small-tiles Martha Cano | 26 Mar 2020

The last few years have been revolutionary for Mexican labor unions. In 2017, the country saw less than 20 officially recognized strikes, but in 2019, workers at more than 70 different factories have been engaged in strike activity to increase wages and bonuses. These strikes have been very successful in increasing worker compensation. The goal is for employers to institute a 20% wage increase and an annual bonus of 32,000 pesos — now known as the "20/32" demand.1 However, to fight back, some employers in the country have used layoffs and other methods to attempt to regain control after the negotiations ended. This bumpy road has led to new legislation that could shift power into the hands of Mexican workers. New ruling affects Mexican labor unions   Workers that join unionized employers with a collective bargaining agreement in place expect that their rights are going to be protected and that their leadership can operate independently of the employer's influence. However, for some time now, employers in Mexico have actually been the managers of the unions within their walls, determining union leadership and overseeing the contracts. In these instances, they've also been able to set the terms of the contracts without input or approval from the workforce. This is clearly a conflict of interest, as employer-managed unions do not offer workers a voice or bargaining power in negotiations. But a new law pushed into place by the Morena party in Mexico is very much pro-labor.2 It will enable workforce unions to elect their own representatives and leadership without employer interference. Additionally, they will be able to vote on contract approvals via secret ballot, protecting their rights and shielding them from any reprisals from company management. By making these types of changes to Mexican labor unions and the underlying legal framework, workers will receive additional protection and leverage during the collective bargaining process. How This Impacts Costs   In Mercer's 2019 Cost of Living Ranking report, Mexico City proves consistently affordable regarding many of the "market basket" options priced in the study. In economic terms, a market basket is a set of goods that can be priced to show the general affordability of a city or geographic location. When compared with other cities and localities around the globe, Mexico can be relatively inexpensive. That said, the increased worker wages and bargaining power resulting from the new labor legislation will also have a trickle-down effect on local economies, further improving the cost of living. Additionally, despite not having a specific price assigned to it, working with a company where employees' voices are heard is also a valuable component in the employment relationship. This improvement in worker rights has significant worth beyond pay; if employers can balance their desire for profitability with the need to care for and support the workforce, they can reduce turnover — an often costly hurdle for employers. For example, Mercer's 2019 Global Talent Trends research shows that thriving Mexican workers are twice as likely to work for a company that ensures equity in pay and promotional decisions, which are key to the conversation on organized labor. Applying These Changes to a Global Economy   Other countries around the world may face challenges similar to those experienced by Mexican workers. Unfortunately, there are still countries where worker rights are close to last on the list of business priorities. Some countries are also facing public outcry about minimum wage increases, which is a similar conversation. There are a few key lessons to be learned from this ongoing story that can offer insights for other countries and employers. For instance, Mercer's research shows that workers who have an employer that cares about them and their well-being are more productive, likely to stay longer and more engaged than those who do not. It shouldn't take a union to force employers to care for their people, but if that's what is required, then so be it. The message is clear: Employers that don't step up for their workforce are on track to face legislative outcry to protect workers' rights and ensure a fair and equitable working environment. By balancing the needs of the business with the needs of the people, employers can maintain some measure of control over the situation. But if it doesn't remain a priority, legislation can tilt the balance of power into the hands of the workers to ensure their voices are heard. Sources: 1. Marinaro, Paolo and DiMaggio, Dan. "Strike Wave Wins Raises for Mexican Factory Workers." Labor Notes, 27 Feb. 2019, 2. Whelan, Robbie and Montes, Juan. "Mexican Lawmakers Approve Pro-Labor Changes." The Wall Street Journal, 11 Apr. 2019,


small-tiles Jackson Kam | 30 Jan 2020

