Written by Ayesha Khan.The views expressed in this commentary are solely those of the author.
It’s only February, and 2018 is already turning out to be a big year. Recent volatility in the U.S. stock market, anticipated change in the job market and the unique geopolitical position occupied by many Muslim countries calls the current global economic situation to our attention. Since the economy often becomes the bedrock of our communities and gives rise to many political tensions that affect us, it is important to pay attention to any apparent volatility and plan for the future.
For the rest of this year, it seems we can expect greater income inequality, a transformed workplace via artificial intelligence, a stagnant workplace for women of color, multiple landmark political decisions and the continued rise of China as an indomitable economic force.
Here are the changes you should expect from the global economy for the rest of this year:
1. America’s income groups will bifurcate further
According to Ray Dalio (author of Principles, Chairman and Chief Investment Officer at Bridgewater Associates), the U.S. currently has 2 economies – the top 40 percent and the bottom 60 percent. Dalio argues that real incomes have been flat to down slightly for the average household in the bottom 60 percent since 1980, and the top 40 percent have approximately 10 times as much wealth as their counterparts. Trumponomics (see below) will not do much to change this. Instead, a greater diffusion of knowledge and skills relevant to the new economy will enable social mobility for the bottom 40.
2. The new economy: Trumponomics, Amazon and artificial intelligence
2018 will usher us further into the “new” economy of artificial intelligence, data analytics and digital everything. What does this mean for us? We need to prepare readily for a new job market: Amazon and the like are the new economy and artificial intelligence (A.I.) is here to stay. From a macro perspective, the global technology Cold War is already underway. According to Eurasia Group, the U.S. and China will move into the A.I. technology arms race with guns blazing in 2018. While the U.S. has more talent, China is deploying more capital in local laboratories as the race to gain technological dominance over Africa, Brazil and Europe continues.
From a citizen’s perspective, the new economy will bring harsher realities. Good middle-class jobs are quickly becoming obsolete. According to McKinsey’s recent Future of Work study, 800 million jobs could be displaced. The elimination process is underway this year. Going out are jobs that require physical or basic mental work and can be automated. These include manufacturing jobs, fast food jobs, data collection jobs and classic back-office jobs. Coming in are managerial jobs that require emotional intelligence not possessed by machines, home health aides, doctors, nurses and personal aides to serve our aging population.
If policies enforce investment in infrastructure and green energy, then manufacturing jobs as construction workers and installation engineers will be in demand. Professions such as data scientists and algorithm developers will be hotter than ever in the A.I. economy and, according to McKinsey, U.S. job growth will be in the high wage bracket. This coupled with the first trend demands urgent reskilling of labor and democratization of next-generation job market skill.
Businesses have to get with the Amazon program to survive. With Amazon’s acquisition of Whole Food’s last year, the recent uptick in Prime membership fee and its ubiquitousness, consumer and retail is turned over its head.
All this volatility coupled with President Trump’s America first economic agenda will make 2018 a year to be closely watched by economists. Eurasia Group’s 2018 outlook identifies Trump’s nationalist economic leaning with threats to pull out of NAFTA and buff trade against China, as inequitable globalization.
3. China will get stronger
Trump’s “America first” policy has created a vacuum in the global political order and China is well placed to replace it. With leadership in technology, a growing economy and a visionary president, China could use 2018 to accumulate more soft power.
4. Brace yourself for pivotal political decisions:
- Results of the Mueller investigation
- NAFTA renegotiation
- Survival of the JCPOA and US-Iran relations
- Article 5 Brexit negotiations
5. Women, especially women of color, face unprecedented challenges in the workplace
The #MeToo movement, Larry Nassar’s trial, Harvey Weinstein’s defamation and the sea of black dresses at awards shows have all made clear: women will not take it anymore. While the momentum is positive and empowering, 2018 requires much ground to be covered. According to McKinsey & Company’s latest women in the workplace report, one in five C-suite leaders are women and fewer than one in 30 are women of color. Entry-level women are 18 percent less likely to be promoted than their male peers. Black women are the most likely of all groups of women to report they never get senior-level contact, affecting the advancement opportunities they are likely to receive. The report warns against conflating diversity and gender as one issue as all women are not having the same experience. Women of color are facing and will continue to face double discrimination which demands new problem-solving strategies in the workplace.
2018 is grim, and yet full of possibility. Let’s hope the dominoes fall positively.