GEN Z'S ROLE IN SHAPING THE DIGITAL ECONOMY - MARCH 2021
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GEN Z’S ROLE IN SHAPING THE DIGITAL ECONOMY MARCH 2021
Gen Z’s role in shaping the digital economy
TABLE OF CONTENTS
Foreword2
Executive summary4
1. Introduction10
2. Who is Gen Z?12
2.1 Gen Z will mature into an engine of growth 14
2.2 Characteristics of Gen Z 14
3. Technology and the labour market18
3.1 The changing face of automation 19
3.2 Digital society and the labour market over
the past decade 21
4. Implications of COVID-19 for Gen Z24
4.1 The immediate economic impact of COVID-19 25
4.2 Recessions and young workers 26
4.3 The structural implications of COVID-19 26
5. How Augmented Reality is changing our future 32
5.1 AR’s emerging role as an engine for change 33
5.2 AR’s steep growth potential 34
5.3 Which skills will be key to thriving in the
AR-enabled workplace? 38
6. A blueprint for the future40
1
Gen Z’s role in shaping the digital economy
FOREWORD
We believe that this generation of young At Snap, we see a hugely activist generation
people will play a vital role in driving the post- who care deeply about the world they live in
pandemic recovery and digital economy and and the impact of their actions on others. A
find many reasons to be optimistic about their group who thrive on disruption, change and
future. fast-paced living; who don’t believe in one-
size-fits-all approaches on everything from
We know this runs contrary to popular gender identity to learning and careers. And,
opinion. It is abundantly clear the pandemic as we’re seeing around the world, they are also
has exacerbated many of the challenges this an increasingly positive force in our democratic
generation faces. Their education has been systems; it was youth-led movements which
disrupted, university courses have been drove mass action on the climate crisis and
postponed and they’ve had to struggle through which, last summer, held corporations and
disjointed, remote learning. There is a shrinking institutions to account on issues such as
pool of entry-level jobs and uncertainty about diversity, representation and inequality.
what the future of work will look like. They are
missing out on interaction with other young For this report we have partnered with Oxford
people for months at a time and there are Economics, to reach behind the negative
concerns about the impact on their mental headlines and build an evidence-based view
health and wellbeing. of what the future looks like for young people
today. We have included insights from policy
All of this has led to the commonly held view experts across education, industry, the labour
that the future for ‘Generation COVID’ is likely market, technology & the future of work. We
to be much more challenging than for previous have analysed a range of data sources and
generations. carried out our own field research. From this, a
new picture has emerged, which shows clearly
While for now the pandemic has arguably how the unique qualities Gen Z possess will
disrupted this group more than any other, we equip them well for the seismic changes we’re
are inspired by the world that they are trying all living through.
to create and our experience at Snap is at odds
with the prevailing narrative. All the time we see By recognising and understanding these
the ingenuity and huge potential of Generation trends, we hope to raise awareness both at
Z – from our youngest colleagues to people who Snap and across the wider tech industry about
use the platform every day – their approach to Gen Z’s unique capabilities and how we can
challenges and problem-solving, their creativity, capitalise on the creativity and adaptability
adaptability and drive to use technology for of young people, in particular, to drive the
good, is an inspiration. recovery and the digital economy in the future.
2
Gen Z’s role in shaping the digital economy
To get there, our research indicates that I speak for all of Snap when I say we are hugely
policymakers must, in the short term, prioritise excited to see where they take us.
plugging the educational attainment gap, either
through small group learning or programmes Claire Valoti,
specifically targeting disadvantaged children. VP International, Snap Inc.
More broadly, we’ll highlight in the report, the
need to retool our education systems to be
fit for the Fourth Industrial Revolution, while
supporting people to adapt to the permanent
and exciting shifts in our economy.
Crucially, as our work shows, far from being a
generation lost to COVID-19, the very nature of
the changes brought about by the pandemic
neatly fit into Gen Z’s existing aptitudes.
The labour market is evolving towards jobs
that demand more digital skills, not fewer.
Meanwhile burgeoning technologies like
Augmented Reality – in greater demand than
ever due to social restrictions – are set to
become more ingrained into our daily lives.
These are trends Generation Z are poised
to lead on. And, combined with their unique
attributes, the digital acceleration brought
about by the pandemic, we might just see them
taking the lead sooner than any of us would
have thought possible.
3
Gen Z’s role in shaping the digital economy
EXECUTIVE SUMMARY
We have set out to understand how the evolution of the labour market and the
changes caused by the COVID-19 pandemic can be expected to shape future
demand for aptitudes and skills and what this means for Gen Z—the latest fully
fledged generational cohort encompassing those born between the mid-1990s
and 2010. Recent estimates suggest that Gen Z is now the world’s largest
cohort, accounting for roughly a third of the global population.1
We have collected evidence and analysed trends across six markets: Australia,
France, Germany, the Netherlands, the United Kingdom (UK), and the United
States (US). The stories told and the conclusions drawn are, therefore, most
relevant to these countries but are broadly applicable across the OECD.
WHO IS GEN Z?
Particularly in more advanced economies, Gen These dynamics will see Gen Z become a
Zers are currently on the periphery of the labour significantly more important independent
market. Over the next 10 years, they will become source of consumer spending. Our projections
an engine of economic growth. Our modelling indicate that they will support over $3.0 trillion of
projects that the number in work across markets spending in 2030 across our six focus markets,
covered will roughly treble to 87 million by 2030. an approximate six-fold increase on 2019.
Moreover, the combination of more experience
and a switch to more full-time working patterns Much has been made of the fact that Gen Z will
will see this group command higher salaries— be the first wholly digitally native generation.
our forecasts suggest a 150% increase in average Our survey research indicates that, compared
earnings by 2030 in real terms. to older generations, this is associated with a
greater familiarity with, and aptitude for using,
digital technology in everyday settings.
