The Future of Work After COVID-19

Friday, May 29, 2020
Andrew Milligan/Reuters

Bernard L. Schwartz Senior Fellow, Council on Foreign Relations; @EdwardAlden

Senior Partner, McKinsey & Company; Chairman and Director, McKinsey Global Institute; Member, Board of Directors, Council on Foreign Relations

Cofounder and Chief Executive Officer, Business Talent Group


MBA Class of 1952 Professor of Business Administration, Harvard Business School; Senior Associate Dean, Harvard Business School Online

Panelists discuss the future of work after the COVID-19 pandemic, including how workers and businesses will have to adapt to the post-pandemic economic landscape and workplace environments.

SPAR: Thank you so much. Good morning, everyone, and welcome to today’s Council on Foreign Relations virtual meeting on the future of work after COVID-19. I’m Debora Spar, professor and senior associate dean at the Harvard Business School. And I’m delighted to be presiding over our conversation today. We have nearly five hundred people registered for this virtual meeting and we’ll do our best to get to as many questions as possible during the question and answer period.

We also have a stellar group of panelists here this morning. You have their full bios, so I will just very briefly introduce Edward Alden, the Bernard L. Schwartz senior fellow at the Council on Foreign Relations; James Manyika, senior partner McKinsey and Company, chairman and director of the McKinsey Global Institute, and a member of the board of directors at the Council on Foreign Relations; and Jody Greenstone Miller, co-founder and CEO of the Business Talent Group.

So I want to get us started with just a very broad general question. And so let me ask each of you: What do you see as the biggest and most enduring changes in the shape and nature of work that are likely to emerge as a result of this pandemic. James, why don’t you start us off, if you don’t mind?

MANYIKA: Well, thank you, Debora. And good morning and good afternoon, everybody. I think, you know, the topic of the future of work was already a conversation. But I think we’re seeing, at least I’m seeing, a few trends start to accelerate. The first one is around automation. This is already something we were discussing in many arenas with regards to the future of work, but we’re starting to see an acceleration of that in some sectors, particularly around food and accommodation services, in mining, and even in manufacturing as these places have continued to work.

The second trend is something that is actually borne of our changes in behavior. We’re now shopping a lot more online and having things delivered to us. We’re doing more telehealth. And we’re also doing more remote learning. All of that has implications for work, because we’ve had to—we’re starting to reconfigure what people do to counter those changes in behavior. And some of that may persist.

But we now have a third trend that’s actually important, concerns about health and public safety. And even those trends which don’t have very much to do with the economy, per se, or with technology, are also starting to reshape how we think about work. And not all of that will come back to where it was, even after we’ve passed this COVID moment.

SPAR: Great. Thanks. And we’ll come back to some of that in a second.

But, Jody, what are you seeing and sort of predicting out there?

MILLER: I think we’re seeing a(n) overall sense that people in the workforce are moving to resiliency instead of efficiency. I actually think in the world of labor, we still need to focus on efficiency. And I think that what we’ll see out of this moment, particularly with the rise and increasing comfort with remote work, that you’re going to have a much more real global talent marketplace, particularly at the high end with knowledge workers, because what you’ll find is in the past where geographic compatibility was an important factor, now you really are able to imagine hiring someone who is not going to be on site very often. And that will change, I think radically, the dynamics of the labor market for a long time, beyond just no offices.

SPAR: Great. Thanks. Again, we’ll come back to some of that.

Ted, what are you seeing as the big shifts out there?

ALDEN: Thanks very much, Debora. It’s great to be here with James and with Jody. Sort of three things; two international, one more domestic. Internationally, I think we’re in the midst of seeing a significant reconfiguration of supply chains that’s going to affect what work is done where. Some of this is continuing trends that were happening partly as a consequence of the trade war with China and the rising cost of doing business in China. But I think in certain sectors, particularly security-related, health-related, there are going to be a lot of conversations about where to locate that sort of work.

Secondly, I think the movement of people is going to be affected quite dramatically. I see this at the border. I’m in Washington state now and looking at the Canadian border here. Trade has been relatively unimpeded. The border’s continued to function smoothly. There’s no personal travel across the border at all. It’s down 98-99 percent. And I think we’re going to see kind of lasting effects on the movement of people, immigration, and business travel, I think foreign students, and others. I think that’s going to have significant effects.

And domestically, I know we’re going to get into this too, I think it’s going to trigger fundamental conversations about the nature of the social contract. The pandemic has particularly hit lower income people hard. It’s hit the essential workers, who are continuing to have to go out and risk their health to keep society functioning. And they are also some of the lower-paid workers. So I think long overdue conversations about inequality and support for lower-income workers I think are going to come front and center in the agenda. So those are my top three.

SPAR: Yeah. So I want to come back and talk specifically about the labor market. But I want to pick up first on what you were talking about in the decline of the movement of people and throw that to the other panelists as well. I mean, everyone on this call, or certainly every one of us, you know, are part of the global economy and the globalized world that we thought was going to on forever. Is this a fundamental shift? I mean, are we going to survive this pandemic and then move back to the world where we all jumped on planes and crossed borders without really thinking about it? Or do you think that we are fundamentally moving into a different kind of world order? Anyone who wants to jump on that one.

MILLER: Yeah. I think there are two different questions, which is personally people who have been flying around the world at the drop of a hat are finding that they can do and be effective without doing that. And also for many people, that’s a more pleasant way to live. So I think there’s a personal component, and I do think you’ll see changes for a really long time. I also believe, however, that the actual globalization of the economy and the world will not dramatically change. Businesses are already too multinational. They may change the supply chain; they may change how they hire. And I think in that—and that will be a good change. But I don’t think you’re going to just sit down and focus only on your, you know, immediate area.