China is fostering a culture of innovation throughout its society — but most notably in its startup businesses. Multinationals can take advantage of this increased energy by investing in Chinese startups or taking a cue from how the successful ones — the "unicorns" — are meeting the demands of a growing Chinese consumer base. Multinationals must also be mindful of what Chinese workers desire most from employers, which is the ability to have a healthy work-life balance, according to Mercer's Global Talent Trends 2019 study. Currently, this is a very real challenge for employees working at tech startups. Developing a Culture of Innovation   To foster this culture of innovation within its industries, the Chinese government is making it easier for entrepreneurs to experiment and grow by implementing more "benign" business regulations. It's also ensuring that there is efficient infrastructure and local support in place.1 One sector that is particularly thriving under this new spirit is insurtech. For example: ZhongAn Online, a digital insurer backed by Ping An, Tencent and Alibaba, has launched a Software as a Service (SaaS) platform for insurance companies, giving them rapid access to ZhongAn's accumulated data on medical claims, medical insurance directories, drug prescriptions and local hospital information across the country.2 Another insurtech example is the partnership between Rui Xin Insurance Technology and China Lending, which aims to help the insurance company develop its own consumer financial platform offering China Lending's products. The two companies will also collaborate to develop more insurance products and attract more customers on both of their platforms.3 These insurtech partnerships exemplify how China is now setting the stage for experimental collaboration and innovation that challenges the status quo. Taking a Cue From Chinese Unicorns   Across many sectors, thousands of Chinese startups are disrupting industries — and stealing customers from established companies — by developing innovative business models to sell even more innovative products.4 Indeed, China has 120 successful startups, more than half of the 234 unicorns globally.5 Chinese startups are excelling because they can quickly reach scale in the large market, and they can tap a growing talent pool, particularly professionals with PhDs — twice as many as those in the U.S. They are also exhibiting a higher risk tolerance that's enabling them to conduct "fearless experimentation" to push out new products as fast as possible. With the rise of digital disruption, these unicorns are eager to take big risks and put their country back on the map as an innovator.5 How Multinationals Can Leverage This Energy   Hengyuan Zhu, associate professor and deputy chair in the Department of Innovation, Entrepreneurship and Strategy at Tsinghua University, believes that startups are successful because they are practicing "contextualized innovation." This entails collaborating with local customers within the country to make sure products meet the specific demands of those localities — and multinational companies operating in China should take a cue.6 "If they want to be successful, multinational companies will have to give more decision-making power to their local branches in China," Zhu said. "They need to do this so that they can leverage global resources, integrate into the innovation system and innovate in China for Chinese customers." An innovative workplace culture must be counterbalanced for organizations to be successful. For instance, organizations need to be willing to experiment but in a highly disciplined manner. Carefully taking this line of thought into consideration in all aspects of the workplace will ensure the success and application of a productive, innovative culture. Dealing with 996: An Unhealthy Work-Life Balance   There is a rising backlash occurring in the Chinese tech community, particularly among startups, that centers on what is known as "996.ICU." The name comes from the typical work schedule for Chinese programmers: 9 a.m. to 9 p.m., six days a week.7 Some startups are forcing their workers to abide by this schedule, either explicitly or by demanding certain KPIs in an unreasonable amount of time. Others are encouraging these schedules by appealing to long-held beliefs within the Chinese culture. For example, Alibaba founder Jack Ma has stated, "No company should or can force employees into working 996 . . . But young people need to understand that happiness comes from hard work. I don't defend 996, but I pay my respect to hard workers!"7 These sentiments are contrary to what the majority of polled Chinese workers shared during the Global Talent Trends 2019 study — that the foremost condition that would help them thrive in the workplace is the ability to manage their work-life balance. This also ranks ahead of their desire to have opportunities to learn new skills and technologies and have a fun work environment. Multinationals considering investment in Chinese startups or taking cues from unicorns may consider adopting many of the attributes of those successfully innovating while fostering a healthier work-life balance for Chinese workers — which can ultimately benefit the organization's bottom line, as well. Sources: 1. Jun, Zie. "Whole-of-society effort drives technology development in China," Global Times, 25 Jun. 2019, 2. Fintech News Hong Kong. "ZhongAn Technology Launches AI-Powered Data Platform for China's Insurance Industry," Fintech News, 14 Aug. 2018, 3. China Lending Corporation. "China Lending Forges Strategic Partnership with Rui Xin Insurance Technology to Develop Online Financial Services Platform," PR Newswire, 15 Jul. 2019, 4. Greeven, Mark J; Yip, George S. and Wei, Wei. "Understanding China's Next Wave of Innovation," MIT Sloan Management Review, 7 Feb. 2019, 5. Nheu, Christopher. "The Secret Behind How Chinese Startups are Winning," Startup Grind, 1 May 2018, 6. Zhu, Hengyuan and Euchner, Jim. "The Evolution of China's Innovation Capability," Research-Technology Management, 10 May 2018, 7. Liao, Rita. "China's startup ecosystem is hitting back at demand-working hours," TechCrunch, Apr. 2019,


