WEBVTT - Why The Global Labor Market Is Shrinking 0:00:01.840 --> 0:00:05.760 The lowest US unemployment rate since I was in diapers, 0:00:05.880 --> 0:00:09.000 and month after month of two hundred thousand plus new 0:00:09.000 --> 0:00:13.960 American jobs. That's a great thing. It also obscures underlying 0:00:14.120 --> 0:00:17.080 changes in the nature of the workforce, both in the 0:00:17.200 --> 0:00:21.080 US and abroad, that will shape society for decades to come. 0:00:22.079 --> 0:00:26.000 Bain and Company calls this coming period a great transformation, 0:00:26.920 --> 0:00:31.560 a shrinking and aging domestic workforce, the decline of a 0:00:31.600 --> 0:00:35.760 global market for labor, and you guessed at rise of robots. 0:00:36.360 --> 0:00:38.880 This will shape things in ways that might be surprising. 0:00:38.960 --> 0:00:42.919 For instance, the state will become more, not less active, 0:00:43.360 --> 0:00:47.000 as voters demand the shift be managed, and watch out 0:00:47.040 --> 0:00:50.640 for conflict between those who have invested in this new 0:00:50.680 --> 0:01:03.800 era and those disenfranchised. Welcome to Benjamin, a show about 0:01:03.800 --> 0:01:08.240 the global economy. I'm Daniel Moss, columnist of Bloomberg Opinion 0:01:08.360 --> 0:01:11.800 in New York, and I'm Scott Lanman and economics editor 0:01:11.880 --> 0:01:15.240 with Bloomberg News in Washington. Our guest this week is 0:01:15.319 --> 0:01:18.600 Andrew Twiddel, a partner at Bain and Company in New York, 0:01:19.040 --> 0:01:22.120 peace chair of their Macro Trends Group, and co author 0:01:22.160 --> 0:01:27.480 of the report Labor The Collision of the Demographics automation 0:01:27.640 --> 0:01:32.520 and inequality. Andrew, Welcome to Benchmark. Thanks for having me down, Scott. 0:01:32.560 --> 0:01:35.280 Happy to be here, Andrew, no one can accuse you 0:01:35.360 --> 0:01:39.160 of thinking small. So do you just ignore the employment 0:01:39.200 --> 0:01:43.240 report that's published the first frauday of every month. Well, 0:01:43.240 --> 0:01:45.320 we're not. We're not quite glued to the to the 0:01:45.440 --> 0:01:47.440 radio or to the TV to watch it. But we 0:01:47.560 --> 0:01:50.320 do pay attention obviously to what happens in the nearer term, 0:01:50.320 --> 0:01:52.640 but we try to put it in context of bigger, 0:01:52.760 --> 0:01:56.600 longer term trends that really affect our clients, corporations and 0:01:56.640 --> 0:02:00.960 investors planning and investment horizons. And in every monthly number 0:02:01.000 --> 0:02:04.440 there are gems of these long term trends. Absolutely we 0:02:04.520 --> 0:02:07.200 see things playing through and and the story gets clearer 0:02:07.240 --> 0:02:09.040 and clearer over time, but we think it will still 0:02:09.080 --> 0:02:11.760 take a few years to play out. Andrew, I just 0:02:11.760 --> 0:02:13.560 have to take a step back for a second before 0:02:13.560 --> 0:02:16.519 we get into the nitty gritty. I've read a number 0:02:16.520 --> 0:02:20.120 of these consulting firms reports throughout my career on big 0:02:20.160 --> 0:02:23.520 macro trends. They really tend to be pretty dryly written, 0:02:23.960 --> 0:02:27.960 bland in their views, pretty safe in their conclusions, and 0:02:28.000 --> 0:02:30.640 that is just not the case with this report that 0:02:30.680 --> 0:02:34.240 you guys put out, it's it's actually pretty provocative. I'm 0:02:34.280 --> 0:02:36.200 wondering did you set out to do that or was 0:02:36.280 --> 0:02:38.520 this just kind of where you ended up after doing 0:02:38.560 --> 0:02:41.840 a thorough analysis of all the data and predictions that 0:02:41.880 --> 0:02:44.799 you were thinking about. Well, thanks, thanks for the comment. 0:02:44.919 --> 0:02:46.639 First of all, we um you know, I don't think 0:02:46.639 --> 0:02:49.119 we try to set out to be provocative per se, 0:02:49.840 --> 0:02:53.079 but we do always ask ourselves when we see conventional 0:02:53.120 --> 0:02:56.760 wisdom coalescing in one direction, where could that be wrong? 