4 1
https://www.bloomberg.com/news/articles/2018-08-20/gen-z-to-outnumber-millennials-within-a-year-demographic-trends
Gen Z’s role in shaping the digital economy
GEN Z TO PLAY A
SIGNIFICANT ROLE IN
THE ECONOMY BY 2030*
By 2030, Gen Z will Their incomes will They will become
make up almost a balloon over the the engine of
third of the workforce next 10 years consumer spending
Gen Z’s share of total Gen Z disposable incomes will Gen Z’s consumer spending
employment will rise rapidly, increase almost seven-fold, will increase more than
from 10% in 2019 to from around $460 billion in six-fold, from $467 billion
30% in 2030. 2019 to $3.2 trillion in 2030. in 2019 to $3.0 trillion in
2030, equivalent to 11% of
total household spending.
*Figures are combined totals for all six markets: Australia, France, Germany, the Netherlands, UK, and US
Collating information from a wide range • Creativity: past surveys have persistently
of knowledge-based questions, we have found that Gen Z are significantly more
developed a digital competence index measure. likely to describe themselves as creative and
Pooling responses across our survey, Gen Z’s undertake creative activities compared to
average competence score was 2.5% higher elder cohorts.2 Our research shines light on the
than Millennials and over 8% higher than Gen X. digital element of this, with Gen Z significantly
more likely to know how to create and design
Beyond digital aptitude, our research has various types of digital content.
highlighted three Gen Z traits that we think are
likely to serve them well in the future workplace: • Curiosity: whether a product of their youth
or a genuine cohort effect, Gen Zers were
• Agility: in interviews with technology significantly more likely to report that they
entrepreneurs, a recurring theme was that were engaging in various forms of informal
Gen Z workers tend to be adept at absorbing learning.
information and reacting to new challenges
as they occur.
2
https://theharrispoll.com/generation-create-gen-z-might-be-the-most-creative-generation-yet-poll-says/ 5
Gen Z’s role in shaping the digital economy
TECHNOLOGY AND THE LABOUR MARKET STRUCTURAL IMPLICATIONS OF COVID-19
Throughout modern history, technology and The coronavirus pandemic has already had
the labour market have been intertwined. One a very visible impact on the labour market,
principal channel through which this has occurred pushing millions into unemployment or
is automation—the process through which temporary inactivity. However, longer-term, our
machines and new technology take on workplace research has identified the following structural
tasks previously performed by humans. trends that will form an important part of the
labour market legacy of COVID-19:
Previous research has demonstrated that the next
wave of automation, led by advances in artificial • An educational attainment gap: in many
advanced economies, the pandemic has
intelligence (AI) and data analytics, will heighten
forced a temporary shift to online learning.
the premium on advanced cognitive skills such
This change has been particularly disruptive
as creativity and critical thinking. Whereas the
for children from disadvantaged households
previous wave of digital automation primarily
who lack access to the requisite digital
affected tasks that required routine manual and
technology, with early evidence suggesting
cognitive skills, AI has the potential to be much
that it has led to lower attainment levels.
more pervasive, affecting, if not displacing, the
role of many high-skilled occupations.3 The • A digital accelerant: the imposition of social
upshot is that being able to challenge orthodoxy distancing has heightened the importance
and develop original solutions are traits which of digital technology. This change has
will be increasingly valued by firms. By extension, been ubiquitous—touching on the way we
the importance of lifelong learning is set to rise communicate, shop, work, exercise, learn,
with workers required to adapt to more rapidly and entertain ourselves.
evolving demands.
• A spur to automation: it is said that necessity
is the mother of invention, and this is
Beyond automation, digital technology is
certainly the case with automation. Past
a major driver of skills due to its pervasive
research has demonstrated that recession
influence on so many aspects of how we live—
periods can account for a large majority of
entertainment, travel, communication, shopping
this activity, so COVID-19 is likely to trigger a
etc. A prime example in the past decade was
new wave of automation.
social media. As membership of social platforms
grew exponentially, the importance of this • A sectoral disrupter: more so than previous
medium for firms to engage with and influence recessions, COVID-19 will disrupt previous
their customers rose accordingly. Moreover, sectoral patterns of production. Across
this trend had spillover consequences with the markets studied, 2020 saw greater variation
associated proliferation of data contributing to in sectoral performance compared to the
the wider need for data analytics skills within previous recession.
organisations and the increased need for
infrastructure which can securely house this
information. These trends were all borne out
by our analysis of jobs postings data covering
Australia, the UK, and the US.
This example demonstrates that the technological
changes which might drive digital skills demand
over the next decade will be those which will
fundamentally change our everyday lives, but
which may be relatively nascent today.
3
Marguerita and Saint-Martin, Anne Lane, “The Impact of Artificial Intelligence on the Labour Market: what do we know so far?”
6 (OECD Social, Employment and Migration Working Paper, No. 256, OECD, January 2021), 61.
Gen Z’s role in shaping the digital economy
PUTTING THIS ALL TOGETHER • Widespread business utility: as we
demonstrate in this report, AR’s applications
The forces unleashed by the latest wave extend well beyond e-commerce with
of digital technology, and accelerated by companies, from agriculture to education,
COVID-19, will be highly disruptive in the already deriving utility from the technology
workplace. These changes will place a across multiple business functions.
higher premium on technological know-how
and cognitive skills such as creativity and • 5G-enhanced: the rollout of the next
generation of mobile communication
critical thinking. Workers needing to switch
technology will substantially improve 5G
careers and those whose responsibilities are
utility, facilitating richer and more immersive
fundamentally altered by AI will need to adapt,
experiences on the go.
upgrading and potentially learning new skills.
As shown, such structural trends play to the • Low adoption barriers: with many
relative attributes of Gen Z: agility; creativity; applications available by a Web Browser
curiosity; and digital competence. or smartphone App, consumers have near-
universal access to AR experiences and, in
contrast to VR, need not invest in additional
AUGMENTED REALITY: A TECHNOLOGY equipment.