MANYIKA: Yeah. And if I could maybe add to what Jody’s just describing, it’s worth remembering that when we think about globalization there are really four different things that are moving around. We’ve got goods and products, we’ve got services, we’ve got financial flows, money, we’ve got people. And now more recently, we have data. So if you look at all those things, yes, some of those will slow down. The people movements might actually slow down. But that’s a small component. We’ve seen, for example, cross-border data flows, which had already been exploding even before COVID, accelerate even further in this moment. So I think when we think about the globalization, we should think about all those different components.

We’ve already—we already know that supply chains, for example, were starting to regionalize a bit, not because of COVID but largely because the centers of consumption were actually shifting. There was a time when the world’s largest market was actually North America. Well, that isn’t the case anymore. There’s now growing demand in other parts of the world as well. So supply chains have already been reconfiguring to take account of where demand is. So the globalization question’s a lot more complicated, I think as Judy was—Jody was describing.

SPAR: So let me go to Ted for a moment here, and if you can just elaborate a bit on the impact of this shift in global supply chains. I mean, is—you’re a specialist on trade. Are we going to see trade shrinking in the future, or, to James and Jody’s point, sort of the goods decline sort of matched by data, and finance, and all the other things that we keep moving around?

ALDEN: I mean, I would agree with that. I think physical goods trade is declining dramatically. I mean, some of that’s just the function of the short-term shutdown, but if you look at WTO forecast for this year we could see trade shrink by as much as a third. I don’t think it’ll be quite that dramatic. But certainly going to be 15-20 percent. And that’s on top of ten years in which the pace of trade growth had already slowed significantly. Up through 2008 trade growth was far exceeding global economic growth. Since 2008 trade growth has run behind global economic growth. So I think, you know, we reached peak globalization maybe fifteen years ago in terms of the movement of goods. And I think that is continuing to shrink.

I do not—I wrote about this recently—do not anticipate a lot of that work coming back to the United States. I think if you look at what companies are doing, they’re diversifying away from China. And I think they’re going to—companies are going to have to become more resilient in terms of relying less on single sourcing, having multiple suppliers that they can draw on in a crisis, depending on where things are shut down. So I think we’re going to see some significant changes in sourcing patterns. But generally I do think, you know, in terms of the size of the economy, trade is going to continue to diminish in importance.

And some of these technologies drive it even more that way. I mean, on the movement of people, there is just a lot of stuff we can do virtually. I mean, we think of these, you know, Zoom calls, but you look at the developments in virtual reality, where you can have somebody from a long distance guiding someone working, you know, on repairing a machine, or doing surgical procedures, or other things. There’s work that can be done from a great distance now that just wasn’t possible before. And so I think that’s going to slow down certainly the movement of people side.

SPAR: All right. So let’s go in that direction then and focus on the labor size of these developments, because clearly one of the things that’s happening, at least in this moment, is what feels like a bifurcation of the labor force. That there’s people like, I presume, many or if not most of us in this room who can sit in our studies or our guest bedrooms and kind of keep working. As Jody was saying, it might even be better because you can sit in L.A. and do a job in London. But certainly there’s an even larger chunk of people who don’t have that luxury, who can’t work from home, and are going to have to be in places and in jobs that are physically dangerous to the level we haven’t seen in most of our lifetimes.

So you know, is this true? Is the labor market bifurcating? And if so, how should we be thinking about it? James, want to start out?

MANYIKA: Sure. I mean, so the whole future of work and bifurcation was already a challenge, even before COVID, because we know that there was massive inequality already. We also know that even though the jobs had recovered since the 2008 recession, we know that the recovery was very uneven, even geographically. We know that parts of the country did spectacularly well in the job recovery, other parts didn’t. So we already had these kind of structural challenges. But I think one of the things that’s happened in this COVID moment is put all that in even sharper relief. So for example, if we looked right now at the—what you might count as the vulnerable workers in the U.S. economy—vulnerable in the sense that they’ve either been laid off, furloughed, or they’re experiencing reduced work hours, or reduced income—that number, that proportion of American workers in that vulnerable category is about a third.

That’s a big number. And when we look at those vulnerable workers, in the way that I just described, some—close to 75 percent of them are low-wage workers. In other words, these are people who earn less than $40,000 a year. And if you—so that’s a big chunk of already low-income, low-wage workers. And the vast majority of them don’t have college degrees. So you look at—and many of them—and close to about 14 percent of them work in businesses or establishments that employ less than a hundred people. So you already look at that, and you can already see the uneven nature of that. It tends to affect people of color, it tends to affect, you know, women. So there’s already an unevenness within that.

So this has now been brought into very sharp relief. And, you know, we all talk about working remotely. You know, most of the work that those people do cannot be done remotely. In fact, we know that of all the work in the U.S. economy, by different assessments somewhere between 40 and 45 percent of work literally cannot be done remotely. You actually have to be in some place doing that work physically. So the reality—so this bifurcation, Debora, I think may in fact have been more exposed, if not exacerbated, by this moment.

SPAR: That’s very scary. Yeah, Jody.

MILLER: Well, I think it was absolutely happening in, you know, the prism that I look through the world is the freelance economy, the gig economy. And you were seeing a huge bifurcation in that world, well before COVID, where exactly what James was saying. Lower skilled, lower paid workers, really vulnerable people were being left out of the social safety net because, of course, we all know in the U.S. that’s all tied to an employer, and in this new more flexible work model that was not working.

And what you saw is the more highly skilled, highly paid workers, many of whom are knowledge workers who can work remotely, actually prefer in many cases to work that way, they suffer the same—the same problems in that they don’t get health care from an employer, they don’t have a social safety net. Obviously, they’re much more able to withstand those differences. But I think what you’ve seen today is a total shift in the way in which we look at the gig economy through the prism of the more vulnerable workers which absolutely need protection. But my biggest concern is that we make a solution, a policy solution, that doesn’t anticipate the fact that you’ve got totally different populations with totally different needs.

