Someone seeking to develop the new human capital needed for success in a different field must write off a significant share of his existing stock. To benefit from the higher expected returns in the new industry, this person will need to recreate all these investments, which will take time – with no guarantee that his future earnings will match what he earned in the past. Along with the significant uncertainty as to the ultimate returns from the career change, there is also the high likelihood of a reduced income for the foreseeable future, not just during training but also during the early years of the new job. This makes changing careers both expensive and risky … Alternatively, the person at risk of being displaced can wait and hope that an employment opportunity will arise in his current industry, one that allows him to preserve the value of his accumulated human capital. Even industries in decline generate job openings and opportunities as they shrink; for the person on the ground who sees the gross flows of job creation rather than the net number, there is always the chance that one will become available to him. In contrast, there is little chance of returning to his former situation once he leaves his current industry, given how quickly human capital atrophies.” This means that the choice to postpone making a decision can be economically rational for the person (and the value of postponing increases with the skill and experience level), even though it is a worse outcome for the economy (Neal, 1995; Jacobson et al., 2005; O'Leary, 2010; Strongin et al., 2016).
The ongoing nature of technological change means the workforce requires life-long and continuous training to operate productively (Llorens et al., 2002). This is supported by the findings that rationalisation, human capital and information and communication technologies are the main drivers of Total Factor Productivity (Gehringer et al., 2016).
Against this stand some worrying facts (AlphaBeta, 2016): In Australia 70% of young people entering the workforce are doing so in jobs that will be radically affected by automation and digitalisation; In Australia 60% of students are being trained in jobs that will be radically affected by automation and digitalisation; In Australia more than half of the workforce will need to be able to use, configure or build digital systems in the period 2018-1019; One in three young Australians are unemployed or underemployed. The Chartered Accountants Australia and New Zealand (2016) in their survey found that: Two-thirds of those with less than five years’ experience (early-career Australians) expect that their job will not exist, or will fundamentally change, in the next 15 years; Of those Australians who will pursue a new job in the next ten years, three in five are looking to change to a different industry, a different role, or both; 52% of Australian employees with less than five years’ experience already see their qualifications as not being “very much” relevant to their work. PwC (2015) states that Australia would experience a $57.4bn growth in GDP if it shifted 1% of the workforce into STEM roles with the largest benefit accruing to the Professional, scientific and technical services sector and the STEM workforce would expect to benefit from a 0.6%-1.8% annualised growth in wages above baseline.