THAT WILL EXEMPLIFY THIS STORY
• Transforming marketing strategy: AR offers
a unique platform to engage with customers,
Augmented Reality (AR) technology has the
in a style that resonates and helps to build an
potential to symbolise this process. It allows
emotional connection. Taken together with
digital content and information to be overlaid
the above drivers, this will be increasingly
on the physical world. Although its initial
achieved at scale, a potent mix for marketing
applications predominantly lay in the world
and brand building.
of entertainment, it has increasingly become
a tool for change among more innovative
Moreover, as the leading users of open source
businesses, a trend that has been accelerated
AR platforms such as Lens Studio, this cohort
by the pandemic.
have a much stronger natural affinity with this
technology, a point confirmed by our analysis.
Market research studies highlight the enormous
Gen Z’s average AR competence score was 17%
potential of AR, with the market projected
higher than Millennials and 34% higher than
to expand four-fold by 2023. Longer-term, a
Gen X.
combination of enablers seem can be expected
to underpin a continued steep growth
trajectory for which would see AR become a
mainstream aspect of the workplace:
• Revolutionising retail: one key driver for
the pick-up in AR adoption over the past 12
months has been consumer brands leveraging
the technology to replicate parts of the in-
store experience. AR’s expansion into this
burgeoning market can be an important pillar
of growth for the next decade.
7
Gen Z’s role in shaping the digital economy
A BLUEPRINT FOR THE FUTURE
Our research has struck a relatively optimistic • Maximising the potential of digital
tone. Clearly though the pandemic, together technology to meet the re-skilling challenge:
with the next wave of technological change, will despite being the root cause of the problem,
create major challenges for society. Supported digital technology can be fundamental to the
by discussions with a range of experts, we solution. AR, massive open online courses
have generated a call to action centred around (MOOCs), and crowd-based tools can
the five themes set out below. More specific become important contributors to re-skilling.
recommendations around each theme can be
found in section six of this document. • Achieving a mindset shift around lifelong
learning: according to survey data, a majority
• Plugging the educational attainment gap: of adults across the OECD do not want to
the disruption to Gen Z’s formal education engage in further training. There is no silver
represents COVID-19’s biggest structural bullet to achieving a substantial shift in this
threat to their this cohort’s prosperity— mindset but governments can assist and
action to correct this associated attainment section six identifies a set of principles which
gap is urgently required. should inform policy design.
• Supporting economic recovery whilst not • Refitting education to the new Industrial
impeding structural adjustment: policymakers age: more broadly, without reform, the formal
face a delicate balancing act in the near-term education system will become increasingly
in trying to minimise labour market scarring. out-of-step with the workplace. Structural
Timing the transition from employment- reform that promotes problem-based learning,
protection to hiring incentive and re-skilling- student agency and reduces the emphasis on
based programmes will be crucial. standardised testing is required.
8Gen Z’s role in shaping the digital economy
9Gen Z’s role in shaping the digital economy
1. INTRODUCTION
The outbreak of the roles in an environment where To create a more rounded
coronavirus pandemic in the economy is operating picture, this study has
early 2020, and the deep well below full capacity. The investigated how these
global recession triggered fear is that they will suffer trends will affect demand for
by measures to contain its from what economists call skills and how they match
spread, have had a hugely “scarring”—persistent negative up to the relative attributes
detrimental impact on society. impacts on their potential of Gen Z. This has involved
The downturn has been earnings power and future a multi-pronged research
notable for its unevenness, employment prospects.4 programme (described below)
landing disproportionately on focused around six markets:
industries which rely on social However, all this discussion Australia, France, Germany,
contact such as hospitality, live neglects the role of COVID-19 the Netherlands, the United
entertainment, and physical as a disruptor and digital Kingdom, and the United
non-essential retail. accelerant. When evaluating States. For the purpose of this
the long-term implications of report, we have considered
This has led to concerns that any event for a group in the them as a collective. At times,
the economic impact will land labour market, understanding we refer to the aggregate
heavily on younger workers, such structural effects is evidence pooled across these
who were more reliant on key. Moreover, judging by six countries as ‘global’ but
these sectors for jobs coming past recessions, 2020 is also would, of course, acknowledge
into the crisis. Moreover, it likely to bring forward the that the findings should only
will certainly be more difficult latest wave of automation be generalised to other high-
for new graduates to secure technologies. income economies.
HOW HAVE WE DONE THIS?
The question we have sought to address is challenging and complex. As such, we have called
upon evidence from a wide variety of sources as part of work, including:
• Job postings data purchased from Burning • Desk-based research including a literature
Glass (BG) covering the period between review and the collection of official data to
2014 and 2019. help support and validate our propositions
which lie outside the scope of the above.
• A consumer survey of individuals across
all six markets in scope. Quota sampling • Discussions with experts from various
was used to ensure a broadly even mix fields including economics, education,
between different generations, defined skills, and industrial policy. These have
as those aged 16 to 24 (Gen Z), 25 to 39 informed our calls to action.
(Millennials), and 40 to 55 (Gen X).
The objective of this report is to document the
• Interviews with 13 AR experts working
major findings and draw out the most salient
across the markets in our study.
implications of our research. As such, we have
• Web scraping techniques to help collect only provided light methodological detail
information on the current size and across the report. However, a comprehensive
economic contribution of the AR sector methodology report can also be found online
globally. for interested readers.
4
Monica, Joyce, Robert and Norris Keeiller, Agnes Costa Dias, “COVID-19 and the career prospects of young people” (Briefing Note,
10 Institute for Fiscal Studies, July 2020).Gen Z’s role in shaping the digital economy
11Gen Z’s role in shaping the digital economy
2. WHO IS GEN Z?
OVERVIEW
• Gen Z is the first wholly digitally native • Gen Z display a higher level of digital
generational cohort. Reflecting their youth competence compared to older cohorts
most of this cohort are on the periphery of who currently dominate the workforce,
the labour market but this is set to change. stemming from being more accomplished
in the areas of content creation,
• Our projections across the six markets
communication, and understanding of
imply that those in-work will triple to
lenses and filters.
almost 90 million by 2030. As they gain
more experience, knowledge, and skills • Gen Z’s attributes seem ideally tailored
and transition increasingly to full-time to a post-pandemic work environment
work, the average earnings of this group that will be more digitally charged and
will grow by 250% in real terms. dynamic. Their agility, curiosity, and
creativity are traits that seem set to be in
• This will drive a massive uplift in their
demand in future workplace.
independent disposable income which
we expect to hit $3.2 trillion by 2030—
equivalent to 11% of these economies’ total.