And as we come out of this period, I think that becomes very important. Because right before COVID you saw, you know, states like California do things like AB5, which have the right intent, which is to protect people, but are using a very old playbook, and a very old vision of work to solve the problem. And so I think there is this even more pressing need to address these problems, but to do it in a smart, future-thinking way, not in a way that makes the labor market even more rigid. So I think it’s a really big challenge for the future.

SPAR: OK. Ted?

ALDEN: Let me just add that I think that on the very short-term horizon we’re just facing some massive challenges. I mean, everybody on the call knows this but, you know, we’re now in a situation where unemployment is probably at least 20 percent, maybe 25 percent. We’ve had forty million unemployment claims as of Thursday. I mean, a good chunk of that’s going to be temporary. People will go back to their jobs as the economy reopens. But the best estimates are maybe 30 to 40 percent of those job losses are permanent. You know, we’re talking about travel, American Airlines and Delta have just announced they’re going to lay off 30 percent of their workforce. We’re going to see a lot more announcements like this.

And we’re in this period right now where because Congress topped up unemployment insurance in a historically generous way, right, an extra $600 a week for everybody in UI—once people managed to get through the horrific backlogs to try to get UI. A friend of mine here said she made eight hundred calls to the state of Washington before her UI claim finally got approved. But you know, people, you know, are in a moment now through the end of July where there’s actually been a fair bit of money coming on. Savings rate went up significantly last month.

Once Congress acts again, that all ends at the end of July. And we’re still going to have unemployment at the end of July that’s probably at least 15 percent, maybe higher. And that’s going to persist for a long time. So I think the income shock from this hasn’t really hit a lot of people yet. And it’s going to hit very, very soon.

SPAR: So at the risk of grasping at straws here, is there—is there any good news that we can imagine. As the overall economy shifts, as we do more online shopping and as these supply chains perhaps move closer to home, will there be any more jobs created in the sort of lower-wage workforce? Or are these jobs just kind of gone?

ALDEN: I mean, just quickly, and then, you know, I can let James or Jody, I mean, yeah. Jobs are being created. You look at what’s happened at Amazon and Walmart, right? Several hundred thousand jobs created by companies that are better placed in terms of the digital transformation in the—in the retail space. So there are jobs being created. It’s not going to come close to making up for the ones that are being lost, but yeah. I mean, there’ll be a shift in where people are employed. We’re seeing that right in the middle of this.

MILLER: And you’re actually seeing it right now. You’re seeing workers who have functional skills who are coming out of hospitality go into life sciences, where there’s a need. So I think one of the good things right now is we have a lot more human capital infrastructure that can more rapidly reallocate talent than we did even in the last recession. And I think that is a positive. And if you couple that with online learning and things that will make it easier for people to—you know, at least those who are able to work remotely and transfer skills, I think that will be better this time around than last time.

SPAR: All right. Good. All right, so let me—let me turn to sort of the third, and really I think the toughest one to get our hands and our heads around, but what should we be doing about this? A number of you have, you know, talked about the safety net as it exists in this country. But clearly it’s not sufficient. As Ted says, it’s about to get much more stressed very quickly. So what is—or, how should we be thinking about a policy response, not only to the health issues but of course, in terms of this conversation, about these workplace and these labor issues?

Ted, why don’t you start us off this time on this ginormous question?

ALDEN: You know, I might actually defer to James, because honestly a lot of what I know about this topic I know from reading McKinsey reports and working with his colleagues like Susan Lund. I think they’ve done the best work in the world on this. So let’s let James launch this, and then I’ll pitch in.

MANYIKA: Well, thanks, Ted. I think, you know, in some ways we tend to focus on what are the big questions that policy is going to have to solve for. I think it’s up to the politicians in the end to actually formulate policy, not for us. But I think there are a few big ones. One is, maybe we now need to seriously take a look at this education/reskilling question. I think we’ve kind of sort of been talking about it, but in some ways this is an extraordinary moment to really take this on pretty seriously. So I would hope that some of the stimulus and other activities we’re undertaking now take a serious look at this question about reskilling.

I think the other question that we—now has been kind of lingering and needing reform for a long time is I think what Jody’s just described, which is the rethinking our safety nets, because this has clearly exposed that this does not actually work. The other thing that I’ve been particularly struck by, Debora—and this is through—you know, I happen to be involved in the governor’s taskforce in California, but this is also something that we’ve seen in our research—which is the geography of work is really quite striking across America, because we did this work where we looked county-by-county across all counties. These questions are very different from place to place. There are places that, quite frankly, you know, they’re surging.

A whole bunch of things are happening. And some places where they’ve suffered from chronic under-economic development, there’s very little business activity, very little company investment. So I think the geography of work has become one of these really chronic issues. Let me mention one other quick thing, which typically doesn’t come up in the context of work because it’s not really a labor market issue, but it’s really fundamental. These are these so-called work adjacent issues. And we’ve seen this in California in a big way—cost of housing, cost of transportation, costs of health. Things are—you know, particularly housing, which we don’t typically think of as a labor market question—but clearly affects how people approach the labor markets or they choose to work and live.

So these are big challenges. So for us to think about, you know, policy priorities, these are areas to take seriously. And then finally, because it’s facing—staring us in the face, we’re going to have to think about how to create work, actually, how to create job opportunities. Because as we’ve all commented, I think, in this discussion, some of these jobs that are being lost will not come back. Many will come back, but not all of them will. So we’re going to end up with this lingering jobs gap that we have to address. And this is why I think either the infrastructure investments, investments to do with climate adaptation, all of which are activities that actually would create work, and that are also important necessary things for us to be doing anyway. So this could be one of those win-win contexts around infrastructure investments and addressing climate change, while creating jobs at the same time.