0:02:56.960 --> 0:02:59.200 And so I think in all of our reports, whether 0:02:59.240 --> 0:03:02.680 it's Labor twenty thirty or um a World of Washing 0:03:02.720 --> 0:03:05.640 Money which was our look at capital Superabundant several years ago, 0:03:05.680 --> 0:03:08.960 and spatial economics, we try to take a little bit 0:03:09.000 --> 0:03:11.080 of a perspective of where could people be wrong and 0:03:11.120 --> 0:03:13.160 where there are some things that are surprising and maybe 0:03:13.200 --> 0:03:18.080 counterintuitive to talk about it's a great transformation, sounds profound, 0:03:18.360 --> 0:03:22.080 but just to be clear, we're talking about trends already 0:03:22.120 --> 0:03:26.160 observable that are going to accelerate. Yes, yep, this is 0:03:26.200 --> 0:03:28.760 not something that's out there in the future. It's happening 0:03:28.800 --> 0:03:31.920 now and it will accelerate. In this case, really We 0:03:32.040 --> 0:03:34.120 use that phrase to describe the period between now and 0:03:34.200 --> 0:03:37.120 roughly so think of this as the next ten to 0:03:37.200 --> 0:03:40.560 fifteen years and kind of a turbulent time, especially in 0:03:40.560 --> 0:03:43.720 the twenties. But it's it's all stuff that has started 0:03:43.720 --> 0:03:47.760 already and will accelerate. And when you say twenties, you twenties, 0:03:47.840 --> 0:03:51.480 not the Roaring twenties. We're here, well, you know, maybe 0:03:51.520 --> 0:03:54.960 maybe echoes of that, the turbulent twenties. Let's say, can 0:03:55.000 --> 0:03:57.760 you just go over what what the main conclusions are 0:03:58.280 --> 0:04:02.800 for our listeners who probably haven't sure, so if I 0:04:02.840 --> 0:04:04.960 can try to boil it down, I'd say we are 0:04:05.000 --> 0:04:07.600 coming from a period that you know, many people have 0:04:07.640 --> 0:04:09.760 called the Great Moderation. If you think about the last 0:04:09.840 --> 0:04:13.000 forty fifty years, there were a lot of really positive 0:04:13.000 --> 0:04:16.560 developments for business, for investors. There's a lot of global growth, 0:04:16.600 --> 0:04:20.120 increasing globalization, and macro was calmed. You know, that was 0:04:20.160 --> 0:04:22.160 the environment most of us grew up in and learned 0:04:22.160 --> 0:04:24.839 to navigate in. And that period clearly ended in two 0:04:24.880 --> 0:04:28.520 thousand eight, and we've had this kind of choppy transition time, 0:04:28.839 --> 0:04:30.680 I would say, over the last ten years or so, 0:04:31.360 --> 0:04:33.240 and so now we're entering this phase we call the 0:04:33.279 --> 0:04:36.200 Great Transformation, and you know, there are several things that 0:04:36.240 --> 0:04:39.320 are happening there. One is we're shifting to this new 0:04:39.360 --> 0:04:43.320 world of labor scarcity driven by demographics, and that's you 0:04:43.360 --> 0:04:46.440 know the reference you made at the start of the program. 0:04:46.480 --> 0:04:49.400 That's gonna have big implications for the workforce. We're really 0:04:49.440 --> 0:04:52.880 seeing automation increase uh and and that's going to reshape 0:04:52.920 --> 0:04:55.960 the economy and profound ways. We're seeing an end to 0:04:56.040 --> 0:04:59.880 this period really of capital superabundance and probably a reset 0:05:00.279 --> 0:05:04.159 so higher interest rates over time, and we're seeing the 0:05:04.240 --> 0:05:07.840 decline in this globalization era. That's a cyclical pattern, by 0:05:07.880 --> 0:05:10.159 the way, this happens throughout history, and now we're entering 0:05:10.240 --> 0:05:12.200 one of those cycles where there is a retreat from 0:05:12.200 --> 0:05:15.800 globalization into what we're calling kind of a post globalization 0:05:15.839 --> 0:05:21.600 area area era, which will have more volatility, more geopolitical volatility, 0:05:21.640 --> 0:05:25.160 macroeconomic volatility. And so we can get into all of 0:05:25.200 --> 0:05:27.120 these trends, but they're going to really shift the way 0:05:27.120 --> 0:05:29.760 we think about running our companies and where we invest, 0:05:29.839 --> 0:05:32.799 and the role of the state with respect to corporate 0:05:33.040 --> 0:05:38.000 the corporate sector. What's this big capital spending an investment 0:05:38.160 --> 0:05:41.520 boom that you full see were used to hearing about 0:05:41.600 --> 0:05:47.080 how capital spending has underperformed and there's not enough investment 0:05:47.200 --> 0:05:49.840 in plant and machinery. How do you square that right? 