small-tiles Nancy Mann Jackson | 30 Jan 2020

Blockchain technology is not just for high-tech industries; it's gradually becoming an important part of even the most traditional professions, including agriculture. For example, India's Ministry of Commerce and Industry recently announced a blockchain-based e-marketplace for coffee producers. The marketplace is helping bridge the gap between coffee growers and buyers, allowing farmers to drastically increase their income. This initiative reflects a global trend of merging technological advances with agriculture. Blockchain Is Boosting India's Coffee Producers   Coffee produced in India is a premium product, produced by farmers who grow their beans under shade, hand pick them and dry them in the sun. The coffee is sold at premium prices around the world, but the farmers receive only a small portion of the profits, because there are many layers of buying and selling between the grower and the final consumer. The new blockchain-based marketplace app for trading Indian coffee brings growers closer to their ultimate customers, helping them earn fair pay and provide reliable traceability that allows consumers to trace their coffee from bean to cup. For customers, the ability to track the journey of the product they are buying can build trust. From the business perspective, that traceability can result in faster and more accurate recalls, reducing risk of food poisoning. By using the online marketplace, growers no longer have to depend on intermediaries. They can interact directly with buyers and earn fair prices for their products. Exporters can also use the online marketplace to quickly find reliable suppliers and traceable coffee products to meet their needs. When the Indian Coffee Board, a division of the Ministry of Commerce and Industry, introduced the e-marketplace in March 2019, a group of about 20 coffee farmers, exporters, importers, roasters and retailers were already registered on the platform from India and abroad.1 From a user perspective, the platform is easy to use. Coffee farmers can log their product credentials, including their relevant certificates, growing location and elevation, details about the crop and other information. For each lot of coffee sold on the marketplace, the system creates a block. That block and its credentials are then stored on the blockchain throughout its journey and are unalterable, creating a record known as a blockchain ledger. A blockchain ledger is useful for all types of agricultural products because of its ability to record and update the status of crops — from planting and harvesting to storage and delivery. A secure, immutable ledger ensures that large agricultural operators never lose a load and that consumers can access the history and details of their food's background. Agricultural Uses of Blockchain Are Expanding Globally   India isn't the only place where the benefits of blockchain technology are having a positive impact on agriculture. France and Ethiopia have also instituted blockchain marketplaces for coffee, and similar marketplaces are operating or under development around the world for other crops and agricultural products. In China, for instance, e-commerce platform traces the production, selling and delivery process for beef raised in Inner Mongolia and purchased by customers in Beijing, Shanghai and Guangzhou. By scanning a QR code, a consumer or retailer can see the size and age of the cow, its diet, when it was slaughtered, when the meat was packaged and what the results of the food safety tests were. Another Chinese company uses ankle bracelets on chickens to record the details of each chicken's life using blockchain, providing assurance to consumers that the free-range chicken they're paying for is actually free-range.2 Analysts expect that the blockchain technology market for agriculture around the world will continue to escalate, growing 56.4% from 2018 to 2022.3 Blockchain marketplaces allow producers and buyers to view trade history, local prices and other information that allow them to negotiate prices with confidence. As food producers around the world continue adopting blockchain technology, they bring more efficiency to their supply chains, improving food safety and traceability, as well as profit margins and consumer trust. Clearly, blockchain can bring about positive change in a variety of ways, but adopting and implementing the technology is much easier said than done. In an industry like agriculture, blockchain will have to reshape a decades-old framework, and that won't happen overnight. It's up to leaders everywhere to understand the value of this technology and get their teams on board with implementing it to achieve that value — even if it means starting small. Sources: 1. "Coffee Board Activates Blockchain Based Marketplace in India." Press Information Bureau, 28 Mar. 2019, 2. Peters, Adele. "In China, You Can Track Your Chicken On–You Guessed It–The Blockchain." Fast Company, 12 Jan. 2018, 3. "Global Blockchain Technology Market in the Agriculture Sector 2018-2022." Global Banking & Finance Review, 26 Sep. 2018,


