You have before you a map, one that

You have before you a map, one that describes the journey
America's labor force is now beginning. It lays out the general contours
of the employment landscape, not the fine details or the specific landmarks,
depicting the many roads to what we call "Workforce 2020." Some will
be superhighways and some will be dead ends for American workers.
Although immense forces shape the employment landscape, we believe
that we know the difference between the superhighways and the dead
ends.
Skilled cartographers in the guise of economists, education experts,
and policy researchers at Hudson Institute helped prepare this map. It
offers our best ideas about what lies ahead and what Americanscollectively
and individually, in large and small firms, in federal agencies and
in small-town development commissionsshould do to prepare for the
journey to Workforce 2020.
Our map is needed because American workers at the threshold of
the twenty-first century are embarking on mysterious voyages. They
seek glittering destinations but travel along roads with numerous pitfalls
and unexpected diversions. Many workersmore than at any time in
America's historywill reach the glittering destinations. They will
enjoy incomes unimaginable to their parents, along with working and
living conditions more comfortable than anyone could have dreamed of
in centuries past. But many other workers will be stymied by the pitfalls
along the road or baffled by the diversions. Their standard of living may
stagnate or even decline. Much is already known today about what will
divide the hopeful from the anxious along these roads, and we will share
that knowledge here.
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What makes America's voyage to the workforce of 2020 unique is not
merely the heights to which some will climb or the difficulties others
will endure. Two qualities give a truly unprecedented character to the
roads ahead. First, the gates have lifted before almost every American
who wishes to embark on the journey of work. Age, gender, and race
barriers to employment opportunity have broken down. What little conscious
discrimination remains will be swept away soonnot by government
regulation but by the enlightened self-interest of employers.
Second, more and more individuals now undertake their own journeys
through the labor force, rather than "hitching rides" on the traditional
mass transportation provided by unions, large corporations, and government
bureaucracies. For most workers, this "free agency" will be
immensely liberating. But for others, it will provoke anxiety and anger.
For all workers, the premium on education, flexibility, and foresight has
never been greater than it will be in the years ahead.
What explains the immense satisfactions and dangers ahead? What
makes possible the unprecedented expansion of opportunities in the
labor force? What forces conspire, for better or worse, to demand that we
compete as individuals and contend with ever-changing knowledge and
skill requirements? We highlight four forces in particular.
FIRST, THE PACE OF TECHNOLOGICAL CHANGE in today's economy has
never been greater. It will accelerate still further, in an exponential manner.
Innovations in biotechnology, computing, telecommunications, and
their confluences will bring new products and services that are at once
marvelous and potentially frightening. And the "creative destruction"
wrought by this technology on national economies, firms, and individual
workers will be even more powerful in the twenty-first century than
when economist Joseph Schumpeter coined the phrase fifty years ago. We
cannot know what innovations will transform the global economy by
2020, any more than analysts in the mid-19.70s could have foreseen the
rise of the personal computer or the proliferation of satellite, fiber-optic,
and wireless communications. However, the computer and telecommunications
revolutions enable us to speculate in an informed manner on the
implications of today's Innovation Age for the American workforce:
Automation will continue to displace low-skilled or unskilled
workers in America's manufacturing firms and offices. Indeed,
Executive Summary 3
machines will substitute for increasingly more sophisticated
forms of human labor. Even firms that develop advanced technology
will be able to replace some of their employees with
technology (witness the "CASE tools" that now assist in writing
routine computer code) or with lower-paid workers in other
countries (witness the rise of India's computer programmers and
data processors).
However, experience suggests that the development, marketing,
and servicing of ever more sophisticated productsand the use
of those products in an ever richer ensemble of personal and
professional servicesalmost certainly will create more jobs
than the underlying technology will destroy. On the whole, the
new jobs will also be safer, more stimulating, and better paid
than the ones they replace.