0:05:49.880 --> 0:05:53.240 You can see the productivity everywhere except in the statistics, right. 0:05:53.960 --> 0:05:56.640 So I think the capital spend boom is going to 0:05:56.680 --> 0:05:59.680 be in response to this labor shortage. So as the 0:05:59.720 --> 0:06:02.120 price of the workforce goes up, there will be more 0:06:02.120 --> 0:06:05.960 incentive for businesses to spend and automate, and the automation 0:06:06.000 --> 0:06:10.080 will become more capable, particularly in the service sector. So 0:06:10.200 --> 0:06:11.960 there's been a lot of automation for many years in 0:06:11.960 --> 0:06:15.599 the manufacturing sector. That's a small part of the economy today, 0:06:15.600 --> 0:06:20.480 certainly from an employment standpoint. And as service sector robotics 0:06:20.560 --> 0:06:23.839 really takes off in terms of capability, the cost of 0:06:23.920 --> 0:06:28.159 developing those robots and cobots falls and the cost of 0:06:28.240 --> 0:06:31.120 labor goes up, it will lead do you know, large 0:06:31.120 --> 0:06:34.839 incentives for companies to automate in a significant way. Andrew, 0:06:34.880 --> 0:06:36.760 you're you're kind of playing right into some of our 0:06:36.800 --> 0:06:39.880 favorite topics here on Benchmark. Dan and I have spent 0:06:40.000 --> 0:06:44.039 a lot of time talking about demographics, automation, and Japan 0:06:44.240 --> 0:06:47.240 as well. And you know, this kind of strikes me 0:06:47.400 --> 0:06:49.960 that a lot of these trends that you're talking about 0:06:49.960 --> 0:06:53.920 are already underway in Japan. Did that strike you as 0:06:53.920 --> 0:06:57.280 all at all as you were putting together this report? Absolutely, 0:06:57.360 --> 0:07:00.440 Japan was, you know, the most demographically far down the 0:07:00.440 --> 0:07:02.680 curve market in the world, and you've seen it for many, 0:07:02.680 --> 0:07:05.159 many years in Japan, as you say, And it's not 0:07:05.279 --> 0:07:07.880 limited to the US and Japan, this is going to 0:07:07.920 --> 0:07:11.440 be all over Western Europe. It's even gonna be in China. Right. 0:07:11.480 --> 0:07:13.600 People like to talk a lot about China getting rich 0:07:13.680 --> 0:07:15.960 before they get or getting old before they get rich, 0:07:16.640 --> 0:07:19.040 and I think that's true U And even in China 0:07:19.240 --> 0:07:23.520 in companies that have had a labor cost advantage, there's 0:07:23.560 --> 0:07:27.600 a big pushed automation. Fox con the electronics manufacturer going 0:07:27.640 --> 0:07:31.440 to be putting in a million robots by so huge 0:07:31.480 --> 0:07:34.400 investments to be able to figure out how to deploy 0:07:34.440 --> 0:07:36.800 this technology. And just to come back to your point 0:07:36.800 --> 0:07:40.440 about what where's the productivity growth? Historically, when you see 0:07:40.560 --> 0:07:43.960 major advances in technology, it does take a few years 0:07:44.440 --> 0:07:47.560 before management teams really figure out how to take advantage 0:07:47.560 --> 0:07:50.040 of it and get those improvements in productivity. So we 0:07:50.080 --> 0:07:53.000 do see it coming really and especially in the next 0:07:53.000 --> 0:07:55.520 five to seven years. Let's say, you know, I'm glad 0:07:55.560 --> 0:07:59.520 you mentioned China. That might strike many of our general 0:07:59.560 --> 0:08:03.880 listeners as pretty strange. There has been an idea that's 0:08:03.880 --> 0:08:05.920 been prevalent in the West for a long period of 0:08:05.920 --> 0:08:09.880 time that China is this vast pool of sweatshop labor. 