SPAR: I want to get the others in but, James, just—I want to pick up on one point. It was actually the first one you raised on the first question. What is the role of automation in this? And is there a way in which we can sort of replace the machines we think we’re about to see with the workers who are going to need these jobs? Or in the wake of this crisis is every manufacturing plant that has vulnerable workers in fact going to have more of an incentive to replace those workers with machines?

MANYIKA: Yeah. I think the automation question is still a complicated one because, you know, at least in our research, and our work, and what we see with companies, there are occupations that will decline in terms of automation. But the vast majority of occupations will have a bit more of what you might call partial automation, where people are going to work alongside machines. And that’s actually the vast majority of them. And that’s then what also creates the need for skilling, because if people are going to be working alongside highly capable machines, the skill profile of those workers is going to be quite different. So I would actually even point to the biggest challenge of automation being almost a skilling question, to complement what people actually do while they’ll be working alongside the machines. I’m not worried about automation, you know, destroying jobs, certainly not in the next two decades anyway. There will be lots of work to do.

SPAR: OK. That’s great. Thanks.

Jody, do you pick up on this reskilling, or any other part of this?

MILLER: I think at the highest level, you asked about, you know, what are the policy opportunities, what do we need to focus on? And I think we need to focus on the fact that the whole labor market structure is based on a very old model, which is favoring a traditional, actually, model where the employer has much more power. They have more power because they are the controller of the benefits and the safety net. They have more power because the government has given then a preferred place in the whole regulatory system. And I think as we think about what we need to do, I think being open and honest about both the challenges of a more flexible labor model, where employers don’t have as much power, where employees in fact are able to decide, you know, I do want to be more of an independent professional.

And I think, you know, we think about this again in the tale of two cities. You’ve got workers who are being exploited by the fact that they are not being protected by their employer, but you have workers at the high end who have—mostly knowledge workers, who are remote—who actually like to work this way. You know, survey after survey will show, 85 percent of the high-end workers who are not in W-2 are not in W-2 because they don’t want to be. And this is one of the last categories where government actually allows discrimination. I mean, you are not treated the same. And so I think the opportunity here is to really address what’s happening in the world, the preferences of talent, and then create a regulatory system that protects those people and protects the government.

I mean, one of the big challenges is tax receipts, which are not automatically withheld if you’re not a W-2. That’s an easy thing to fix. So I think there’s a big opportunity here to open our eyes to what’s really happening in the labor market and craft a policy and structure that supports it.

SPAR: So let me just push back a little bit, although it’s fascinating. Do you think it’s even vaguely realistic in this country to imagine a system where pensions and health care, just like two things, could be handled in either an open market situation or a government-supported one? I mean, we’ve had a really tough time even thinking about health care, for sure.

MILLER: I mean, I hope COVID-19 is a big push in the right direction. I mean, the idea that COVID-19 is making it clear that people without health care, it’s a public policy interest to make sure people are treated. Why would that be limited just to COIVD-19? So I think there—I think there are big changes that are possible. We’ve seen it with the ACA. And I don’t see why can’t continue to do that.

In terms of pension, I mean, honestly, companies have already changed. You know, defined benefit plans don’t exist very often. They’re already defined contribution. I don’t think it’s a far-fetched notion that—and particularly because as people see how vulnerable they are. They are going to get laid off—they’re not really secure from a government—from an employer program—that there will be greater pressure. And you can imagine, as more people are either forced into or decide to work differently, you will have a much bigger constituency to force some of these issues than you had when it was really just a few people on the side.

SPAR: All right. Ted, you get to clean this all up and put a bow on it. What’s your –

ALDEN: Yeah, no, I mean, Jody and James have done a great job of touching on a lot of the issues. Let me just express some of my frustration that these things have been on the agenda for a long time now. I mean, you know, we went into a lot of this in our Council on Foreign Relations taskforce on the future of work with Penny Pritzker and John Engler. Aspen’s done great work, Brookings, Carnegie. Brookings worked on the geography of work and what’s happened. You know, the superstar cities that are pulling away and the rest of the country falling behind.

There is a massive overdue agenda here. And I think, you know, we’ve seen in this crisis some of the enormous vulnerabilities that’s created here in the United States, both in health terms and in economic terms. I mean, we are—you know, we’ve been shockingly un-resilient in this crisis. You know, incredibly vulnerable in ways I think most of us didn’t fully appreciate. And there has been a lot of excellent work on the kinds of things that are needed. And, you know, Jody and James mentioned many of the items here.

But, you know, if we don’t get these done as a country, and get them done pretty soon, I think our situation is going to continue to deteriorate in very worrisome ways. I mean, you don’t have to like the European response across the board. They haven’t done a lot better on the health front. But you know, if you look at what they’ve done in terms of the income support programs for employees, you know, job sharing and supplements to keep people on the job, it’s worked in a much more coherent and orderly way than we’ve been able to pull off.

That’s not necessarily the best model, but ours has worked terribly. And you have to ask yourself the question of when is the message finally going to get through that we are in serious, serious need in this country of reforming a whole range of the things that we’ve talked about here? It’s so overdue at this point. And COVID-19’s really brought that home.

SPAR: And do you think that sort of the system, such as it is, will be able to respond finally to this crisis? Is it—is it big enough that it will wake us up?

