Jobs Lost, Jobs Gained: Workforce Transitions In a Time of Automation

12/20/2017

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James Manyika, Susan Lund, Michael Chui, Jacques Bughin, Jonathan Woetzel, Parul Batra, Ryan Ko, Saurabh Sanghvi | McKinsey & Company

In our latest research on automation, we examine work that can be automated through 2030 and jobs that may be created in the same period. We draw from lessons from history and develop various scenarios for the future. While it is hard to predict how all this will play out, our research provides some insights into the likely workforce transitions that should be expected and their implications. Our key findings:
  • Automation technologies including artificial intelligence and robotics will generate significant benefits for users, businesses, and economies, lifting productivity and economic growth. The extent to which these technologies displace workers will depend on the pace of their development and adoption, economic growth, and growth in demand for work. Even as it causes declines in some occupations, automation will change many more—60 percent of occupations have at least 30 percent of constituent work activities that could be automated. It will also create new occupations that do not exist today, much as technologies of the past have done.
 
  • While about half of all work activities globally have the technical potential to be automated by adapting currently demonstrated technologies, the proportion of work actually displaced by 2030 will likely be lower, because of technical, economic, and social factors that affect adoption. Our scenarios across 46 countries suggest that between almost zero and one third of work activities could be displaced by 2030, with a midpoint of 15 percent. The proportion varies widely across countries, with advanced economies more affected by automation than developing ones, reflecting higher wage rates and thus economic incentives to automate.
 
  • Even with automation, the demand for work and workers could increase as economies grow, partly fueled by productivity growth enabled by technological progress. Rising incomes and consumption especially in developing countries, increasing health care for aging societies, investment in infrastructure and energy, and other trends will create demand for work that could help offset the displacement of workers. Additional investments such as in infrastructure and construction, beneficial in their own right, could be needed to reduce the risk of job shortages in some advanced economies.
 
  • Even if there is enough work to ensure full employment by 2030, major transitions lie ahead that could match or even exceed the scale of historical shifts out of agriculture and manufacturing. Our scenarios suggest that by 2030, 75 million to 375 million workers (3 to 14 percent of the global workforce) will need to switch occupational categories. Moreover, all workers will need to adapt, as their occupations evolve alongside increasingly capable machines. Some of that adaptation will require higher educational attainment, or spending more time on activities that require social and emotional skills, creativity, high-level cognitive capabilities and other skills relatively hard to automate.
 
  • Income polarization could continue in the United States and other advanced economies, where demand for high-wage occupations may grow the most while middle-wage occupations decline— assuming current wage structures persist. Increased investment and productivity growth from automation could spur enough growth to ensure full employment, but only if most displaced workers find new work within one year. If reemployment is slow, frictional unemployment will likely rise in the short-term and wages could face downward pressure. These wage trends are not universal: in China and other emerging economies, middle-wage occupations such as service and construction jobs will likely see the most net job growth, boosting the emerging middle class.
 
