Rethinking the 21st Century Social Contract Amidst COVID-19: Fragility, Inequality, and Technological Acceleration

This podcast episode features James Manyika of the McKinsey Global Institute discussing the evolution of the social contract in the 21st century, particularly its impact on individuals as workers, consumers, and savers. Manyika highlights that while there have been significant gains in employment, such as 45 million more working-age people gaining employment by 2018 compared to 2000 (with 30 million of those being women), work has become increasingly fragile, characterized by the rise of part-time, independent, and gig economy jobs, coupled with a decrease in worker safety nets. As consumers, globalization has made discretionary goods cheaper, but essential costs like education, housing, and healthcare have skyrocketed, especially in advanced economies. For savers, despite more options, most individuals haven't been able to participate effectively. The COVID-19 pandemic has brought these pre-existing fragilities into "very sharp relief," creating a dual public health and economic crisis that has rendered approximately a third of US workers vulnerable.

Manyika distinguishes the current crisis from the 2008 financial crisis, noting that stimulus and bailouts are complicated by the public health crisis, as people cannot simply return to work or fully participate in the economy. He suggests that stimulus efforts should have been more directed towards low-income individuals and small-to-medium-sized businesses, as these groups are disproportionately affected; for instance, 80% of vulnerable workers earn less than $40,000 annually and often cannot work remotely. The "superstar effect" is explored, demonstrating how the top 10% of firms capture 80% of available profits, a trend likely accelerated by the pandemic's digital shifts. Conversely, superstar cities, which rely on densification, may experience "de-densification" due to public health concerns and increased remote work.

The discussion also delves into the governance of rapidly advancing technologies like AI and synthetic biology. Manyika advocates for a balanced approach, neither halting technological progress nor allowing it to proceed unmanaged. He emphasizes the need for governance mechanisms to mitigate downsides such as bias, misuse (e.g., deep fakes, fake news), and authoritarian surveillance, while harnessing benefits like contact tracing and vaccine development. He supports adaptive policymaking and pilot programs, akin to the FDA, but stresses the importance of "forward-looking thinking" for foundational technologies whose effects, such as genetic editing, may be irreversible and not amenable to simple iteration.

Looking ahead to the "future of work," Manyika references the Lyndon Johnson Commission's insight that "technology destroys jobs but not work." He identifies four key transitions: skills adaptation, requiring continuous reskilling for emerging and changing jobs; occupational shifts, as the economy moves towards new sectors; wage and income adjustments, noting a potential "down draft impact" on wages as more service sector jobs emerge; and the redesign of work itself, incorporating new protocols like social distancing. The Swedish model of "protecting people, not jobs" is presented as a potential framework for societies to navigate these transitions, suggesting a shift in governance focus to ensure that opportunities are leveraged and societal despair is avoided.

"many of the challenges that we've seen now have been brought into very sharp relief because a lot of the challenges for individuals have had to do with the fragility of work and incomes and inequality"

"most of those job gains that have occurred have actually been in either part-time or independent work or even the so-called gig economy income fragility has actually gone up and as well as worker safety nets have also been decreased"

"a third of the workers united states which is about 57 million workers are actually vulnerable where vulnerability here refers to either they've been laid off furloughed or experiencing reduced hours"

"the complication of a economic economy collapse and a public health crisis is a new experience for us"

"the top 10 percent you could call those the superstar firms in that set were now capturing close to 80 percent of the profits available to all those firms"

"it's actually quite possible that these superstar effects will will get even more accelerated"

"one of the things that's going to be interesting about these superstar cities is that many of them relied on what you might call densification or agglomeration people living in very high dense environments and I think as as concerns about public health and safety increase we may actually see perhaps a de-densification of most things"

"technology destroys jobs but not work"

"the view that says we should therefore stop using technologies doesn't seem to make sense to me at the same time the view that says we should let technology do what technology will do and not manage it in any way also doesn't make sense to me"

"this question of the wage effects as occupations shift and the structure of the economy shifts in this future work is one of the most difficult ones for us to contemplate"