Gen Z is generally described Gen Z is the first wholly is set to become a driving
as those born between the digitally native generation— force of the economy and
mid-1990s and 2010. Recent those brought up from birth describes the attitudes and
estimates have suggested to use digital technologies and characteristics which set
that they are now the largest social platforms as the primary them apart from preceding
generational cohort on earth, means of communication, generations.
accounting for almost one- entertainment, and
third of the global population consumption. They have
in 2019. Across the six markets increasingly attracted the
covered in our study, Gen attention of researchers, as
Z’s population share is much they start to mature into
lower, but they still numbered the workforce. This chapter
some 106 million in 2019. explores how this cohort
12Gen Z’s role in shaping the digital economy
GEN Z WILL MATURE INTO ENGINE OF GROWTH
FUTURE POWERHOUSE OF THE GLOBAL WORKFORCE
Gen Z’s share of total employment will nearly treble over the next ten years.
2019
2030
28 million / 10% 87 million / 30%
35.3% 32.0% 31.1% 29.1% 26.0% 24.0%
14.8% 12.8% 10.6% 9.8% 7.1% 8.0%
United
Netherlands Australia United States France Germany
Kingdom
KEY DRIVER OF INCOME GROWTH
Gen Z incomes will increase Their consumer spending will increase more than six-fold,
almost seven-fold from $467 billion in 2019 to $3.0 trillion in 2030.
by 2030.
This is equivalent to 11% of total household spending.
HIGH LEVELS OF DIGITAL COMPETENCE
16–24 25–39 40–55
Gen Z show higher levels
of digital competence
than their elders.
(index, global average = 100) 104.1 101.6 96.1
1996 2010
13Gen Z’s role in shaping the digital economy
2.1 GEN Z WILL MATURE INTO AN ENGINE OF GROWTH
×3 As the majority of our Gen
Z cohort join the workforce,
our forecasts imply that
Putting these trends in
employment and earnings
together, the forecasts show
Gen Z employment
is forecast to more the number of Gen Z in that Gen Z’s income from work
than treble by employment will more than will balloon from $440 billion
2030, with this treble to 87 million people by to more than $3.5 trillion by
group accounting 2030 in the six markets This 2030. To put this in context,
for 30% of total means that Gen Z are forecast their share of economy-wide
jobs compared to to account for 30% of total earnings will rise from less
just 10% today. employment in 2030, up from than 3% in 2019 to 20% in
just over 10% in 2019. 2030. Even after paying tax
on their incomes, Gen Z will
With greater experience, have a disposable income of
knowledge and skills will also $3.2 trillion in 2030, seven
come greater earnings power. times the $460 billion in 2019.
Indeed, workers, on average, Accounting for the likely
enjoy faster wage growth savings that Gen Z workers
during the early years of their will make, their total consumer
career. Based on past trends spending will be $3.0 trillion—
and projected macroeconomic equivalent to 11% of total
changes, we expect the household spending across
average earnings of Gen Z to the six economies.
increase by almost 250% by
2030 to over $42,000.
2.2 CHARACTERISTICS OF GEN Z
$3.0 trillion Our survey of members of the
three generations either in or
entering the labour market
collect information on the
respondent’s knowledge
and understanding of digital
Forecast independent
identifies some important technology across six broad
spending power of
differences in attitudes and themes. Answers to each
Gen Z in 2030
aptitudes. These are examined question have been normalised
compared to
in more depth below. and aggregated into an
$460 billion
index where a score of 100
in 2019.
Gen Z possess higher levels of corresponds to the average
digital competence of all respondents across
the seven markets. Based on
We used the results of our this measure, Gen Z’s overall
survey to create a measure level of digital competence
of digital competence based is higher, on average, than
on respondents’ evaluations both Gen X and Millennials, as
of their own knowledge and shown in Fig. 1.
understanding of everyday
digital tasks. A wide range
of questions were used to
14Gen Z’s role in shaping the digital economy
Fig. 1: Digital competence index by age cohort: global sample Digging deeper, the
Index, global average = 100 outperformance of Gen Z
was driven by three main
106
areas: AR, communication and
content creation. On the other
104
104.1 hand, older respondents in
our survey tended to report
102 that they had more advanced
101.6 knowledge and understanding
100 of topics related to information
security. Generational
98 differences were much more
modest across the other two
96 components of our digital
96.1 index: buying and selling online
94 (e-commerce) and gathering
and verifying information.