small-tiles Andre Maxnuk | 30 Jan 2020

The megacity will define economic growth in the coming years. Citing Monterrey and Guadalajara, Mexico, as examples, these emerging centers of business and commerce are positioned to grow quickly and possibly outpace traditional capitals of commerce. They also have the potential to learn from the mistakes of traditional big cities and engineer smart, long-term, sustainable growth. Urbanization is developing at such a rate that nearly half (47 percent) of GDP growth will come from 443 growth economy cities between 2010 and 2025, as Mercer's People First report notes. These cities are also on a trajectory to amass 1 billion new consumers and, between now and 2030, will significantly change the way people live and work. How Urbanization Changes Local Economies   While widespread adoption of the internet and interconnected technologies was predicted to enable people to live and work anywhere, it's actually had the opposite effect. Instead, more people have been drawn into cities for work. Innovative workers are seeking one another to collaborate in developing new industries in today's rapidly evolving global economy. They want an environment in which they can be more productive and more creative with like-minded peers. As all these bright minds flock to growing metropolitan areas, cities have become the crucible of collaboration. Take Guadalajara, for instance. The city's technology industry traces its roots back to the 1960s, when high-tech foreign companies looking for cheap labor moved manufacturing operations there. These companies included Kodak, Motorola, IBM, Hewlett-Packard and Siemens. Yet, when many of those operations moved to Asia in the early 2000s, the city still found a way to persevere as a hub for technology. As Andrew Selee from the Smithsonian Institution notes, "Guadalajara reinvented itself as a major center for research and development, programming, design and other high-skilled tech occupations, building on the foundation that had been laid years earlier."1 Guadalajara's highly trained engineers "inverted the model," designing components in Mexico and having them manufactured in Asia, as one engineer told Selee. Today, many Silicon Valley–based tech companies maintain research, development and programming facilities in Guadalajara, and the city — now known for its engineering talent and creativity — is home to a wide range of technology startups. How Cities Can Prepare and Respond   Rapid growth in jobs and economic opportunities is positive yet challenging for cities such as Guadalajara, also known as "Mexico's Silicon Valley." The city's population has grown to include more than 8 million people and is now the second biggest metropolitan area in Mexico, just behind Mexico City.2 The population is expected to expand even more (over 15%) in the next decade. It is also the third largest economy in Mexico, with a GDP of $81 billion.3 Comparatively, Monterrey has a population of 5 million and is the third largest metropolitan area in Mexico.2 Monterrey's population is also expected to increase over 16% in the next decade. Its GDP is valued at $123 billion — making it the highest GDP per capita city in Mexico and the second highest in Latin America.3 Both Guadalajara and Monterrey will continue to grow and expand, as will their workforces, so it will be vital to understand what today's and tomorrow's employees want. New residents don't just bring creativity and an interest in collaborating with other like-minded individuals; they also bring needs for healthcare, education, recreation, infrastructure and security. In order to keep bright individuals in the city, contributing to the growing economy, an emerging megacity must be able to provide the environment and services those individuals and their families want for a satisfying life. While business leaders often assume that a good salary will motivate people to move to a city and stay there, human and social factors are actually more important for the workers making those decisions. To attract and keep people, a city must create an environment for them to thrive across multiple dimensions, focusing on what matters most to them. Most cities, despite their rapid economic growth, are not doing a great job meeting the needs of the people who live there, which creates tension between what people value and what a city is able to deliver. Mercer found a 30+ point gap between workers' quality-of-life expectations and how a city is meeting them. To reverse that trend, city leaders must understand their importance for future economic growth and adopt a new outlook that includes these three components: 1.  