The future of work won't be as bad as we're told

I can't remember when there's been so much speculation about what the future holds for working life. Or when those who imagine they know what the future holds have worked so hard to scare the dickens out of our kids.

Getting on for 100 years ago – 1930, to be precise – the father of macro-economics, John Maynard Keynes, wrote an essay, Economic Possibilities for our Grandchildren, in which he calculated that if technological progress produced real economic growth per person averaging 2 per cent a year for 100 years, by then people would enjoy a comfortable standard of living while needing to work only 15 hours a week.

He was writing during the Great Depression, so I doubt if many people believed him. He was right, however, to predict the Depression would end and growth would resume, powered by continuing advances in technology.

By the 1960s and early '70s it was common for futurologists to predict that more and more labour-saving technology would allow big reductions in the standard 40-hour working week.

What a laugh. Today's futurologists – amateur and professional – are predicting roughly the opposite to what Keynes and the '60s futurologists were.

Thanks to continuing technological advance and the digital disruption it's producing, working life is getting ever tougher and less secure, we're told.

As we learnt last week, all the extra jobs created in Australia over the year to February – a mere net 100,000 – were part-time, with full-time jobs actually falling by 21,000.

So there's the proof we're going to the dogs – and it'll keep getting worse. All those part-time and casual jobs. The growing army of the "under-employed".

We're moving to the "gig economy", where full-time, permanent jobs become the exception and most workers are employed on short-term contracts, many are self-employed like Uber drivers or need a "portfolio" of jobs on different days.

Frightening, eh? I read someone confidently assuring school kids they'd have 10 different jobs – or was it 10 different occupations? – in their working lives. Then I read someone assuring kids they'd have 17 different jobs. Not 16, or 18, but 17.

This growing job insecurity is why there's a renewed push among progressives – including Greens leader Richard Di Natale – for a "universal basic income". It'll be needed because so many people will be earning little or nothing from employment.

Have you detected my scepticism? This is people during a period of weakness in the jobs market predicting – like Keynes's pessimists – it will stay weak forever – and get worse.

That's part of it. The other part is the futurologists who, unlike us mere mortals, can see with perfect clarity what our technological future holds.

If you think economists aren't good at forecasting, futurologists are much worse. Much of what they predict never comes to pass and most of what they correctly predict takes much longer than they expected. Then there's the things they failed to predict.

The only safe prediction is that the future will be different to the present. Any more specific prediction is mere speculation.

The futurologists generally know – or profess to know – a lot more than the rest of us about all the new tricks the latest technology will soon be able to do. What they almost always underestimate is the human factor: whether we'll want it to do those tricks.

If the futurologists had been right, by now most of us would be working from home. We aren't – because it suits neither bosses nor workers.

It's tempting to predict the digital revolution will eliminate many jobs in the services sector, leading to mass unemployment.

Trouble is, employers have been installing labour-saving equipment since the start of the Industrial Revolution, and so far the unemployment rate is hardly up to double figures.

That's because improving the productivity of a nation's labour increases its real income. When that income is spent, jobs are created somewhere in the economy.

Technological advance doesn't destroy jobs, it "displaces" them from one part of the economy to another.

It's possible the digital revolution is so different to all previous technological revolutions that what's been true for 200 years is no longer true. Possible, not probable.

Those predicting our kids will be tossed out of their jobs many times in their working lives forget that market forces involve the interaction of supply and demand.

Their prediction of almost universal job insecurity in the gig economy assumes this will happen because it's what the demanders of labour – employers – want.

This is naive. It assumes all labour is unskilled – so employers don't care who does it and never have trouble recruiting and training a constantly changing workforce – and that there's no such thing as "firm-specific knowledge".

No employer would treat skilled labour in such a cavalier fashion. Employers know the suppliers of labour – employees – wouldn't want to work for such an appalling outfit.

And such an apocalyptic prediction fails to allow for what economists call the "policy reaction function" – if things get too bad for too many workers, governments will step in and legally require employers to treat their staff fairly – just as they already impose paid public holidays, annual leave, minimum wages, penalty payments and much else on unwilling employers.

Why do they do it? Because, in a democracy, workers have far more votes than bosses.

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Someone has to give if we’re to fix the budget

The nation's budget problem still won't be solved when, one day in the distant future, we get the federal budget back into surplus. Only a change in strategy is likely to produce a sustained solution.

As successive intergenerational reports demonstrate, on present policies government spending will just grow and grow, requiring ever-higher taxes.

If we don't like that idea – or politicians regard it as an impossible sell – we need to think a lot harder about what we're spending on, why it's growing so fast, what things we should stop spending on, and how we can make our spending more effective, in the process slowing the rate at which it's growing.

The five biggest areas of spending include welfare benefits, health, education and infrastructure. Infrastructure's too important to share a column, so we'll return to it.

But it, plus health and education, are even bigger when you remember how they dominate the states' budgets – a reminder that federal and state budgets need to be considered together, and that cutting federal grants to the states, and cost-shifting by the states back to the feds, aren't genuine solutions.

Of three categories – welfare benefits, health and education – the intergenerational reports make it clear health will be by far the fastest growing.

That's not so much because of ageing as because advances in medical technology are hugely expensive, and it's quite unrealistic to imagine that Australian voters will settle for anything less than gaining subsidised access to the latest and best technology ASAP.

Since this is the political reality, the problem (and much of the pressure on budgets) is easily solved.

Our politicians simply need to be brave and tell voters the truth: if they want ever more and better healthcare then, as with everything else, they'll have to pay more for it – in the form of, say, regular increases in the Medicare levy.

That's the fundamental solution, but we could also do more to slow the rate of growth in healthcare spending by removing at least some of the waste and inefficiency that everyone in the system tells us exists.

Much could be done to make education spending more effective. Instead, however, since the national knockback of the 2014 federal budget, the government's done little but crack down on the previous year's crackdown on the welfare cheats the Liberal hard right has convinced itself are ripping off billions every year.

Sorry, not nearly good enough. Nor is preaching the evils of tax increases while you wait for bracket creep to claw back the eight successive tax cuts we were awarded when Peter Costello thought the resources boom would run forever.

The trouble with many professed supporters of Smaller Government is that they want to have their cake and eat it.

They want to reduce government spending so they can pay less tax, but they don't want to give up the middle-class welfare they enjoy – much of it awarded to them by the great man who didn't believe in smaller government, John Howard.

Much of Howard's handouts to the comfortable came in the fifth big spending area, tax expenditures – which have the same cost to the budget as ordinary expenditures, but are hidden away on the tax side where they aren't noticed.

These include various new benefits for supposedly self-funded retirees, the private health insurance tax rebate, big increases in grants to non-government schools and Costello's unsustainably generous increase in superannuation tax concessions for high income earners.

To be fair, Malcolm Turnbull has made a good start to cutting back the super concessions – over the vociferous opposition of his hard right backbench.

More must be done to cut back rapidly growing tax expenditures.

But if we're genuine about achieving fiscal sustainability while restraining the rise in tax rates, we need to embrace a new principle to sit beside our heavily means-tested welfare system (which is the main reason Australia's overall level of taxation is so much lower than almost every other developed economy).

The companion principle should be: we're no longer prepared to subsidise positional goods in the name of encouraging "choice".

We'll put all our effort into providing a good public health system and a good public education system, and that's it.

Of course, it's a free country and if you think you can do better than the public system by making private arrangements, feel free.

But don't expect other taxpayers to subsidise your efforts to get better than they're getting.

In any case, the easier you make it for punters to enjoy positional goods, the less positional you make them, cheating the better-off of their feeling of superiority.

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