92
16 to 24 25 to 39 40 to 59 This fits with earlier research
Source: YouGov data, Oxford Economics analysis exercises such as work carried
out by Dell Technologies in
2018. Its survey of 12,000 Gen Z
Fig. 2: Digital competence score by age cohort: global sample secondary and post-secondary
students in 17 countries found
Index, global average = 100
that almost all had used
AR competence technology as part of their
120 formal education while 80%
115 wanted to work with cutting-
110 edge technology in their future
105 careers. Seventy-three per cent
Security 100 Communication rated their technology literacy
as good or excellent and 68%
95
said they had above-average
90
coding skills.5
85
80
Gathering Content creation
and verifying and distribution
information
E-commerce
16 to 24 25 to 39 40 to 59
Source: YouGov data, Oxford Economics analysis
5
Dell Technologies. Gen Z: The future has arrived. https://www.delltechnologies.com/en-us/perspectives/gen-z.htm?linkId=58995076 15Gen Z’s role in shaping the digital economy
Gen Z are creative Various studies indicate that For example, Tess Inglis and
Gen Z consider themselves Antoine Vu at Paris-based
Creativity is the key driving more creative than other Atomic Digital Design say
factor behind Gen Z’s digital generations. A new study by Gen Z express themselves
strengths. Online platforms JWT Intelligence and Snap Inc. differently than older
give Gen Z an outlet for their finds that half (51%) of Gen generations, tend to be more
creativity, and Gen Z have Z believe their generation is agile, and are much more
in turn adapted well to the more creative than previous open to change. Projects can
technology. Using an arsenal generations. A more recent sometimes change, and the
of digital tools such as AR study by Cassandra research work done needs to change
lenses, filters, emojis, face on behalf of Snap Inc. finds to accommodate this. They
swaps, and short videos, Gen that 76% of global Gen Z say say it is generally the younger
Z not only express themselves they are creative, significantly generations who are more able
and communicate with more than older generations. to accept this change while
others, but also use these those from older cohorts may
tools and platforms creatively Further, Gen Z’s digital take change more personally
for advocacy, art, and creativity has a counterpart in and find it harder.6
entrepreneurship. the analogue world too: 77%
of Gen Z in the JWT study Mike Khouri, managing
indicated that they spend director of Tactical, a full-
Gen Z express themselves free time offline drawing, service agency based in Dubai,
differently to older generations, journaling, or playing an says Gen Z are born into
tend to be agile, and are much instrument. the culture of digital media,
more open to change. Projects and are native users of AR
can sometimes change, and the Gen Z are agile meaning they are open to
work done needs to change to innovation. He adds that Gen
accommodate this. Moving beyond our survey, our Z will be some of the quickest
case study interviews, focused to learn from the current
on the AR sector, have also pandemic and their behaviours
provided us with an opportunity will adapt accordingly.7 Berlin-
to understand more about the based digital artist Aaron
distinguishing generational Jablonski, who uses AR and
characteristics of Gen Z. face tracking technology in his
daily work, agrees Gen Z are
The easy-to-use infrastructure the first generation to grow up
Gen Z are good at picking up that AR platforms provide immersed in social networks.
new software and technology means companies can look He says they are constantly
as they have grown up around for staff with soft skills as well surrounded by information
it. Gen Z also understand how as those with formal training. which seems to have
to build concepts for other Many entrepreneurs said that influenced how they operate in
members of Gen Z which makes this favoured Gen Z who had the workplace.8
them very useful. picked up a range of skills at
school and through friends. Although the main decision
makers at Hamburg-based
immersive agency Headraft
are Gen X, the team members
from Gen Z play a critical
role in terms of creative work
6
https://atomicdigital.design/
7
https://www.wearetactical.com/
16 8
https://exitsimulation.com/Gen Z’s role in shaping the digital economy
with AR video effects, says Gen Z are eager to maximise the opportunities afforded by
founder Julian Weiss. They can digital learning tools
absorb lots of information fast
which is important given the Our survey shows that When it comes to informal
volume of data available. He members of Gen Z are much learning rather than organised
adds younger generations are more likely to embrace digital education, as Fig. 3 shows,
more in touch with what other technology for both formal Gen Z were more likely to
people in their demographic learning and more personal take part in a wide range of
want, which makes them self-education. Unsurprisingly, informal online lessons or to
able to adapt their ideas to the number of Gen Z who took find information using digital
suit people of their own age.9 part in formal online classes technology. Almost one in five
David Loughnan at Australia’s was much greater than Gen participated in an online class
immersive technology creative X or Millennials, as the former that they were taking just for
agency Unbnd, says Gen were more likely to be in full their personal edification. They
Z have been exposed to time education. More than were also more likely to use an
smartphones and software half had undertaken distance online chat forum to help them
their entire lives and have learning compared with solve a problem and to watch
an instinctive understanding around a third of the other two a lecture online.
of technology. They have a cohorts. While more than 60%
better understanding of how of those were taking part in
to design mobile products secondary or undergraduate
and services for their own education, 15% were doing
demographic.10 postgraduate education
online while 13% were taking
professional qualifications.
Fig. 3: Participation in online learning by age cohort: global sample
Share of respondents by age
45%
16 to 24 25 to 39 40 to 59
40%
35%
30%
25%
20%
15%
10%
5%
0%
Participated in an Participated in an Used an online Watched an online Watched a lecture
online class that online class that chat forum to help video to help you online to learn
you’re taking as you’re taking just you gure out complete an about a new topic
part of a formal for fun a problem everyday task
qualification
Source: YouGov data, Oxford Economics analysis
9
https://www.headraft.com/
10
https://unbnd.com.au/ 17Gen Z’s role in shaping the digital economy
3. T
ECHNOLOGY AND THE
LABOUR MARKET
OVERVIEW
• Throughout modern history technological postings data covering Australia, the
advances have major structural effects United States, and the UK over the past
on skills demand through the process of five years bears this out.
automation.
• ‘Social media’, ‘Cloud solutions’ and
• The next wave of automation is set to various skill clusters related to data
heighten the premium on advanced analysis have been among the most
cognitive skills such as creativity and important contributors to the growth in
critical thinking. demand for digital skills during this period.
• By extension, the importance of lifelong • This suggests that the technological
learning is set to rise with workers changes which might drive digital demand
required to adapt to more rapidly evolving in the labour market over the next
demands. decade may be those with the potential
to transcend everyday life, but which are
• Over the past decade, the growth of social
relatively nascent today.
platforms, and the associated proliferation
of data, have had substantial spillover
effects for demand for digital skills. Jobs
Throughout modern the replacement of certain As a result, firms continually
history, the labour market human tasks by machines. adapt the way that they
and technological change These ‘direct’ effects are, deliver products and services
have been inextricably of course, highly influential. to their customers with
linked. More often this Demand for skills, however, knock-on effects for what
relationship is framed within is also sensitive to the they require from their staff.
the context of the world of ‘indirect’ channels through
work. Notably, technology which technological progress
supports ‘automation’— transforms how we live.