Focus on people first. As technology continues to enable people to work smarter and make faster decisions, jobs will continue to change. Technology, automation and digitization will make work more efficient, but unique human capabilities will propel growing cities. If the people needed to operate and manage artificial intelligence don't want to live in a city, all the automation won't matter. Cities — as well as employers — must focus on the value of human qualities and skills and how to help those humans find satisfaction. 2.  Understand what people want. More than a good job and a good salary, people want a high quality of life. That includes the ability to feel safe and access good schools for their children, quality healthcare, recreation, clean air and water, and other lifestyle factors. Companies may be able to attract top employees, but cities must focus on providing the environment and lifestyle that will keep those employees. 3.  Prioritize partnerships. Most cities have big challenges to overcome to provide the quality of life that people want. No single entity can solve systemic problems, so public-private partnerships are crucial to address macro issues and gaps, such as in infrastructure, as well as safety and housing, and overcome challenges before they become exacerbated. Public-private partnerships are essential for cities, businesses and people to succeed. Increased urbanization and the blossom of new megacities will send waves throughout the global economy in the years to come. But to foster positive growth and innovation, successful megacities must acknowledge and act upon the wants and needs of those skilled workers who will call these cities home. Sources: 1. Selee, Andrew. "How Guadalajara Reinvented Itself as a Technology Hub," The Smithsonian Institution. 12 Jun. 2018, 2. "World Urbanization Prospects 2018," United Nations, 3. Berube, Alan; Trujillo, Jesus L.; Ran, Tao; Parilla, Joseph. "Global Metro Monitor report," Brookings, 22 Jan. 2015,

Editors' Picks


Pivot to Growth: How AI Is Democratizing the Future of Work
Gail Evans | 25 Jul 2019

The power of AI will shape the future of work and optimize productivity. As digital transformation continues to accelerate business operations, our work and personal schedules are becoming increasingly integrated. Never before have parents, professionals and entire communities of people been forced to harmonize such escalating demands on their work and private lives. Orchestrating the responsibilities of modern life can feel daunting. Raising healthy and well-adjusted children, supporting a struggling partner or friend, impressing your boss and coworkers, and not purchasing those chocolate chip cookies (who has time for dinner?) can overwhelm the human soul. Thankfully, AI platforms are not only changing how professionals organize information and interact with data, but how they navigate the challenges of everyday life. Introducing Warren   Warren, Mercer consulting's AI digital assistant, is a sophisticated AI platform designed to leverage real-time data with learned patterns to enhance workforce productivity. It works 24/7 to ensure your personal and professional obligations are well organized and your career trajectory is moving forward. It does this by contextualizing data from your past, present and future and streamlining your responsibilities and schedule in ways that encourage better decision making. In other words, Warren is your dedicated personal coach, confidant and teammate — the ultimate convergence of people and technology. Every day, people struggle to maximize the value of their time. Too often, our work is undermined by inferior data that results in poor choices, inefficient scheduling and time-consuming distractions. Many people lack the time or resources to adjust to inevitable changes in our pressing daily priorities. Warren is here to help people focus on what is most important, when it's most important. It's less about how tech informs us and more about building a hybrid existence of machines and people working together. You bring the human element to the relationship with your creativity, strategic thinking and empathy, and Warren augments your human capabilities by suggesting recommendations based on designated goals and targets. It then makes adjustments according to previous conversations with you. All professionals, not just those at the top of the hierarchy, deserve a personal assistant to help clear their headspace. This democratization of the workforce due to AI will revolutionize how ideas come to fruition and businesses grow. The days of compartmentalizing your personal and professional lives are gone. Warren allows you to prioritize and immediately address anything life throws at you: Your child's school principal expects you to answer the phone at 1 p.m. on a Tuesday, and your boss emails you at 8 p.m. on Thursday night anticipating a quick reply. No problem. Warren is here to help you thrive in a world that demands so much of your time, energy and sanity. Warren will take it from here: No, your child does not have a peanut allergy. Yes, you have briefed the team about the sales meeting and printed the glossy reports for each stakeholder. Done and done. Modern life is a fully integrated experience without