ALDEN: You know, I don’t know. I don’t know. I mean, part of—you know, I was hesitating whether to make this argument or not, because I see the holes in it. Part of it’s the lack of countervailing power. I mean, I think a lot of these conversations have been about what business ought to do in its own interests. And there’s certainly a lot of companies doing good things. But across the board, you know, business interest at the end of the day is profit and return to shareholders. And what we lack is a kind of countervailing power from workers. And it’s because of the decimation of the union movement. I can see things that might really strengthen unions in this new context. I mean, we’re talking about jobs you can’t outsource in the same way that the old manufacturing jobs could be outsourced. You’ve got this new awareness that people doing distribution work, people in the grocery stores, people in the meatpacking plants are critical to making our society work. That’s a sort of invitation for those people to stand up and say: Hey, if I’m essential, pay me like I’m essential.

So I do think there’s an opportunity here for some kind of resurgence of worker power. The odds—you know, I mean, American laws are very unfavorable to union organizing. There’d be a lot of pushback. Automation works against this in some places. I don’t know whether we’ll get there. But I’ve kind of lost my faith that business is going to make these changes in its own interest. I just don’t think—there are too many things that lead business to look short term. And I think unless there’s a countervailing push from people organizing workers, we’re not going to see the changes that we’re talking about here.

SPAR: Yeah. Thank you.

James, do you want to jump in on that?

MANYIKA: Yeah. I was just going to add to what Ted just described. I mean, I think this—one of the issues that could be one of the ways to solve some of this is to look at the kind of incentives that the policy mechanisms can create for businesses and the private sector. The work of the Aspen Institute on the future of work, and Brookings’ work, and even some of Ted’s work at the Council highlighted this.

An example of this is, there are very few—relatively few incentives we create for businesses to focus on human capital. So we have all these incentive systems we’ve put in place to encourage businesses to invest in capital capital, to invest in R&D. Which is all wonderful, and it’s exactly the right thing to do. But if you look at the relative sort of incentives in place to encourage, for example, businesses to train their workers, to think about the evolution and lifecycle of human capital in their companies, and all of that, it’s nothing compared to what we do for the other things, in terms of incentive systems. So this is another potential area of policy to think about. How would we—how could we create incentives that encourage the kinds of things that Ted is describing?

SPAR: All right. Thank you. You’ve given us so much to think about.

So at this time I would like to invite the members to join our conversation with any questions. I’ll remind everybody that this meeting is on the record and that an operator will help you join the question queue. So just put up your virtual hands, and we’ll take it from there.

STAFF: That’s right.

(Gives queuing instructions.)

We will take the first question from Laetitia Garriott de Cayeux.

Q: Hi. Laetitia Garriott de Cayeux, Global Space Ventures.

My question has to do with the connectivity divide and ensuring rural American workers are offered equal opportunities to participate in a COVID era where work from home will likely play a bigger role, recognizing, as James mentioned, that about a third of the work still won’t be able to be done remotely. Do you have prescriptions to suggest to improve or complement preexisting programs, such as the FCC $20 billion Rural Digital Opportunity Fund? And what are, for now, funding limitations with this program?

MANYIKA: I’m happy to respond to that. So thank you for your question. Laetitia. I think this whole digital divide question is actually one of the things that becomes very apparent in this COVID moment, where the only infrastructure that we’ve all had to rely on is essentially digital infrastructure and accessing connectivity. And you see the differences in two areas. One is geographic, as you just pointed out, rural areas. And in some cases even some counties that are not rural, by the way, because the broadband coverage isn’t just a rural/urban difference. Some counties have an issue too. But you also see it on the income scale, where a lot of people who’ve had to stay home because of school closures have not have been able to participate remotely because they don’t have digital infrastructure, don’t have wi-fi access in poor homes, and so forth. So you’re exactly on the right issue.

With regards to the particular legislation, I have not looked at that in detail. But I do know that what we’re doing on the digital infrastructure front is actually not nearly enough. And this COVID moment has exposed that we are underinvesting in digital infrastructure, particularly if we’re looking at geography and low-income communities. We need to have access to digital infrastructure, and access.

ALDEN: Let me just add quickly, I mean, you know, we need the twenty-first century of Eisenhower’s national freeway building program, right? This is the modern freeway. This is how we connect. And every portion of the country needs to be brought into it. And I really do think that’s going to take a massive effort led out of Washington. There are a lot of good things going on at the state, but this needs to be a national priority. And just to tee off of James as well, because I see this in my own teaching, I mean, there’s a lot of inequality among students on what they have access to. It’s not just the quality of their connections at home, but even the quality of their hardware. Not everybody can afford a good-quality laptop. You have a lot of families where they’re sharing it, which is difficult because kids are online being educated at the same time.

You know, that is just exacerbating the already deep educational divides we have in this country. And some work I did at CFR some years ago on education, you look at kids in the higher levels of the income strata, and their educational performance is as good as anywhere in the world. But farther down, you know, our students are falling farther and farther behind their colleagues in the rest of the world. So this is a fundamental inequality problem that really needs to be tackled with government action.

SPAR: And, Jody, if I go back to sort of Ted’s point earlier about how we find countervailing power, is this at least one area where you could imagine sort of the upper-tier workers, who also need the digital connectivity, at least sort of pushing this through the political system?

MILLER: I mean, I think not only will it be upper-tier workers, businesses will have an incentive to make sure that they are equipping and have a larger pool of people who are able to participate in the labor market, by making sure you’ve got the basic government pipes laid and that the actual equipment is something business actually today even, you know, will supply for people who need it. So I think it is a combination of business interests, government action, and individual demands.

SPAR: Thanks. Next question.

STAFF: Sure. Our next question will come from Stephen Blank.

Q: Hi. Ted, it’s good to see you. I hope the family is well.

ALDEN: Thanks, Stephen.