18Gen Z’s role in shaping the digital economy
Fig. 4: How technology influences the way we work
DIRECT EFFECTS
Shifting demand for skills
in the workforce
INDIRECT
Technology EFFECTS
and automation What we buy and how we live
3.1 THE CHANGING FACE OF AUTOMATION
Digital technology has already Fig. 5: Changes in demand for task type in the US: 1960 - 2009
driven major changes. As Index, 1960 = 50
computers in the workplace
70
have proliferated during the
‘ICT revolution’, firms found 65
that they no longer needed
workers to perform a range of 60
repetitive tasks. This led to a
structural decline in demand 55
for more routine jobs and an
associated swing in favour 50
of roles which require more
45
advanced analytical and
interpersonal skills.
40
The rate of change has 35
slowed recently. The past
decade, however, has seen 30
significant advances in the 1960 1970 1980 1990 2000 2009
fields of artificial intelligence
Non-routine analytical Non-routine interpersonal
(AI), additive manufacturing,
and robotics which seem set Routine cognitive Routine manual
to unleash a further surge Non-routine manual
in automation. Indeed, one
prominent study estimated Source: Autor and Price (2013)
that almost half of all US jobs
might be at “high risk” over
the next two decades.11
11
C and Osborne, M Frey, “The Future of Employment: How Susceptible are Jobs to Computerisation?” (Oxford Martin School
Working Paper, 2013). 19Gen Z’s role in shaping the digital economy
Together with other By extension, the importance
megatrends such as of lifelong learning is also set
population ageing, this to rise, with workers required
suggests that the next to adapt to more rapidly
decade is set to be marked evolving tasks.13 In this sense,
by a further decisive shift digital technology will also be
towards demand for more a vital complement. Thanks
advanced cognitive, social, and to the Internet, we have never
technological skills (Fig. 6). had such a vast array of
This view was underscored information and learning tools
by the OECD in their Skills for at our fingertips. Being able
2030 report which highlighted to maximise the opportunities
the integral role of creativity afforded by this resource will
and critical thinking to future be vital for individuals in order
work. Being able to challenge to thrive in the increasingly
orthodoxy and develop dynamic workplace of the
original solutions are traits 2020s.
which will be increasingly
valued by firms.12
Fig. 6: Projected change in demand for skills: 2030 vs 201614
USA Western Europe
-11%
Physical and manual skills
-16%
-14%
Basic cognitive skills
-17%
9%
Higher cognitive skills
7%
26%
Social and emotional skills
22%
60%
Technological skills
52%
-20% -10% 0% 10% 20% 30% 40% 50% 60%
% change in hours worked, 2030 vs 2016
Source: McKinsey Global Institute
12
T and Frey, C Berger, “Future Shocks and Shifts: Challenges for the Global Workforce and Skills Development” (OECD report, 2015).
13
Organisation for Economic Cooperation and Development, “OECD Future of Education and Skills 2030” (Concept note, 2018).
20 14
It is important to note that these changes will not solely be driven by advanced digital technology. For example, an important
driver for the increase demand for social and emotional skills is the increased need for caring as a result of ageing populations.Gen Z’s role in shaping the digital economy
3.2 DIGITAL SOCIETY AND THE LABOUR MARKET OVER THE PAST DECADE
Over the past decade, the A related knock-on effect of And, in turn, as the commercial
way we connect has been this growth, but more broadly importance of processing
revolutionised by the explosive the rise of the information and understanding data has
growth of social platforms. society, has been the steadily risen, the need for
The volume of active accounts proliferation of data (Fig. 7). technological infrastructure
grew by around 1,500% The rate of increase shows which can support the
between 2008 and 2018 no signs of abating with the associated increased
with increasingly diverse volume of data estimated to demand on computing
offerings designed to appeal be doubling every two years. power and data storage has
more directly with specific The commercial consequences become paramount. The
demographic groups. of this development have been key organisational change
enormous, with firms able to that has underpinned this
For businesses, this trend realise value by offering more shift, particularly for smaller
has been hugely important. targeted marketing services. In businesses, has been the
These platforms provide a parallel, firms have also become widespread adoption of cloud
means for firms to directly increasingly aware of the value computing technology.
engage with and influence that can be brought to their
customers. Understanding own organisations through the These trends are borne out by
how to leverage social analysis of internal data. our analysis of job postings
platforms to market, network, data.15 Overleaf, word clouds
and recruit has become an describe the trends in the
increasingly important driver volume of job postings in
of corporate success. various markets within scope
with terms grouped by skill
Fig. 7: Social media accounts and global volume of data: clusters (Fig. 8).
2010 - 2018
Monthly Zetabytes This analysis shows that social
14,000 35 media-related terms were the
Social media users Data volume largest absolute contributor
(left-hand scale) (right-hand scale) to the increase in the demand
12,000 30 for digital skills between 2014
and 2019 in Australia and the
10,000 25 UK, and the sixth largest in
the United States. Similarly,
the rising importance of data
8,000 20
is captured by a plethora
of related skill clusters such
6,000 15 as ‘machine learning’, ‘data
science’, and ‘data analysis’,
4,000 10
whilst ‘Cloud solutions’
was one of the top five
contributors to growth across
2,000 5 all markets.
0 0
2010 2011 2013 2014 2015 2016 2017 2018
Source: Our World in Data, Oxford Economics
As noted, our dataset contained information on job postings across all six markets in scope. However, the data for Australia, the US,
15
and the UK offered a more comprehensive view of labour market trends over a sustained period: 2014 to 2019. 21Gen Z’s role in shaping the digital economy Fig. 8: Contribution to growth in digital job postings by skill cluster (Australia, UK, and United States in ascending order) between 2014 and 2019 22
Gen Z’s role in shaping the digital economy
23Gen Z’s role in shaping the digital economy
4. I MPLICATIONS OF COVID-19
FOR GEN Z
OVERVIEW
• The economic impact of COVID-19 has • In contrast to the Global Financial Crisis
been devastating, triggering the deepest (GFC), this pandemic has been marked
global recession in modern history. by an upturn in start-up activity and will
cause greater structural change across the
• The damaging impact on sectors such as
economy. Heightened disruption will only
hospitality which are key employers of
minimally cost Gen Z—who have much less
young workers has led to concerns about
job-specific capital to lose—and plays to
the impact of the recession on Gen Z, but
their natural agility.
this ignores the structural dimension of
the pandemic. • COVID-19 seems set to lead to a
permanent acceleration in the adoption of
• On the downside, the disruption to Gen Z’s
digital technology across society, a trend
education is a cause for concern although
that will benefit the first wholly digitally
the impact on their labour market
native cohort.
prospects is highly uncertain at this stage.