0:08:10.400 --> 0:08:13.360 Now you mentioned fox Con. Let's talk a little bit 0:08:13.400 --> 0:08:19.240 about that company and it's iconic role in China's industrialization 0:08:19.320 --> 0:08:24.000 and what you think it's doing with robots is so important. Well, 0:08:24.080 --> 0:08:26.400 it's it's just part of the toolkit to continue to 0:08:26.440 --> 0:08:29.920 be cost competitive and to have a place at the 0:08:29.960 --> 0:08:33.240 center of global supply chains. You can't rely forever on 0:08:33.280 --> 0:08:36.440 a low cost uh you know, wage model. That's not 0:08:36.480 --> 0:08:38.600 what the Chinese government wants to do. That's not going 0:08:38.640 --> 0:08:41.320 to promote social stability in China. So they're trying to 0:08:41.360 --> 0:08:45.520 innovate number one, and all the China made in initiatives 0:08:45.520 --> 0:08:48.720 are partly about how do you add more value and 0:08:48.760 --> 0:08:51.720 they're trying to maintain a cost advantage, and automation is 0:08:51.800 --> 0:08:54.280 clearly going to have to be a big part of that. 0:08:54.640 --> 0:08:57.160 So this iPhone I've just taken out of my pocket 0:08:57.520 --> 0:09:02.280 purchased on Montague Street in Brooklyn. Fox Con had a 0:09:02.360 --> 0:09:06.360 key role in this fund didn't talk about that well. 0:09:06.520 --> 0:09:08.959 It had a key role, particularly in the production and 0:09:09.000 --> 0:09:11.520 assembly of the phone. It didn't really have a lot 0:09:11.520 --> 0:09:15.040 of the I P around the software, the customer experience, 0:09:15.120 --> 0:09:17.640 and so that's a point that sometimes lost in the 0:09:17.640 --> 0:09:20.920 global trade debate as well. But China understands this. China 0:09:20.960 --> 0:09:23.199 wants to be able to add more of the value 0:09:23.559 --> 0:09:27.400 in the content, the intellectual property. And to your point 0:09:27.400 --> 0:09:30.520 about is it just a series of you know, large 0:09:30.960 --> 0:09:34.240 pools of labor, low cost labor. Some of the most 0:09:34.480 --> 0:09:38.560 cutting edge new economy companies in the world are in China, 0:09:38.840 --> 0:09:42.320 and I'm thinking not just of of manufacturers like fox Con, 0:09:42.800 --> 0:09:47.400 but certainly the technology companies Ali Baba, ten Cent, b 0:09:47.440 --> 0:09:51.880 I do UH, financial services companies paying on the Global 0:09:51.880 --> 0:09:55.400 Insurance Company and Financial which was started by Ali Baba 0:09:55.440 --> 0:09:57.720 and is now would be the eighth largest bank in 0:09:57.760 --> 0:10:01.080 the US if it were a standalone bank. Um Higher 0:10:01.760 --> 0:10:04.679 which is an impliance company and they bought g S 0:10:04.720 --> 0:10:07.680 appliance business. That's not really a new economy company, but 0:10:07.760 --> 0:10:10.000 they have one of the most cutting edge approaches to 0:10:10.120 --> 0:10:12.760 organization and leadership in the world. So you've got this 0:10:12.920 --> 0:10:16.480 very robust corporate sector in at least the private part 0:10:16.480 --> 0:10:19.160 of the market there that is innovating at the same 0:10:19.160 --> 0:10:21.199 time as as people maybe still think of them as 0:10:21.240 --> 0:10:23.720 just a source of low cost labor. Andrew, let me 0:10:23.760 --> 0:10:27.600 shift gears to another important conclusion in your report. You 0:10:27.679 --> 0:10:30.559 say that over the long term there's going to be 0:10:30.640 --> 0:10:33.560 an expansion in the role of government as a result 0:10:33.600 --> 0:10:38.240 of all these changes. You see the upper class and 0:10:38.240 --> 0:10:41.040 and lower class kind of replacing what's now upper class, 0:10:41.080 --> 0:10:46.600 middle class and lower class. Automation really making high skilled 0:10:46.679 --> 0:10:50.000 jobs in high demand, and yet there's going to be 0:10:50.040 --> 0:10:54.600 an even further hollowing out of of lower paid jobs. 0:10:54.640 --> 