Q: Well, I want to go to supply chains. So get beyond the COVID issue. The model that we’re talking about so much of low-level Walmart products, of commodity pharma, that’s the old world. What we’re looking forward to, it seems to me—or are we, that’s the question—is a world in which the Chinese increasingly control or own much at the higher level, whether it’s automotive, whether it’s aviation, AI, pharma, and our trade situation changes dramatically. One thing can be for sure, I think, in this vision. The Chinese are not going to permit the iPhone example to repeat itself where they simply assembly stuff at a low level of skill and then exploit back to us. The Chinese want to own a lot of the high-tech end of all of this. And that changes everything. Should we be thinking—how do we think about a world with not Walmart supply chains, but a new world of very serious competition at the highest level of technology?

SPAR: Ted, do you want to start us on that one?

ALDEN: Yeah, I mean—I mean, that’s a question that deserves probably two of these on its own. But I guess I draw some parallels with the competition with Japan in the 1980s. And I’m aware of the differences. Japan was not a security risk to us the way China potentially is. But the way you win these competitions, at the end of the day, is by out-innovating. I mean, the Chinese are moving up the ladder rapidly. I’m not saying they can’t innovate. Clearly they can. But in a lot of products they’re still a catch-up economy. And they are using a variety of tools to try to catch up to where we are. Certainly, there are technologies we need to be careful about. You know, you look in the 1980s with what we did with respect to semiconductors in Japan. Again, there wasn’t a security threat there, but there was a very clear decision in the Reagan administration, we couldn’t let the semiconductor industry disappear. And we’re in the same situation now with high-end semiconductors and other things.

But the notion—I also wrote about this, you know, this week—that somehow we’re going to squeeze the Chinese the way we did the Soviets and prevent their technological development, I think that’s a very bad idea. I think at the end of the day, it doesn’t succeed. I think we win these competitions by leaping ahead. And that’s where you get back into all these questions of, you know, investing in R&D and, you know, what are we doing to retain talented immigrants, and, you know, what’s the investment in early stage companies to help them develop the next thing. What’s our broadband capacity? All those fundamental questions about actual economic development that we have not been taking seriously enough as a country. We have been playing defense rather than offense, figuring somehow we can squeeze the Chinese through tariffs, or sanctions, or other things, and win the competition that way. We’re not going to win the competition that way.

MANYIKA: Yeah, and if I could add to that—thank you for your question, Stephen—last year we—you know, a few of us were involved in a Council on Foreign Relations taskforce that looked at U.S. innovation strategy and national security. This was something that involved several Council members. And one of the things we highlighted in that is that we have to out-innovate our competitors. We have been lagging in terms of our level of investments in R&D. We are—you know, the peak of U.S. investment in R&D, by the way, was actually 1964, and it’s been declining since.

And depending on how you measure it, we now spend maybe about 0.7 of our GDP in investments in R&D. So there’s something about how do we out-innovate, particularly around several core foundational areas? AI—you mentioned many of them—AI, connectivity as in 5G, but now also the biological revolution that’s underway is another area, quantum computing, hypersonics. So this kind of foundational technologies that are critical—and there are supply chains too, by the way—that are critical both to the economy as well as to national security, where we just have to out-innovate our competitors.

SPAR: Thanks. Next question.

STAFF: Our next question will come from Lois Gimpel Shaukat.

Q: Hi. This is Lois Gimpel Shaukat from McKinsey. Hi, James. Hi, Ted.

So my question is around immigration policy, which I’m sure doesn’t surprise Ted in the least. As we talk about the change in movement of labor as spurred on by COVID, the question is really two parts. Both in the short term and in the long term, what do you see as the policy as it is likely to be, or maybe as it should be, going forward with respect to immigration?

So let me clarify. So in the short term, what we have is governments around the world forced people to stop moving because they shut their borders, right? Some of those countries are opening up. We see some of them open and then close. So I’m curious to know, you know, how do you see that playing out in the short term? And in the longer term, what do you think will or should be the response in the U.S.? Historically U.S. immigration policy, like many countries, very much limited unskilled workers from—you know, from legal access to employment in the U.S., and in more recent years also has begun restricting access to skilled labor. Does that balance need to shift? Is that possible? Is that likely, given that we need to reskill people to fill roles that are needed in the U.S.? Or is that going to be totally done by the folks in the U.S. who have been left out of the labor market? Just curious to know what you all think about these types of issues.

ALDEN: I mean, I’m happy to start. I’ll try to keep it short because it’s a big—you know, it’s a big question. I mean, you know, we’re behind the eight ball in this country because we never passed comprehensive immigration reform. So we’ve got an immigration system that’s sixty-five-or-so years out of date, and desperately needs updating across the board. And we could talk about that for the whole session. I think—you know, I think in the short term I think there’s going to be significant restrictions on immigration. This just puts—an on travel. This puts another element in the decisions by countries on who to enter, and the worry about people bringing the virus. Which is a real worry. Let’s not underestimate that. I mean, this was spread by travel to begin with, so I think there’s going to be a lot of skittishness about that, at least until, you know, fingers crossed, we develop a successful vaccine. Then I think we get into a more serious question about what the priorities should be going forward.

To me, the most interesting thing has been the declaration that farm workers are essential. I mean, here you’ve got people, many of whom are undocumented, that live every day under the threat of deportation. And suddenly you’ve got a president who has not been a friend of theirs declaring them essential. And I think that’s going to change some of the conversations around the immigration workforce. I don’t see it happening immediately, but I think it will change going forward. This is just another one of those debates where we’ve been stuck as a country for a couple of decades now, and just have not tackled the difficult questions about how to reform our system in a way that makes it work for our economy and, more broadly, for our society in the twenty-first century.

MILLER: I do think this is a place where remote work, though, will have an impact. Because to the extent you can take advantage of talent globally without physically crossing a border, I do think you’re going to see some of the pressure come off of the need to travel to the U.S., but still take advantage of the global intellectual talent pool.