• In common with all recessions, the • One manifestation of this will be an
increased reliance on remote working.
pandemic is set to accelerate the new
Our analysis shows that Gen Z’s higher
wave of automation. This will accentuate
digital competence should support their
the need for creativity and curiosity in the
adaptation to this new way of working.
workplace—two of the inherent traits of
Gen Z.
24Gen Z’s role in shaping the digital economy
4.1 THE IMMEDIATE ECONOMIC IMPACT OF COVID-19
The pandemic triggered the Sectors which have borne
deepest global recession in the brunt of the COVID-19
modern history. Alongside shock are a disproportionately
the scale of the economic important source of
contraction, the COVID-19 employment for Gen Z
recession has been noteworthy (Fig. 9). Looking across the six
for its deeply uneven sectoral labour markets in our study,
effects. Across most advanced Gen Z employment in retail
economies, businesses in trade, hospitality, and leisure
industries reliant on social accounted for almost 40%
contact have been either of Gen Z jobs in 2019, more
mandated to shut down or seen than double the share of older
demand severely constrained workers.16 Such a gloomy
by health-related anxieties. prognosis has dominated much
of the rhetoric associated with
the crisis and young adults.
Fig. 9: Dependence on jobs in retail, hospitality, and leisure: Gen Z vs older workers
Share of total employment by age
50%
45% 47.1%
44.7%
43.9%
40% 42.1%
35%
30% 31.0%
25% 26.1%
20%
18.0% 17.9% 18.6%
15% 16.8% 17.1%
16.1%
10%
5%
0%
15–24 25+ 15–24 25+ 15–24 25+ 15–24 25+ 15–24 25+ 15–24 25+
Germany France Netherlands UK Australia US
Source: National statistic agency data, Oxford Economics analysis
16
Technically these sectors are referred to as “wholesale and retail trade”, “accommodation and food service activities” and “arts,
entertainment and recreation” in the sectoral accounts that are used to estimate GDP. 25Gen Z’s role in shaping the digital economy
4.2 RECESSIONS AND YOUNG WORKERS
The view that economic These effects have typically So, to what extent will the
downturns disproportionately been found to be temporary pandemic affect the long-term
affect young workers is far from with the impact disappearing prospects of Gen Z? In our
new. Evidence from cohort within 10 years. Despite being view, to answer this question
studies—those which follow temporary, these costs will it is appropriate to assess the
the same group of students be significant to the affected likely structural implications of
over time—consistently find individuals. On the other hand, COVID-19. It is to this that we
that entering the labour it does suggest that, should turn next.
market during a recession has countries manage to avoid
a negative impact on earnings a permanent increase in the
and employment rates.17 Certain unemployment rate,20 these
groups also appear more at risk much-touted scarring effects
including: are unlikely to have a material
impact on the earnings power
• Graduates from less
and employment prospects of
prestigious universities and
Gen Z in 2030.
those obtaining degrees
which are associated with
lower career earnings, on
average, are more at risk.18
• There is some evidence that
the recession-entry effects
are more significant for
females.19
4.3 THE STRUCTURAL IMPLICATIONS OF COVID-19
A loss of educational value required technology. Given attempted to quantify it here.21
the importance of education This should not be interpreted
Compared to the temporary to labour market outcomes, as an attempt to downplay
loss of job opportunities in it is likely that this aspect of the potential significance of
hospitality, in our view, a much COVID-19 will diminish the this issue. Indeed, in chapter
more pressing concern relates economic prospects of Gen Z. six of this report we explore
to the disruption to Gen Z’s some potential remedies in
education caused by the Although a handful of studies more depth.
pandemic. The shift to online have attempted to assess
learning has been particularly the potential impact of this
problematic for children from change on future earnings,
disadvantaged households we consider this cost to be
with less or no access to the highly uncertain and have not
17
H and von Wachter, T Schwandt, “Unlucky Cohorts: Estimating the Long-Term effects of entering the Labor Market in a recession in
Large Cross-Sectional Data Sets”, Journal of Labor Economics, 51(7) (2019): 161-98.
18
D, Deutscher, N, Hambur, J and Hansell, D Andrews, “The Career Effects of Labour Market Conditions at Entry” (Treasury Working
Paper, Australian Government: the Treasury, 2020).
26 19
Ibid.
20
An extensive literature has explored the extent to which negative shocks can have a permanent impact on the unemployment
rate—a phenomenon known as hysteresis. Whilst there have certainly been high-profile examples significant encouragement can
be taken from the path of unemployment in most OECD markets following the GFC.