0:10:57.920 Basically that's going to you know, really force some big 0:10:58.000 --> 0:11:01.440 questions on society, you know, as all this as the 0:11:01.480 --> 0:11:06.440 aging demographics happen. My question is we're recording this in 0:11:06.440 --> 0:11:10.319 a week where the US midterm election looms over everything, 0:11:10.800 --> 0:11:14.240 and yet you know, over the long term, you know, 0:11:14.720 --> 0:11:17.599 you make these conclusions that seem like they're you know, 0:11:17.880 --> 0:11:20.360 you're going to have an expansion of the government's role 0:11:20.800 --> 0:11:25.040 regardless of you know, whatever the short term political impact 0:11:25.200 --> 0:11:28.280 is in the US or anywhere else how how did 0:11:28.280 --> 0:11:32.320 you arrive at this particular conclusion about the role of government. 0:11:32.960 --> 0:11:34.640 It's a it's a great question, and I'm glad you 0:11:34.640 --> 0:11:36.000 asked that, because I want to make it clear we're 0:11:36.040 --> 0:11:38.880 not trying to make a commentary on short term political wins. 0:11:39.320 --> 0:11:41.840 But the broad story we see here is, you know, 0:11:41.880 --> 0:11:45.280 you've got labor scarcity leading to a rise in labor 0:11:45.360 --> 0:11:48.439 costs and wage growth, all else equal, that would reduce 0:11:48.559 --> 0:11:52.720 inequality and probably help with some of the political stability. However, 0:11:53.040 --> 0:11:55.680 just as that's really taking hold, you've got this huge 0:11:55.720 --> 0:11:58.800 wave of automation that's going to be coming that will 0:11:59.200 --> 0:12:04.120 outright this place probably of the jobs in the country, 0:12:04.240 --> 0:12:09.200 and it will put downward wage pressure on another. Let's say, 0:12:09.360 --> 0:12:12.000 the people who will really benefit the most from and 0:12:12.040 --> 0:12:15.559 can take advantage of the automation are the best educated, 0:12:16.320 --> 0:12:20.760 highly paid people today. And so we enter this period 0:12:20.880 --> 0:12:24.880 with historically high levels of inequality, and all of these trends, 0:12:25.000 --> 0:12:27.040 you know, we haven't even talked about life cycle and 0:12:27.080 --> 0:12:30.680 better health, where the outcomes are also very skewed and unequal, 0:12:31.160 --> 0:12:36.560 will reinforce the pressure on equality or inequality um and 0:12:36.640 --> 0:12:39.320 so you know, given that trend, I guess. The final 0:12:39.360 --> 0:12:42.000 point I would say is this transition will happen very 0:12:42.080 --> 0:12:46.120 very fast by historic standards. So waves of automation and 0:12:46.160 --> 0:12:49.600 new technology are nothing new. But if you look at 0:12:49.640 --> 0:12:52.400 previous shifts, you know, you can go back and look 0:12:52.400 --> 0:12:54.719 at the movement from the farm to the factory a 0:12:54.800 --> 0:12:57.360 hundred years ago. You could look at the shift from 0:12:57.360 --> 0:13:00.720 a manufacturing economy to a service economy. We took one 0:13:00.760 --> 0:13:02.920 other example, which is a more recent and narrow one, 0:13:02.960 --> 0:13:05.280 but a sharp correction, which was the impact on the 0:13:05.320 --> 0:13:09.520 construction sector in the wake of the housing bust. In 0:13:09.559 --> 0:13:11.199 each of those cases, if you just look at the 0:13:11.280 --> 0:13:14.600 number of jobs that were displaced each year, and you 0:13:14.640 --> 0:13:16.840 look at what we see coming in the next ten years, 0:13:17.520 --> 0:13:20.200 this new shift is going to be twice as big 0:13:20.360 --> 0:13:24.160 and twice as fast as anything we've seen before. And 0:13:24.200 --> 0:13:27.560 the question is can the political system handle that when 0:13:27.600 --> 0:13:31.200 you're entering that period with historically high levels of inequality. 