The best jobs created in the Innovation Age will be filled by
Americans (and workers in other advanced countries) to the
extent that workers possess the skills required to compete for
them and carry them out. If jobs go unfilled in the U.S., they
will quickly migrate elsewhere in our truly global economy.
Because the best new jobs will demand brains rather than brawn,
and because physical presence in a particular location at a particular
time will become increasingly irrelevant, structural barriers to
the employment of women and older Americans will continue to
fall away. Americans of all backgrounds will be increasingly able
to determine their own working environments and hours.
SECOND, THE REST OF THE WORLD MATTERS to a degree that it never did
in the past. We can no longer say anything sensible about the prospects
for American workers if we consider only the U.S. economy or the characteristics
of the U.S. labor force. Fast-growing Asian and Latin
American economies present us with both opportunities and challenges.
Meanwhile, communications and transportation costs have plummeted
(declining to almost zero in the case of information exchanged on the
Internet), resulting in what some have called "the death of distance."
Whereas the costs of shipping an automobile or a heavy machine tool
remain consequential, the products.of the world's most dynamic industriessuch
as biological formulas, computers, financial services,
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4 Workforce 2020
microchips, and softwarecan cross the globe for a pittance. Investment
capital is also more abundant and more mobile than ever before, traversing
borders with abandon in search of the best ideas, the savviest
entrepreneurs, and the most productive economies. The implications of
this globalization for U.S. workers are no less complex than the implications
of new technology:
Manufacturing will continue to dominate U.S. exports. Almost
20 percent of U.S. manufacturing workers now have jobs that
depend on exports; that figure will continue to escalate. America's
growing export dependence in the early twenty-first century will
benefit most of America's highly productive workers, because
many foreign economies will continue to expand more rapidly
than our own, thereby generating massive demand for U.S. goods.
Skilled workers whose jobs depend on exports are better paid than
other U.S. manufacturing workers as a rule, because the U.S.
enjoys a comparative advantage in the specialized manufacturing
and service sectors that create their jobs. These workers also tend
to earn more than similar workers in other countries.
But globalization will affect low-skilled or unskilled American
workers very differently. They will compete for jobs and wages,
not just with their counterparts across town or in other parts of
the U.S., but also with low-skilled workers around the globe. As
labor costs become more important to manufacturers than shipping
costs, the U.S. will retain almost no comparative advantage
in low-skilled manufacturing. Jobs in that sector will
disappear or be available only at depressed wages. Second or
third jobs and full-time employment for both spousesalready
the norm in households headed by low-skilled workerswill
become even more necessary.
Manufacturing's share of total U.S. employment will continue to
decline, due to the combined effects of automation and globalization.
But the millions of high-productivity manufacturing
jobs that remain will be more highly skilled and therefore better
paid than at any other time in U.S. history. Employment growth,
meanwhile, will remain concentrated in services, which also
Executive Summary 5
will benefit increasingly from export markets and will offer high
salaries for skilled workers.
Globalization and technological change will make most segments
of the U.S. economy extremely volatile, as comparative
advantages in particular market segments rise and then fall away.
Small- and medium-sized firms will be well situated to react to
this volatility, and their numbers will grow. Labor unions will
cope badly with this rapidly evolving economy of small producers,
and their membership and influence will shrink.
Individual workers will change jobs frequently over time. For
those who maintain and improve their skills, the changes should
bring increasing rewards. But the changes may be traumatic for
those who fall behind the skills curve and resist retraining.
THIRD, AMERICA IS GETTING OLDER. At some level, all of us are aware
of this. Our parents and grandparents are living longer, and we are having
fewer children. But U.S. public policy as well as many employers
have yet to come to grips with the full implications of Ametica's aging.
The oldest among America's so-called baby boomersthe massive
cohort born between 1945 and 1965will begin to reach age 65 in 2010.
By 2020, almost 20 percent of the U.S. population will be 65 or older.
There will be as many Americans of "retirement age" as there are 20-35
year -olds. America's aging baby boomers will decisively affect the U.S.
workforce, through their departure fro