SPAR: Which suggests a sort of possibly strange reality that the sort of—the folks who used to be the global ones stop moving and the people who’ve been constrained are the ones we need to move. So that would be sort of topsy-turvy.

James, did you want to jump in on this one?

MANYIKA: No, only to add to Jody’s comment that one of the things, again, I points to, if—you know, we may have to rethink what we think of globalization. This is back to the point that in fact if data flows—cross-border data flows, which are what’s needed to support the kind of work that Jody’s describing, they’ve been exploding. And part of that is because of exactly what Jody’s describing, which is people don’t have to move as much. But we’re finding ways to transfer economic value, whether it’s through people, ideas, intellectual property, and other things through these cross-border data flows. That may be the new face of globalization going forward.

MILLER: Yeah, I can imagine it even in my sector of education. That is, we are sort of pushed increasingly online—you know, the students who’ve been crossing borders are not going to come in such numbers anymore.



SPAR: Great. Next question, please.

STAFF: Sure. Our next question will come from Hank Cohen.

Q: Good morning. Thanks for the very interesting discussion.

I don’t know if you remember about eight months ago the U.S. Business Council took note of the great inequality in this country. And they said: Maybe business should do something about it? This was just a passing thing, and I don’t know if they’re going to follow up. But my question is about the former candidate in the Democratic primary, Mr. Yang. Remember, his main platform was to give everyone a basic income in the United States, sort of emulating Finland. What do you think of that idea?

MANYIKA: I’m happy to jump in. I think, you know, one of the things that we’re seeing in massive reconsideration is this idea of universal basic income. I think it was kind of a quirky idea maybe, you know, a year or two ago, but I think it’s actually getting much, much more conversation. The reason why that question I think is important is we know that incomes for many people are actually not adequate for what they need to live anymore. You know, Ted mentioned earlier this idea of the social contract. We did some work along with some other economists earlier this year and last year which looked at what has changed for individuals in the economy.

When you think about the expenses that people have to deal with as individuals or households, there are a lot of that have declined. So the cost of a car, the cost of a computer, the cost of a TV. All these things have massively declined and, you know, buyers get enormous value. But there are a few categories whose costs have far, far outstripped people’s incomes, or even inflation. And those are housing, those education and health care, in many of these countries.

So when you think about the fact that these things now cost a lot more and incomes have not kept up with that, and now you have this COVID moment where people actually are out of work. I think you have to wonder: How do we think about that from people who still need to live too? So I think this idea of universal income—you know, I have other complicated issues—I have other issues with it. But I think it forces the question of how should people live? I mean, there are other issues that come with that way of solving this issue, by the way, and we could have a longer discussion about it. But it does force us to face this reality of people don’t earn enough to live.

SPAR: So let me take the question and give it back to Jody and Ted but make it even perhaps a little bit more pointed, because as James said it’s been sort of this quirky idea out there for a while. But is this now a realistic solution? Is universal basic income a policy prescription that we should be pushing for?

MILLER: I think it’s all part of the tactics and tools that we should consider when we think about the broader safety net. I mean, it is clearly one of the biggest arrows in anyone’s quiver if you’re going to try to address this inequality. But I think I wouldn’t look at it in isolation. I mean, I think it has to be part of what are we doing about health care? What are we doing about retirement? What are we doing about, you know, other benefits? And, yes, I think it’s a powerful way to address some of the problems, but I don’t think it’s the only thing that has to be done.

SPAR: Right. Ted?

ALDEN: I mean, I guess—you know, I would just—my thinking has evolved a little bit on this. I was—I was something of a skeptic. I favored sort of more targeted policy interventions. I think if we had a political system that functioned better, I would still favor those more targeted interventions. But UBI has the virtue of simplicity. I think you can make a strong argument for it politically. I think there are big fairness arguments in there. I think the universality is actually appealing, even if for better-off people a lot of it’s going to get taxed back. Universal programs, if you look at universal health insurance in a lot of countries, tend to draw a lot more political support than programs that are being seen just as targeted at certain low-income individuals. So I actually think this is a moment where the discussions around UBI are going to get very serious. And I think they should. I think it has a lot of virtues.

SPAR: Thanks. Next question, please.

STAFF: Sure. Our next question comes from Scott Malcomson.

Q: Hi. Scott Malcomson at Strategic Insight Group.

It’s painful not to follow that thread of virtual globalization and the idea that COVID could send the citizens of nowhere back home. But that’s a fascinating idea.

I just wanted to—on the countervailing power question that Ted Alden raised, and business incentives, an SME survey this week showed about a third of small and medium enterprises hoping to not retire all of their pre-COVID workforce. At the same time, in our COVID economy SME owners will need to be flexible to deal with infection resurgences and have policies to ensure the stability of the workforce. This is as much or more a set of issues for states, which administer UI and Medicaid, than for the federal government. So could states, facing severe budget shortfalls, actually be a main source of the innovation that Ted Alden located in labor union in an earlier era?

SPAR: Ted, do you want to start there?

ALDEN: Well, let me just say quickly, yeah, I mean, I think—I think they could be. I mean, I’m out here in Washington state, where the governor here’s been doing all sorts of interesting things in terms of access to college, and, you know, effectively sort of social safety net programs for gig workers, and other things like that. A lot of that’s going to be off the table given the budget crisis right now. I mean, I do believe Congress urgently needs to pass funding for state and local governments which, as you know, don’t have the ability to run deficits, that already are cutting budgets pretty dramatically.

I mean, I like the state innovation model. The problem is, you know, the theory of this, of the states as laboratories of democracy, was that the best ideas would be picked up at the national level. And our national politics has been so dysfunctional for so long that that’s not happening. So what we’re getting are, you know, pockets of interesting policy innovation in different places around the country. I mean, James could give a bunch of examples on apprenticeship, and lifelong learning. I mean, there’s a lot of good things happening. They just haven’t kind of added up to the critical mass that really deals with the breadth of the problem. And I don’t know how you do that without national action. I don’t think the states are an adequate substitute.

