs may be more scarce and project-based, while linked to employers and markets around the world
  • Updating social security programs that are currently based on traditional employment relationships.
  • Distributing risk and responsibility fairly between workers, employers and the state.

As we continue to wrestle with these issues, we invite you to consider the following questions:

  • What are the key policy issues we need to be addressing to facilitate the transition to the new economy? What policy innovations are possible?
  • What governance structure(s) would best support multi-sectoral collaboration to advance the objectives of a new and inclusive economy?

We also invite you to share promising practices as well as any helpful resources that could facilitate effective cross-sector collaboration and learning.

References

Policy Horizons Canada (2012). The Next Economy: Transformation and Resilience in Times of Rapid Change . Ottawa: Government of Canada.

Balliester, T. and A. Esheikhi (2018). The Future of Work: A Literature Review . Geneva: International Labour Office.

Busby, C. and R. Muthulumaran (2016). Precarious Positions: Policy Options to Mitigate Risks in Non-Standard Employment . Toronto: C.D. Howe Institute.

Graham, M. I. Hjorth, and V. Lehdonvirta (2017). Digital Labour and Development: Impacts of the Global Digital Labour Platforms and the Gig Economy on Worker Livelihoods . Oxford, UK: University of Oxford

Johal, S. and A. Yalnizyan (2018). Race to the Top: Developing an Inclusive Growth Agenda for Canada . Toronto: University of Toronto, Mowat Centre.

Lavoie, M. and E. Stockhammer. (2012). Wage-Led Growth: Concepts, Theories and Policies . Geneva: International Labour Organization.

Lewchuk, W. et al (2013 ). It’s More than Poverty: Employment Precarity and Household Well-being . Poverty and Employment Precarity in Southern Ontario, McMaster University and United Way Toronto.

Lewchuk, W. et al (2018). Getting Left Behind: Who Gained and Who Didn’t in an Improving Labour Market . Poverty and Employment Precarity in Southern Ontario, McMaster University and United Way Toronto.

Mitchell, M. and J. Murray (2017). The Changing Workplaces Review: An Agenda for Workplace Rights. Summary Report . Toronto: Government of Ontario, Ministry of Labour.

Policy Horizons Canada (2012). The Next Economy: Transformation and Resilience in Times of Rapid Change . Ottawa: Government of Canada.

Policy Horizons Canada (2016). Canada and the Changing Nature of Work . Ottawa: Government of Canada.

Taylor, C. et al (2015). Change Work: Valuing Decent Work in the Non-Profit Sector . Toronto: University of Toronto, Mowat Centre.

Unifor (2018). The Future of Work is Ours: Confronting Risks and Seizing Opportunities of Technological Change . Available [Online]: [https://www.unifor.org/sites/default/files/documents/document/1173-future_of_work_eng_no_bleed.pdf