boundaries. Welcome to the new normal. Work at the Speed of AI   Working at the speed of AI means never having to ask yourself if you left the stove on, the location of the room for your 9 a.m. meeting or the accuracy of the data in the graph illustrating last quarter's output numbers. Forget reminders taped to your computer, those awkward moments in conference rooms when your PowerPoint presentation won't load and having to memorize yet another password. Say goodbye to staring into your glass of red wine late at night and wondering if you're a good parent. You are because Warren reminded you not to schedule that important call with the Hong Kong office during your daughter's debut as the Cheshire Cat in her school's rendition of "Alice in Wonderland." Warren recognizes your human idiosyncrasies and fallibilities. It fact checks and performs quality control for each step of your busy day. Every aspect of your professional life will be optimized through AI technology, which consequently, will profoundly increase the quality and enjoyment of your personal life, too. By predicting and mitigating our own very human mistakes and lapses in judgement, AI can make the human experience more meaningful, rewarding and impactful. Just as email, instant messaging and in-person video calling has changed the way people communicate with others, Warren is changing the way people communicate with themselves, their work duties and their entire careers. An Era of Democratized AI   As businesses pivot to growth, people will increasingly have the freedom to think beyond the minutia of day-to-day obligations and dedicate that found time, brain space and capacity to keep looking and moving forward. In the workplace, Warren empowers change at every level of an organization, which will forever alter the dynamics of influence and flow of ideas. No longer will the big ideas and future-thinking changes come from the top down. From the CEO, the summer intern and the stately boardroom to the bustling mailroom, groundbreaking solutions and cutting-edge revelations will arise from everywhere. Through the democratization of AI, the people closest to the products, solutions and services will finally have the necessary time and capacity to think through improvements and invent the next best practice or idea. AI will inspire employees at every level to think smarter and faster, drive game-changing strategies and identify new ways to co-create and innovate. Warren and other AI technologies will enable employees — regardless of title, level or rank — to grow personally and professionally. The future of work, much like in the past, will be defined by access to information and opportunities, as well as the integration of technology and human potential. AI now presents businesses with a universe of unprecedented possibilities, and employers must do everything they can to empower their people to compete in the future and continue to provide value to the company. Warren is AI's version of a dedicated collaborator who barely sleeps, only deals with facts and accurate data, and will never steal your lunch from the refrigerator. Finally, Warren is a colleague for a new era of people, technology and the symbiotic workforce.


Navigating the New Era of Automation
André Maxnuk | 25 Jul 2019

Artificial intelligence (AI) and automation are global main-stage players in many industries, with seemingly limitless opportunities. You can have your food made by robots, or even let your car do the driving for you — but what's next?1 This upward trend has been far-reaching, disrupting the ways certain industries operate and shifting how employers hire. With no slowdown in sight, let's explore what's in store for businesses navigating this new era. Automating Jobs in Key Industries   Automating work isn't a one-size-fits-all approach. Certain industries, firms and jobs are more likely to be impacted than others. For instance, manufacturers have long used this approach and tend to seize automatable opportunities whenever possible. Take the South Korean Ministry of Trade, Industry and Energy for example, which has been investing money into the development of industrial automation for the past few years and shows no sign of stopping.2 This is just one country, but it represents the direction of the industry and process overall — the goal is to keep costs low while maintaining efficiency. The auto industry has seen similar gains within the manufacturing process, as well as in the production of self-driving vehicles. While there have been fits and starts with this tech, The Verge notes that it's being continuously refined and may soon change automobile production entirely.3 While these industries serve as golden examples of what AI and automation can do, others struggle with implementing key functions of this tech. Hospitality, food service and health care all exemplify this lag: These industries are heavily driven by labor, which makes automating operations tricky. While there are opportunities to embed technology to scale services, not every customer in these industries is ready to have their service automated, as aptly noted in a recent CNN news story.4 Measuring the Impact on Economies and Employment   