0:13:31.360 --> 0:13:34.200 Our view is it's not really wise to count on that, 0:13:34.320 --> 0:13:37.040 And if you're a business leader today, you should expect 0:13:37.120 --> 0:13:39.240 that one way or another there will be a more 0:13:39.280 --> 0:13:43.360 interventionist role of the state in the economy, if only 0:13:43.400 --> 0:13:45.960 to keep the folks with pitch folks away from the 0:13:46.000 --> 0:13:49.400 c suite well to try to manage the transition and 0:13:49.480 --> 0:13:52.600 help preserve social stability. You know, this is also playing 0:13:52.600 --> 0:14:29.960 out just there you go. Now, you also talk about 0:14:30.000 --> 0:14:34.240 the possibility of a spike in interest rates as this 0:14:34.320 --> 0:14:37.720 process occurs. That really fascinates me as a student of 0:14:37.800 --> 0:14:41.720 the Federal Reserve. We've become so obsessed lately with you 0:14:42.000 --> 0:14:46.280 where our star is? Where is the new neutral level 0:14:46.320 --> 0:14:49.480 of interest rates? And gosh, you know, at this point 0:14:49.480 --> 0:14:52.280 in the economic cycle, shouldn't rates be higher so that 0:14:52.320 --> 0:14:56.760 there's ammunition there for the next recession. You're actually saying 0:14:57.200 --> 0:15:01.200 rates are going to go considerably higher. Talk about well, 0:15:01.240 --> 0:15:03.560 just to be clear, I'm talking about long term rates, 0:15:04.200 --> 0:15:07.320 and I'm talking about a multi year view. So I 0:15:07.360 --> 0:15:11.560 think yes, and and and a trend that will play 0:15:11.560 --> 0:15:14.480 out really over call at the next three, five, seven years. 0:15:14.520 --> 0:15:17.160 In the very near term, there's likely to be a 0:15:17.200 --> 0:15:20.480 cyclical recession at some point in the next twelve eighteen, 0:15:20.600 --> 0:15:24.320 maybe twenty four months. When that happens, probably short term 0:15:24.400 --> 0:15:27.080 rates will come back down a bit again. Uh. Now, 0:15:27.200 --> 0:15:29.880 to your point, government has limited ammunition, but but there's 0:15:30.040 --> 0:15:32.720 some ammunition. And in a cooling economy to expect short 0:15:32.800 --> 0:15:36.600 term rates at least to be low. But as this 0:15:36.680 --> 0:15:40.240 automation trend plays out and there's a huge new demand 0:15:40.480 --> 0:15:43.440 for capital, one other thing is going to be happening 0:15:43.480 --> 0:15:45.440 at the same time, and that is that the supply 0:15:45.520 --> 0:15:47.800 of capital won't be growing at the same rate it 0:15:47.840 --> 0:15:51.480 has historically. And again that comes back to demographics. So 0:15:51.600 --> 0:15:54.880 this long period of low and falling interest people saving 0:15:54.920 --> 0:15:58.000 for the pensions and actually living that pation. Fewer people 0:15:58.040 --> 0:16:01.160 in their peak saving years. So when we look around 0:16:01.200 --> 0:16:04.680 the world in any given country, it's the share of 0:16:04.680 --> 0:16:07.360 the population that's called it forty five to sixty or 0:16:07.400 --> 0:16:12.000 sixty five, that's the peak savers. When that share peaks, 0:16:12.640 --> 0:16:15.560 that's when you get maximum savings. Remember Ben Burnanki talking 0:16:15.600 --> 0:16:18.680 about a savings glut that was the global population, you know, 0:16:18.720 --> 0:16:21.440 peaking in that in that age segment. Well, guess what, 0:16:21.680 --> 0:16:23.480 as we continue to age, we're now coming out of 0:16:23.480 --> 0:16:26.320 that segment. Japan was the first to get there. And 0:16:26.400 --> 0:16:28.920 as you continue to age, you actually start consuming again. 0:16:29.000 --> 0:16:31.320 You have to draw down your savings, so we won't 0:16:31.320 --> 0:16:34.280 be getting this huge build up of savings from demographics. 