The 2030 Economy and Your Investment Portfolio

It’s summer—a time for reading and exploring ideas, perhaps on a beach or over cocktails. While it’s anything but breezy, this week’s post deals with a topic you can mull over for some time: colliding demographic and economic trends that could radically alter your investment portfolio, work and social environment over the next dozen years.

According to a Bain & Company research report, Labor 2030: The Collision of Demographics, Automation, and Inequality, two factors will have a major impact on the economy in the 2020s and into the 2030s. The first is a decline in the growth of the labor market.

In the 1970s and ‘80s, employment shifted into overdrive as baby boomers reached maturity, women entered the workforce en masse, and China and India opened to the West. Now, the report argues, these trends are largely played out. As boomers retire, the number of available workers will fail to meet employer demand.

That could be a boon for older workers who want or need to work longer, as well as for new graduates entering the workforce. But it will collide with trend number two—the rise of automation.

Advances in artificial intelligence and machine learning will automate many job functions, improving productivity 30 percent by 2030, the report says.

But automation also means many employees will be out of a job. By 2030, employers will need 20 to 25 percent fewer workers. Eventually, automation could eliminate up to 50 percent of current jobs.

Though automation will affect all areas of the economy, it won’t do so equally. Less-educated workers are likely to be squeezed out, while those with higher education and valuable skills will be more in demand than ever.

That is a recipe for increasing income and wealth inequality, which, in turn, could lead to government interventions. A broader social safety net, worker reeducation programs, higher taxes, and more regulations could all be on the menu. Trade disruptions may also occur as countries seek to gain a competitive advantage in the new economy.

We can’t know yet whether Bain has hit the mark with its predictions or whether the future will unfold in a different, totally unanticipated manner. But the report is an interesting read that could have important implications for your portfolio and family wealth in the decades to come.

For a summary of some of the ideas in the report, check out the MarketWatch article, If you’re over 40 and work, you’re in for some big surprises.