Bain: Collision Of Demographics, Automation, And Inequality Signals Societal Catastrophe
by Tyler Durden
ZeroHedge.com
Mon, 03/26/2018
Earlier this month, John Mauldin hosted the Strategic Investment Conference 2018, a three-day investor conference with 20 financial experts discussing everything from the global economic outlook for the next 12-months, along with trading strategies to overcome significant geopolitical, economic, and technological risks.
One panel was hosted by Karen Harris, Managing Director of Bain & Company’s Macro Trends Group, who presented a fascinating keynote tilted: “Labor 2030: The Collision of Demographics, Automation, and Inequality.”
According to Mauldin Economics, Harris addressed roughly 700 investors who eagerly waited for her speech. Harris started off by saying, “the combination of a demographically shrinking workforce plus increasingly cost-effective automation will aggravate inequality, constrain demand, and put a cap on economic growth.”
She also warned, “this will have all sorts of unpleasant effects in the next decade.”
Similar to Chris Hamilton via the Econimica blog, Harris indicates there is a significant and ominous shift currently underway in the American economy — originating from the 1980s/1990s and forced upon by a “supply-constrained world to a demand-constrained one.” The primary drivers of the shift are debt, demographics, and disruption (or automation).
“Automation’s impact will be highly unequal. At least initially, high-wage workers will reap most of the gains and low-wage workers pay most of the cost. This is not beneficial to social order, obviously, but in the end, it’s not helpful even to the businesses that automate. Someone has to buy the goods the robots build and wealthy people have a lower propensity to spend. The results will be “demand-constrained growth.” This isn’t necessarily a contraction, but it will likely cap future GDP growth potential”
About 13-minutes into the keynote, Harris elaborated on “technology’s impact on demographics, i.e. helping people live longer.” She does not foresee lifespans dramatically increasing to reverse or cushion the deceleration in America’s lifespan growth.
Bain believes the collision of demographics, automation, and inequality has only just begun — and it will get much worse for the American worker. She dubbed the inflection point the “Wile E. Coyote” moment…
Harris says rising inequality has only just begun. It will get much worse and not just in the US. Many won’t notice initially because rising productivity will mask some of the job losses, but eventually, job losses will overwhelm productivity. She called this the “Wile E. Coyote” moment. Hard to pinpoint, but probably coming in the next decade.
Now is no time to follow market momentum, Harris says. It is a massive boom akin to tech and housing combined and the reversal will be tough.
Another implication is consumer spending. Baby Boomer spending growth will begin declining in the 2020s anyway. Add in the growing inequality with up to 25% of the workforce displaced by automation, and middle-class markets seem likely to erode. Investors and businesses should be asking, “Who will be my customers a decade from now?”
The Rest…HERE