0:16:34.760 --> 0:16:36.920 And at the same time, we'll be getting a huge 0:16:36.960 --> 0:16:40.040 pull of those savings to fuel the investment boom. And 0:16:40.080 --> 0:16:42.480 so that's where we see those two things over time 0:16:42.560 --> 0:16:45.160 leading to a rise in rates at the back end 0:16:45.200 --> 0:16:48.480 of that. Any good investment boom is usually followed by 0:16:48.480 --> 0:16:53.080 an investment bust. Talked about this increasing pressure on employment 0:16:53.120 --> 0:16:55.480 in the back half of the next decade, and so 0:16:55.560 --> 0:16:58.280 I would expect rates to come down again, maybe pretty 0:16:58.280 --> 0:17:00.520 sharply for at least for a period of time, but 0:17:00.560 --> 0:17:02.720 between now and then there will be this rise we 0:17:02.760 --> 0:17:06.600 believe as as those supply demand trends play out. Well, 0:17:06.600 --> 0:17:08.880 there's that mention of Japan again. I want to come 0:17:08.920 --> 0:17:11.600 back to Scott's question and broaden it. I mean, it's 0:17:11.680 --> 0:17:15.600 Japan just the laboratory for everything right now, the canary 0:17:15.640 --> 0:17:19.240 in the coal mine. I mean, there's there's I mean, 0:17:19.280 --> 0:17:21.840 not just on labor, but the phenomenon you just described, 0:17:21.880 --> 0:17:27.439 the savings or labor automation capital. You know, Japan has 0:17:27.560 --> 0:17:30.480 has got some unique characteristics just in terms of their 0:17:30.480 --> 0:17:35.120 geopolitical situation. Um, you know one one for example, immigration. 0:17:35.920 --> 0:17:39.240 It's obviously very contentious in many Western countries now, but 0:17:39.400 --> 0:17:41.919 in the boom years it provided a big part of 0:17:41.920 --> 0:17:45.680 the labor force growth. Japan's never really had an openness 0:17:45.720 --> 0:17:49.000 to large scale immigration, even when times were good. They're 0:17:49.000 --> 0:17:50.840 tweaking that a bit at the moment. They're starting to 0:17:50.880 --> 0:17:53.320 tweak that. They're talking about getting more women into the workforce, 0:17:54.200 --> 0:17:56.040 but there's only so many levers you can pull, which 0:17:56.040 --> 0:17:58.040 is another reason why you see them at the forefront 0:17:58.040 --> 0:18:02.119 of automation. So to get back to this idea, of 0:18:02.160 --> 0:18:08.080 the three trends which boosted the global labor market baby boom, 0:18:08.200 --> 0:18:12.080 is China and India coming online, rise of women in 0:18:12.119 --> 0:18:15.760 the workplace, Let's look at that middle one. Amid all 0:18:15.880 --> 0:18:20.560 this talk about deglobalization and talk about a new competitive 0:18:20.560 --> 0:18:24.640 relationship between the US and China, is it really appropriate 0:18:24.680 --> 0:18:28.360 to talk anymore about a global labor pool. So one 0:18:28.359 --> 0:18:30.760 of the other trends we talk about when we describe 0:18:30.800 --> 0:18:34.480 the Great Transformation is this pullback from globalization. And that's 0:18:34.520 --> 0:18:39.000 partly political, but it's partly economic as well. And some 0:18:39.080 --> 0:18:42.720 of the outcomes of this technology growth are that it 0:18:42.840 --> 0:18:46.439 allows companies to produce more closer to where the demand is, 0:18:47.280 --> 0:18:50.480 and that is going to reduce the appeal of this 0:18:50.920 --> 0:18:53.159 you know, call it the China development model. But it 0:18:53.240 --> 0:18:56.920 was the Korean development model and the Japanese development model 0:18:56.960 --> 0:18:58.520 before that, and if you go back far enough, it 0:18:58.560 --> 0:19:01.720 was the US development model sentoting with the garment industry 0:19:01.720 --> 0:19:03.760 and right, so that I don't think it's going to 0:19:03.800 --> 0:19:06.359 be a viable growth model anymore for these countries with 0:19:06.480 --> 0:19:09.119 large pools of cheap labor, and there's going to be 0:19:09.119 --> 0:19:12.040 too much of the value added that comes from manufacturing, 0:19:12.160 --> 0:19:16.159 that comes from local production, local distribution, more of a 0:19:16.200 --> 0:19:19.920 digital and experience based economy. And so I think it's 0:19:20.000 --> 0:19:21.680 it's a very fair question. You know, when we talk 0:19:21.720 --> 0:19:24.440 about a global labor market and you know, huge free 0:19:24.440 --> 0:19:29.320 flows of labor and migration and trade. You know, not 0:19:29.359 --> 0:19:31.480 to say that that stuff goes away by any means, 