The idea that artificial intelligence will eliminate jobs is a real fear for workers. It echoes concerns previously heightened in the U.S. in the 1960s regarding the bump in automated processes and unemployment, as MIT highlights.5 However, Lyndon B. Johnson said it best: "The basic fact is that technology eliminates jobs, not work." This distinction and how employers handle role changes is what will make or break many organizations shifting to automated operations. For developing economies, automating certain jobs could create better opportunities by eliminating dangerous roles or roles that rely too heavily on physical labor. While it may cause some degree of unemployment during the short-term transition, it's likely to open opportunities for other safer, more satisfying jobs for those affected individuals. It all comes down to a shift in workplace skills. Research shows that the future skills of the workforce should prioritize leadership and other soft skills to remain relevant and competitive. In a recent interview, the CEO of LinkedIn explained the most important skills of the future aren't coding or technical; they're soft skills, such as communication and collaboration, and the workforce will need to readily prioritize these as automated operations grow.6 Aging in an Automated World   The intersection of an aging workforce and increasing automation is a very real threat to today's workers. Those with 30 or 40 years of experience are more likely to be doing tasks that can be automated — a fact that is only more troubling when examined on a global scale. In certain areas, such as Vietnam and China, between 69% and 76% of tasks managed by older workers are at risk of becoming automated. For reference, in the U.S., jobs held by more senior workers are believed to be about 52% automatable. What's also potentially worrisome is that older populations of workers in areas, such as Japan, are growing rapidly, creating a spiraling effect. The good news is employers are responding by eliminating forced retirement and looking for additional options to alleviate this pressure. Automation is bringing an incredible amount of positive opportunities into the workplace, but it's important not to lose sight of those who may be negatively impacted. Whether that means prioritizing training in soft skills to ensure a more "future-proof" workforce or looking for more appropriate ways to leverage automated work in highly manual jobs and industries, the truth is this trend isn't going away. Competition and globalization will continue to push employers to find new, creative ways to automate processes, but those who seek visionary ways to reshape their workforce around this technology will have the real competitive edge. Sources: 1 Constine, Josh, "Taste test: Burger robot startup Creator opens first restaurant," Tech Crunch, June 21, 2018, 2 Demaitre, Eugene, "South Korea Spends $14.8M to Replace Chinese Robotics Components," Robotics Business Review, October 20, 2015, 3 Statt, Nick, "New documentary Autonomy makes the convincing case that self-driving cars will change everything," The Verge, March 13, 2019, 4 Andone, Dakin and Moshtaghian, Artemis, "A doctor in California appeared via video link to tell a patient he was going to die. The man's family is upset," CNN, March 10, 2019, 5 Autor, David H., "Why Are There Still So Many Jobs? The History and Future of Workplace Automation," MIT: Journal of Economic Perspectives, Vol. 29, Issue 3, summer 2015, 6 Umoh, Ruth, "The CEO of LinkedIn shares the No. 1 job skill American employees are lacking," CNBC, April 26, 2018,


Asia Must Navigate Pensions Crunch
David Anderson | 03 Apr 2019

Asian pension systems are facing major challenges. The region is experiencing seismic demographic changes, with rapidly aging populations and declining birthrates. But investment returns are relatively low due to geopolitical uncertainty and minimal interest rates. With the region having relatively few robust retirement systems, many Asian countries will struggle to provide adequate pensions. Governments need to take positive action now to reduce financial pressures and avoid intergenerational conflicts between the young and old. Life expectancy at birth in the region has increased by seven to 14 years in most countries during the last 40 years, according to the 2018 Melbourne Mercer Global Pension Index (MMGPI), which ranks pension systems round the world on adequacy, sustainability and integrity. This is an average of one additional year every four years. The increased life expectancy of a 65-year-old over the last 40 years has ranged from 1.7 years in Indonesia to 8.1 years in Singapore. Much of the rest of the world is facing similar challenges relating to aging populations, and nations are pursuing similar policy reforms. These include raising pension ages, encouraging people to work longer, increasing the funding levels set aside for retirement and reducing the amount of money people can take out of their pension accounts before they reach retirement age. The 2018 MMGPI findings pose the fundamental question: What reforms can Asian governments implement to improve the long-term outcomes of their retirement income systems? The