21
Eric and Woessmann, Ludger Hanushek, “The Economic Impact of Learning Losses” (OECD research report, September 2020), 24.Gen Z’s role in shaping the digital economy
Disruption on a new scale A trigger to new enterprise and automation
Whilst recessions have It is said that necessity is Tangentially, whilst recessions
always had uneven effects the mother of invention, and are periods where many
on different sectors of the this is certainly the case with firms fail, they also often act
economy, the impact of the automation. For example, past as a spur to new ways of
COVID-19 pandemic is likely to research has shown that all the doing business. In this sense,
be more pronounced, in this automation associated with the downturns can be viewed as
respect.22 Indeed, our analysis ICT revolution in Canada took a necessary evil which help to
suggests that the variation in place during the past three root out less efficient firms and
output growth in 2020 was, recessions, whilst an equivalent working practices. Looking
on average, 80% higher than study covering the United across markets in scope where
during 2009 across the six States suggested this figure data are available (Fig. 10),
markets in scope. Moreover, was almost 90%.23,24 Therefore, the number of new start-ups
even post-pandemic, the it seems certain that COVID-19 was higher in three out of
extreme events of the past 12 will lead to a major leap forward four countries during the first
months may well shape our in the next wave of automation. three-quarters of 2020 despite
behaviour and, as a result, As described in the previous the logistical problems created
sectoral demand. chapter, these technological for new business registration.
advances are expected to lead
What are the labour market to a larger premium in the
implications of such increased workplace on attributes such
disruption? At an aggregate as creativity, problem solving,
level they point to the and agile thinking—a trend that
imperative of retraining and should play to the inherent
reskilling—a theme on which strengths of Gen Z.
we elaborate in chapter six.
Workers will increasingly need Fig. 10: Start-up growth in 2020 in selected markets
to adapt to new demands Annual growth
within their existing roles or to 70%
completely reset their career 2020 Q1 2020 Q2 2020 Q3
path. The costs to Gen Z of 60%
these changes will be relatively 2020 Q1–Q3 total
minor—by definition, they will 50%
have much less job-specific
capital to lose than older 40%
workers. Moreover, as shown
in chapter two, Gen Z workers’ 30%
natural agility will serve them
well in adapting to such 20%
evolving demands.
10%
0%
-10%
-20%
France Germany UK US
Source: Oxford Economics
22
J, Bloom, N and Davis, S Barrero, “COVID-19 is also a Reallocation Shock” (Working Paper 2020-59, Becker Friedman Institute, June
2020), 60.
23
J Blit, “Automation and Reallocation: Will COVID-19 Usher in the Future of Work?” (Canadian Public Policy Brief, August 2020), 11. 27
24
N and Siu, H Jaimovich, “Job Polarization and Jobless Recoveries”, Review of Economics and Statistics, 102 (1) (2020): 129 - 147.Gen Z’s role in shaping the digital economy
Start-up growth has been Fig. 11: High-propensity business applications in the US:
strongest in the United States. 2006 - 202025
As shown in Fig. 11, the GFC Business applications
was characterised by a slump 600,000
in new enterprise formation Recession
which remained a permanent
feature of the next decade. 500,000
The experience of COVID-19
has been a complete opposite,
with the unprecedented 400,000
disruption sparking a new
wave of enterprise. New
business applications rocketed 300,000
to an unprecedented level
during the second half of
200,000
2020, well in excess of any
levels recorded over the past
15 years. 100,000
0
2006 2008 2010 2012 2014 2016 2018 2020
Source: United States Census Bureau, Oxford Economics analysis
Accelerating the shift towards a more digital economy
Although there is no This, in turn, has turbocharged Within this change, increased
consolidated information the adoption and integration use of remote working or
regarding the activities of of digital technology across collaboration and adapting to
new enterprises that sprang corporations. Indeed, based increased customer demand
up in 2020, it seems certain on an survey of executives, online were identified as the
that many will be connected McKinsey have estimated two areas where executives
to the digital economy. The that COVID-19 will accelerate felt that practical changes
necessary shift away from digital adoption by seven implemented during COVID-19
social contact in the workplace years, on average, among were likely to become
and in interactions with firms surveyed.26 The study permanent (Fig. 12).
customers has heightened the also highlighted a step-
premium for businesses of a change in businesses’
digital competitive advantage. mindset with just one-in-ten
respondents indicating that
they regarded technology
‘primarily as a source of cost
savings’ compared to almost
half pre-crisis.
28 25
High-propensity business applications are those which are judged to have a high probability of creating jobs, based on a set of
defined conditions. Further detail can be found here.
26
D Seiler, “How COVID-19 has pushed companies over the technology tipping point - and transformed business forever” (McKinsey
Research Report, October 2020).Gen Z’s role in shaping the digital economy
Fig. 12: Share of businesses reporting that they have changed features as a result of COVID-19
Expect change to stick Do not expect change to stick
Expect some change to stick/Don't know Did not experience this change
Increasing use of advanced
10 7 3 79
technologies in business strategy
Increasing migration of assets
18 9 6 66
to the Cloud
Increasing use of advanced
19 11 7 63
technologies in operations
Increased spending on
20 10 7 63
data security
Increasing customer demand for
33 17 12 38
online purchasing and/or services
Increase in remote working
or collaboration 50 21 21 7
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Percentage share of respondents
Source: McKinsey Executive survey
The rise of remote working—a mixed blessing for Gen Z?
The likelihood of a widespread In terms of the consequences where applicable. The self-
permanent shift towards a for Gen Z, increased reliance reported impact—measured on
more hybrid model of remote on digital technology as a a scale from ‘very negative’ to
work has been underscored means of communication ‘very positive’—was described
by a recent academic study should play to the strengths of across a wide range of aspects
(Fig. 13). This showed that US these digital natives. Indeed, of job performance such as
firms expected ‘working from research by Milkround, a UK meeting deadlines, creativity
home’ days to rise to just over graduate careers website, and communication. We
20% post-COVID compared showed that Gen Z workers also collected information
to less than 5%.27 Moreover, had adapted better to the on various factors that could
polling of workers suggests challenges presented by have influenced reported
their preferences may be remote working such as performance, such as the
even stronger—drawing on a increased reliance on video difference in the quality and
consumer survey, the same conferencing technology.28 reliability of the person’s
study indicated that, among internet connection, prior
employees who could, post- As part of our consumer experience working from
COVID these individuals survey, we asked participants home, occupational role, and
wanted to work from home about their experience of general digital competence (as
around 50% of the time. remote working during 2019, described in chapter two).
27
J, Bloom, N and Davis, S Barrero, “COVID-19 is also a Reallocation Shock” (Working Paper No. 2020-59, Becker Friedman Institute,
2020), 60.
28
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