0:19:31.520 --> 0:19:33.720 but it doesn't have the same kind of rapid growth 0:19:33.720 --> 0:19:36.200 and expansion that we've seen in the past. Two quick 0:19:36.280 --> 0:19:39.240 questions come from that. Number One, I was in Vietnam 0:19:39.359 --> 0:19:42.240 recently and the story was all about China being an 0:19:42.240 --> 0:19:47.520 exporter of manufacturing labor to places like Vietnam. You seem 0:19:47.560 --> 0:19:50.600 to be calling that into some sort of question. They're 0:19:50.600 --> 0:19:53.480 saying China was sending labor to Vietnam where they were 0:19:53.520 --> 0:19:56.960 putting capital into Vietnam to do production there. It's the latta, 0:19:57.040 --> 0:19:59.600 but described as the form. Well, so I think the 0:19:59.640 --> 0:20:03.600 latter clearly makes sense as China's own labor costs grow 0:20:04.280 --> 0:20:07.560 and they become a producer of lots of capital if 0:20:07.560 --> 0:20:12.040 they're looking for opportunities to invest that um. So there's 0:20:12.040 --> 0:20:14.639 clearly going to be sectors where labor costs still matters 0:20:14.680 --> 0:20:16.920 a lot and where there will be opportunities for lower 0:20:16.960 --> 0:20:20.879 cost countries to produce. But at the scale and the 0:20:21.320 --> 0:20:23.760 kind of broad based impact on the economy that we've seen, 0:20:24.359 --> 0:20:25.880 it's going to be very hard. I like the way 0:20:25.920 --> 0:20:30.000 you sketch this from a Japanese model, Korean model, Chinese model. 0:20:30.040 --> 0:20:32.520 I guess in between that you could have squeezed Taiwan 0:20:32.600 --> 0:20:36.480 as well. Now, some of the buzz at the moment 0:20:36.560 --> 0:20:38.520 is that you know Africa is going to be next, 0:20:38.520 --> 0:20:41.199 and people talk about what's going on in Ethiopia. Is 0:20:41.200 --> 0:20:44.119 it too late for Africa? Has technology caught up with 0:20:44.160 --> 0:20:47.560 this model? Well, again, I think there will be individual 0:20:47.640 --> 0:20:51.840 countries Africa as many many countries in different situations, and 0:20:51.840 --> 0:20:54.920 so it's more often reminded it's not a country. There 0:20:54.960 --> 0:20:57.320 will be places where that model, you know, works well, 0:20:57.359 --> 0:20:59.080 and I think there will tend to be places where 0:20:59.119 --> 0:21:03.080 there's at least enough of a potential domestic market that 0:21:03.240 --> 0:21:07.840 it's not just export dependent growth. But you know, if 0:21:07.880 --> 0:21:10.359 you're asking, as you look across Africa, is there a 0:21:10.359 --> 0:21:13.040 pool of labor there that can do for that region, 0:21:13.080 --> 0:21:16.840 that continent what happened with China In our view, the 0:21:16.880 --> 0:21:20.240 answer would be no. Andrew Shradel of Bain, thank you 0:21:20.359 --> 0:21:21.879 very much for being with us. You can find the 0:21:21.920 --> 0:21:25.479 report Labor twenty th at Bain dot com or just 0:21:25.560 --> 0:21:28.280 punch that into your favorite search engine. Andrew, thanks for 0:21:28.359 --> 0:21:35.200 joining us. Thank you. Benchmark will be back next week. 0:21:35.400 --> 0:21:37.720 Until then, you can find us on the Bloomberg terminal, 0:21:37.920 --> 0:21:41.040 Bloomberg dot com or Bloomberg App, as well as podcast 0:21:41.080 --> 0:21:45.160 destinations such as Apple Podcasts, Spotify or wherever you listen. 0:21:45.680 --> 0:21:47.480 We'd love it if you took the time to rate 0:21:47.560 --> 0:21:50.320 and review the show. Some more listeners can find us, 0:21:50.720 --> 0:21:53.440 and you can find us on Twitter, follow me at 0:21:53.640 --> 0:21:58.480 Scott Landman Dan you're at Moss Underschool Eco. I think 0:21:58.520 --> 0:22:01.000 you can follow up reports from Mark asked Andrew Schiddell 0:22:01.080 --> 0:22:05.119 and his colleagues at Dane Insights. Benchmark is produced by 0:22:05.160 --> 0:22:09.119 topor Forhez. The head of Bloomberg Podcasts is francesco Leavie. 0:22:09.600 --> 0:22:11.360 Thanks for listening, See you next time.