  • To achieve good outcomes, policy makers and business leaders will need to embrace automation’s benefits and, at the same time, address the worker transitions brought about by these technologies. Ensuring robust demand growth and economic dynamism is a priority: history shows that economies that are not expanding do not generate job growth. Mid career job training will be essential, as will enhancing labor market dynamism and enabling worker redeployment. These changes will challenge current educational and workforce training models, as well as business approaches to skill-building. Another priority is rethinking and strengthening transition and income support for workers caught in the crosscurrents of automation.
Summary of Findings: The technology-driven world in which we live is a world filled with promise but also challenges. Cars that drive themselves, machines that read X-rays, and algorithms that respond to customer service inquiries are all manifestations of powerful new forms of automation. Yet even as these technologies increase productivity and improve our lives, their use will substitute for some work activities humans currently perform—a development that has sparked much public concern. This research builds on MGI’s January 2017 report on automation and its impact on work activities. We assess the number and types of jobs that might be created under different scenarios through 2030, and compare that to work that could be displaced by automation.2 The results reveal a rich mosaic of potential shifts in occupations in the years ahead, with important implications for workforce skills and wages. The analysis covers 46 countries that comprise almost 90 percent of global GDP. We focus on six countries that span income levels (China, Germany, India, Japan, Mexico, and the United States). For each, we modeled the potential net employment changes for more than 800 occupations, based on different scenarios for the pace of automation adoption and for future labor demand. The intent of this research is not to forecast. Rather, we present a set of scenarios (necessarily incomplete) to serve as a guide, as we anticipate and prepare for the future of work. This research is by no means the final word on this topic; ongoing research is required. Indeed, in Box E2 at the end of this summary, we highlight some of the potential limitations of the research presented in this report. Our findings suggest that several trends that may serve as catalysts of future labor demand could create demand for millions of jobs by 2030. These trends include caring for others in aging societies, raising energy efficiency and meeting climate challenges, producing goods and services for the expanding consuming class, especially in developing countries, not to mention the investment in technology, infrastructure, and buildings needed in all countries. Taken from another angle, we also find that a growing and dynamic economy—in part fueled by technology itself and its contributions to productivity—would create jobs. These jobs would result from growth in current occupations due to demand and the creation of new types of occupations that may not have existed before, as has happened historically. This job growth (jobs gained) could more than offset the jobs lost to automation. None of this will happen by itself—it will require businesses and governments to seize opportunities to boost job creation and for labor markets to function well. The workforce transitions ahead will be enormous. We estimate that as many as 375 million workers globally (14 percent of the global workforce) will likely need to transition to new occupational categories and learn new skills, in the event of rapid automation adoption. If their transition to new jobs is slow, unemployment could rise and dampen wage growth. Indeed, while this report is titled Jobs lost, jobs gained, it could have been, Jobs lost, jobs changed, jobs gained; in many ways a big part of this story is about how more occupations will change than will be lost as machines affect portions of occupations and people increasingly work alongside them. Societal choices will determine whether all three of these coming workforce transitions are smooth, or whether unemployment and income inequality rise. History shows numerous examples of countries that have successfully ridden the wave of technological change by investing in their workforce and adapting policies, institutions, and business models to the new era. It is our hope that this report prompts leaders in that direction once again. AUTOMATION COULD DISPLACE A SIGNIFICANT SHARE OF WORK GLOBALLY TO 2030; 15 PERCENT IS THE MIDPOINT OF OUR SCENARIO RANGE In our prior report on automation, we found that about half the activities people are paid to do globally could theoretically be automated using currently demonstrated technologies. Very few occupations—less than 5 percent—consist entirely of activities that can be fully automated. However, in about 60 percent of occupations, at least one-third of the constituent activities could be automated, implying substantial workplace transformations and changes for all workers. All this is based on our assessments of current technological capability—an ever evolving frontier While technical feasibility of automation is important, it is not the only factor that will influence the pace and extent of automation adoption. Other factors include the cost of developing and deploying automation solutions for specific uses in the workplace, the labor market dynamics (including quality and quantity of labor and associated wages), the benefits of automation beyond labor substitution, and regulatory and social acceptance. Taking into account these factors, our new research estimates that between almost zero and 30 percent of the hours worked globally could be automated by 2030, depending on the speed of adoption. In this report we mainly use the midpoint of our scenario range, which is 15 percent of current activities automated. Results differ significantly by country, reflecting the mix of activities currently performed by workers and prevailing wage rates. They range from 9 percent in India to 26 percent in Japan in the midpoint adoption rate scenario This is on par with the scale of the great employment shifts of the past, such as out of agriculture or manufacturing evidence on technology and employment is reassuring.

Jacques Bughin, Director, McKinsey Global Institute Senior Partner, McKinsey & Company Brussels

James Manyika, Chairman and Director, McKinsey Global Institute Senior Partner, McKinsey & Company San Francisco 

 Jonathan Woetzel, Director, McKinsey Global Institute Senior Partner, McKinsey & Company Shanghai 

Susan Lund, Michael Chui, Parul Batra, Ryan Ko, Saurabh Sanghvi 

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