natural starting place to create a world-class pension system is ensuring the right balance between adequacy and sustainability. A system providing generous benefits in the short-term is unlikely to be sustainable, while a system that's sustainable over many years usually provides modest benefits. Without changes to retirement ages and eligibility ages to access social security and private pensions, the pressure on retirement systems will increase, which could threaten the financial security provided to the elderly. Increased workforce participation by women and older workers can improve adequacy and sustainability. Japan, China and South Korea rank near the bottom of the Mercer index. Their pension systems do not represent a sustainable model to support the retirement of current and future generations. If left unchanged, these countries will suffer social conflicts, since pension benefits will not be distributed equally between generations. Japan, for instance, is taking baby steps to reform its pension system by gradually raising the mandatory retirement age of some 3.4 million civil servants to 65 from the current 60 years of age. Japanese retirees can now choose to start receiving their pensions at any point between the ages of 60 and 70, with greater monthly payments offered to those who start at age 65 or older. Having the world's highest life expectancy and lowest birthrate, Japan's population is expected to shrink. This challenging situation is already contributing to skill shortages, which will further impact Japan's shrinking tax revenue base. The Japanese government could improve its pension system by encouraging higher levels of household savings and continuing to increase the level of state pension coverage, since 49 percent of the working age population is not covered by private pension plans. Introducing a requirement that part of the retirement benefit must be taken as an income stream and not a lump sum will improve the overall sustainability of the social security system — as would reducing government debt as a percentage of gross domestic product, as this improves the likelihood that the current level of pension payments can be maintained. China faces different issues. China's unique pension system comprises various plans for urban and rural populations, as well as for rural migrants and public sector workers. The urban and rural systems have a pay-as-you-go basic pension consisting of a pooled account (from employer contributions or government expenditure) and funded individual accounts (from employee contributions). Supplementary plans are also provided by some employers, particularly in urban areas. The Chinese pension system could be improved by increasing the use of workers' contributions to pensions to enhance the overall retirement protection of workers and increasing minimum support for the poorest retirees. A requirement that part of the supplementary retirement benefit must be taken as an income stream should be introduced, as well. More investment options should be offered to pension holders to permit a greater exposure to growth assets, while pension plans should improve their communications with members. Hong Kong should consider introducing tax incentives to encourage voluntary member contributions, thus increasing retirement savings. Hong Kong should also require that part of the retirement benefit be taken as an income stream. Older workers should be retained in the labor market as life expectancies rise. South Korea suffers from one of the weakest pension systems for the poor when expressed as a percentage of the average wage at just six percent. Its system would benefit by improving the level of support provided to the poorest pensioners, introducing a requirement that part of the retirement benefit from private pension arrangements be taken as an income stream and increasing the overall level of contributions. Singapore's well-structured pension system is ranked top in the region and has seen improvements in sustainability. Its retirement system, the Central Provident Fund, provides flexibility to its members, who include all employed Singaporean residents and permanent residents. But more can be done. Barriers to establishing tax-approved group corporate retirement plans should be reduced, and the CPF should also be opened to temporary nonresident workers who comprise more than a third of the labor force. The age that CPF members can access their savings should be raised, as well. Since pension systems are an intergenerational issue, they require a long-term perspective. Pension systems, which are one of the largest institutional investors in any market, should increasingly recognize the importance of acting as good stewards of the capital entrusted to them, including managing risks, such as climate change. With Asia's aging populations staying productive well into their 70s and even 80s, it is critical to improve the provision of adequate and sustainable retirement income. Raising the retirement age, expanding the coverage of private pensions for workers and encouraging financial planning and early savings should be the focus of employers and policy makers. Article originally published in Nikkei Asian Review.