SPAR: James or Jody?

MANYIKA: Yeah. No, I would tend to agree with that. One of the things that I always find frustration—and maybe this is what Ted is referring to—is that, you know, you see all these lots of amazing examples of innovations, and particularly—take the topic of skilling, for example. There’s lots of amazing innovations. But the critical question always to ask for those is: So how many people went through that program? And what you typically find is we’re talking about small numbers, right? We’re not talking hundreds of thousands. We’re not talking millions. And we’re—in fact, the scale of the problem when it comes to reskilling is in the millions. And there are only a few mechanisms that can give you that kind of scale, right? You know, you’d have to get things at the federal level, maybe at the very, very, very large state level—a Texas or a California maybe. But it’s very hard to get scale without kind of policy leverage to get that scale.

MILLER: And I would actually add there’s a bigger risk to it, which is that every state’s doing their own thing. If you are a medium-sized business, trying to understand, you know, what’s happening in California, versus Massachusetts, versus Texas, is actually a big, you know, tax on business, to really try to comply with their innovation, or whatever their new protection is. And I think you have to be very careful that you do need—going back to what Ted said—you really do need a global, both for scale but also for consistency, as a business operating in many states.

SPAR: And certainly this patchwork contributes to the geographical variation that James was talking about earlier. I mean, it is not surprising but sad that we’re all sitting here on the coasts, different coasts, but, you know, that sort of portrays a larger truth.

All right. I think we have time for one, maybe two more. The next question.

STAFF: Sure. Our next question will come from Maryum Saifee.

Q: Thank you. Maryum Saifee.

My question is, building off the first one on the digital divide, how can we better address racial disparities not only making access to technology more equitable, but also reskilling programs, especially as we’re seeing communities of color, as we discussed, disproportionately impacted by COVID?

MANYIKA: Well, I think in some regards this is actually an area where I’m seeing lots of interesting innovations, actually. I think I’ve just been excited by the number of companies that are starting to make big investments in digital infrastructure and creating access, and with all kinds of programs. And one of the advantages of when digital technology companies do that is quite often they have platforms that can actually reach many people. So that’s—you know, and we’re even seeing nonprofits too. I happen to be involved with Khan Academy, which is a nonprofit which is—provides free education. And so the partnerships and things that they’re doing, together with other companies, to provide access to low-income communities is a big deal.

But, again, none of that is a substitute for what governments and state and local entities can do an should be doing to make investments in digital infrastructure so that people can actually have broadband access and other access to these technologies. So I think you kind of need the combination of both policy mechanisms plus these kind of scalable innovations that have inherent scale because they’re using technology itself to get to scale.

MILLER: One of the interesting things that’s been happening is digital transformation has actually been rapidly accelerating by necessity. So companies that used to have to close their books every month, you know, with the person in the office, instantly had to be able to do it digitally. And I think the advantage of that is that that will sort of up everybody’s game and will affect all communities because more and more jobs are going to require this kind of digital connectivity throughout an organization. And so I think coming out of COVID what I expect is that you’ll see a much higher percentage of companies operating digitally on many more functions. And that will bleed into the requirements. And this is where business will get some power, I think, to move things. They will require a level of infrastructure for their employees to be able to participate in the new digital way in which they’re operating.

SPAR: Ted?

ALDEN: I agree with all that. The only thing I would add is I think this crisis has forced all of us to become a lot more digitally literate. I mean, I got dragged kicking and screaming into online teaching. And it’s worked better than I thought it would. And so there’s a big learning curve there for a lot of us. But I do think coming out of this we’re going to see people a lot more comfortable with the whole range of technologies than they were going in, out of necessity. And that probably—

SPAR: So let me—let me us that. I don’t think we have quite enough time for another question, but this has been a fascinating conversation. I must confess, I’ve also found it a deeply depressing conversation, perhaps not surprisingly. But in the sort of forty-five seconds we have left, I’m wondering if I could ask each of you to leave us with a note of optimism. You know, is there something that we’re learning from this that may in fact be some good news in this very scary moment?

So Ted’s given us one, that we’ve all finally become more digital. James or Jody, anything else?

MILLER: Yeah. I think in the long arc of time, people who are free—free agents—tend to do better. They tend to be happier. And if you look at Hollywood, if you look at sports, you know, look at technologists. Technologists now have agents, the very best technology people. So I think if we can move to a world where more people do have power, and freedom, and aren’t tied to a traditional work model, you will find people are happier and, over time, better paid.

SPAR: Can you give us something happy to think about?

MANYIKA: Two things maybe. I think one is I think we’ve all discovered a huge appreciation for technology and the power that it can actually help give us to help our societies function when many other things fail. And I think—so that—so as someone who loves technology, I’m excited about that. But the other hopeful optimism, I think we’ve all become much, much more aware of the challenges and the problems we need to solve. I think if we’re debating some of them and maybe even not paying attention to them a year ago, I think we are now. I think we now know our health system doesn’t quite work. We now know that our—the ability of our government to respond to things doesn’t quite work. So we have now become much, much more acutely aware. And maybe that’ll make us do something.

SPAR: So that’s a wonderful note on which to end. So hopefully we will take this as a the wake-up call we’ve been waiting for and, just picking up on what you’ve all said, find some way to create change at the federal level, because without that it doesn’t seem like the work of the states, and the businesses, and free agents themselves will suffice.

So thank you all so much for giving us so much to think about. Thank you to our members who’ve been here and asked such great questions. Please remember that the audio and transcript of today’s call will be posted on the CFR website. Best wishes to everybody and stay safe. Thanks.


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