How technology is transforming the world of work

This is an age of anxiety about the job-killing effects of automation, with dire headlines warning that the rise of robots will render entire occupational categories obsolete. But this fatalism assumes that we are powerless to harness what we create to improve our lives – and, indeed, our jobs.

Evidence of technology’s potential to help resolve our job concerns can be found in online talent platforms. Digital platforms already have transformed many parts of the economy. The online marketplaces built by Amazon and Alibaba, for example, have reshaped the retail landscape, partly by changing the local nature of retail markets.

Online talent platforms apply a similar approach to the world of work – with a similar impact. By creating regional, national, and even global job markets, they allow employers to tap into broader talent pools and connect job seekers with a wider universe of opportunities. In this way, they have transformed the typical job search, and are now approaching the critical mass needed to move employment numbers.

Such platforms take various forms. Websites like LinkedIn, Monster.com, and Indeed.com – which match individuals with employers seeking to fill traditional jobs – have already engaged hundreds of millions of individual users and many of the world’s leading companies, and are generating the bulk of the economic impact. But there are also the digital marketplaces of the “gig economy,” which connect freelancers with work assignments, from web development to chauffeuring passengers, thereby reducing underused labor and capital.

Digital platforms make markets more transparent and efficient, which is exactly the kind of disruption that today’s labor markets need. In many countries, 30-45% of the working-age population is unemployed, inactive, or working only part-time. Meanwhile, companies are complaining that they cannot fill open positions in sectors ranging from technology to health care. And those who are employed are often stuck in roles that do not take full advantage of their skills. These issues represent a staggering waste of human and economic potential.

The problems stem from the fact that today’s labor markets provide crude, incomplete, and geographically restricted signals about the skills that actually are in demand. As a result, mapping out an education, training, and career path entails quite a lot of guesswork. That does not only hurt workers; it also means that companies’ needs can be left unmet.

Online talent platforms can boost labor-market efficiency by aggregating data on candidates and job openings in a broader geographic area, thereby illuminating for workers which positions are open today, as well as the actions they can take to gain more fulfilling work. This dynamic could be especially important in Europe, where employment prospects differ radically across countries (and across regions within countries), and many feel trapped in stagnant local economies. It is not likely that someone will move from Spain to Swaziland, even for a dream job; but that person might accept a better position a few hundred miles away.

Moreover, by facilitating faster matches, online talent platforms shorten the duration of unemployment, while the creation of flexible part-time opportunities can draw more inactive workers into the labor force and help part-time workers add hours. At the same time, by connecting the right person with the right role, such platforms can boost productivity.

In short, while online talent platforms cannot boost weak demand in advanced economies, solve complex development issues in the emerging world, or create better jobs across the board, they can have a major impact on seemingly intractable issues like unemployment, underemployment, and low job satisfaction. According to a recent McKinsey Global Institute research study, they could increase global GDP by $2.7 trillion annually by 2025; that is equivalent to adding another United Kingdom to the world economy.

Much of the impact of online talent platforms stems from the use of technology to bridge information asymmetries that impair labor-market performance. In the past, these gaps were only partly bridged by signals carrying useful information. But online talent platforms aggregate much larger amounts of information efficiently, increasing the “signal density.”

With expanded data, companies can use predictive analytics to identify the best candidate for a given role. Job seekers can augment their educational credentials and employment histories with samples of their work and endorsements from co-workers and customers, thereby conveying their potential value to employers more effectively.

Furthermore, platforms that aggregate anonymous reviews from current and former employees give individuals a better idea of what it is like to work for a given company, as well as the salary they can and should expect. As employee satisfaction becomes more widely reported, companies are facing pressure to ensure good working conditions in order to recruit the talent they need.

So far, the biggest winners from this shift have been educated and skilled professionals in the advanced economies. In fact, the most sought-after engineers and software developers may not need to apply for jobs at all; companies are now increasingly recruiting “passive” candidates, sometimes forcing employers to increase the salaries of workers they want to retain.

But it is not all good news. Now that employers have new tools for recruitment and assessment, they may find low-skilled workers easier to replace, potentially worsening income inequality in the short run. In the longer term, however, a better overall system for skills upgrading could be designed – one that could be integral to facilitating upward mobility.

And there is another benefit in this regard. As the career outcomes associated with specific institutions and degree programs become more transparent, education and training providers will become more accountable for preparing their students for prosperous and productive lives.

With global smartphone subscriptions set to reach eight billion by 2025, online talent platforms have enormous room to expand into new regions and sectors. As these technologies continue to evolve, they may change the world of work in ways we cannot even imagine today. It seems that there is room in the labor market for a little optimism, after all.

This article is published in collaboration with Project Syndicate. Publication does not imply endorsement of views by the World Economic Forum.

To keep up with the Agenda subscribe to our weekly newsletter.

Author: Michael Spence, a Nobel laureate in economics, is Professor of Economics at NYU’s Stern School of Business. James Manyika is the San Francisco-based director of the McKinsey Global Institute.

Image: Devices displayed on a web during. REUTERS/Hannibal Hanschke.