November 9, 2015
If you want to understand exactly how the economy has changed over the last few decades, one of the most important statistics is also one of the least remarked upon. It is the growing disconnect between a firm’s earnings and the number of people it employs, a statistic that puts paid to the lie that people are an organisation’s greatest asset. Once upon a time, of course, there was a direct correlation of one sort or another between the a firm’s revenue and the number of people it employed and consequently the amount of space that it took up. This was especially true for the world’s great manufacturers and other industries engaged in what was once proper work; moving, creating, destroying and maintaining things. Growth and success meant more employment and more space. There were economies of scale but the upshot was more or less an arithmetic progression in employment based on earnings.
So, for example, General Motors was once amongst the largest and most commercially successful firms on the planet and employed people in appropriate numbers. In 1979, GM employed 853,000 people worldwide and was the largest private sector employer in the US with nearly 620,000 employees. Its operations supported hundreds of thousands of other jobs in related industries. It could lay claim to being the figurehead of capitalism if not necessarily the world’s most successful company with turnover of over $66 billion in that year.
In 2015, this mantle has passed (arguably) to Microsoft. Yet it turns over around $94 billion but only employs 119,000 people. Similar patterns are evident at Apple ($234 billion with 115,000 people) and Amazon ($ 89 billion with 222,000). However, these are all companies that actually produce something that people are willing to buy. Several new operations which produce nothing tangible make the point even more forcibly that revenue is no longer linked to employment. Facebook ($13 billion turnover and 10,000 people), Google ($66 billion with 60,000 people) and Twitter($1.4 billion with 3,900 people) are all wildly successful commercially without actually employing too many people.
With the possible exception of Google, who have more than an eye on being a dominant force in the emerging market for driverless vehicles, these companies are very unlikely to do much in the way of employing more people as a way of generating revenue. Amazon, in particular is far more likely to scale back employment numbers as it switches to drones and robots to handle its logistics, the core of its operation. That world is coming far sooner than you might expect.
According to a new 300-page report from Bank of America Merrill Lynch, the robots are already taking our jobs away. In the US, there has been a 72 percent increase in the number of industrial robots in the workplace over the last ten years while human jobs in manufacturing have fallen by 16 percent. This is only the beginning. In the UK, over a third of white collar workers will have their jobs taken away by robotics and artificial intelligence. In the US, the proportion is nearly half.
These might be high profile examples, but the general thrust of this force is felt across all sectors and all sizes of organisation and the growing disconnect between revenue and employment is throwing up a number of new challenges in the workplace sector. I am not one of those people who believes that the office is dying but it is certainly changing. The property sector, in particular, is struggling to adapt, as we reported last week.
This is evident in the growth of more agile forms of property ownership such as coworking but is also apparent for larger organisations. Earlier this month the University of Northumbria published research which showed that property owners face a deficit running to £4.8 billion over the next few years simply because they are not offering tenants the sort of space they need. By that they mean the sort of ‘agile’ space based on the growing disconnection between people, space, time and revenue. For a growing number of organisations, people and buildings are no longer primarily assets with a direct and semi-permanent influence on commercial success but services to be consumed in pursuit of it.
An edited version of this comment features in the new issue of Mix Interiors.
Main image: Corbis