Technology, jobs, and the future of work
Automation,
digital platforms, and other innovations are changing the fundamental nature of
work. Understanding these shifts can help policy makers, business leaders, and
workers move forward.
The world of work is in
a state of flux, which is causing
considerable anxiety—and with good reason. There is growing polarization of
labor-market opportunities between high- and low-skill jobs, unemployment and
underemployment especially among young people, stagnating incomes for a large
proportion of households, and income inequality. Migration and its effects on
jobs has become a sensitive political issue in many advanced economies. And
from Mumbai to Manchester, public debate rages about the future of work and
whether there will be enough jobs to gainfully employ everyone.
The development of
automation enabled by technologies including robotics and artificial
intelligence brings the promise of higher productivity (and with productivity,
economic growth), increased efficiencies, safety, and convenience. But these
technologies also raise difficult questions about the broader impact of
automation on jobs, skills, wages, and the nature of work itself.
Many activities that
workers carry out today have the potential to be automated. At the same time,
job-matching sites such as LinkedIn and Monster are changing and expanding the
way individuals look for work and companies identify and recruit talent.
Independent workers are increasingly choosing to offer their services on
digital platforms including Upwork, Uber, and Etsy and, in the process,
challenging conventional ideas about how and where work is undertaken.
For policy makers,
business leaders, and workers themselves, these shifts create considerable
uncertainty, alongside the potential benefits. This briefing note aims to
provide a fact base on the multiple trends and forces buffeting the world of
work drawing on recent research by the McKinsey Global Institute and others.
1.
Developments in employment,
income, and skills
Challenges in labor markets
are growing, household incomes in advanced economies have been stagnating, and
there are increasing skill gaps among workers.
Labor markets are under strain, and talent is
underutilized
Unemployment and underemployment are high around the world. In the United States
and the 15 core European Union countries (EU-15), there are 285 million adults
who are not in the labor force—and at least 100 million of them would like to
work more. Some 30 to 45 percent of the working-age population around the world
is underutilized—that is, unemployed, inactive, or underemployed. This
translates into some 850 million people in the United States, the United
Kingdom, Germany, Japan, Brazil, China, and India alone. Most attention is paid
to the unemployed portion of this number, and not enough to the underemployed
and the inactive portions, which make up the majority of untapped human
potential.
Almost 75 million youth
are officially unemployed. Women represent one of the largest pools of untapped labor: globally, 655 million fewer
women are economically active than men. In a “best-in-region” scenario in which
all countries match the rate of improvement in gender gaps (in labor force
participation, hours worked, and sector mix of employment) of the best-performing
country in their region, $12 trillion more of annual GDP would be realized in 2025, equivalent in size to the current
GDP of Japan, Germany, and the United Kingdom combined.
Household incomes in advanced economies have stagnated or
fallen, fueling public disgruntlement
The vast majority of
people derive incomes from jobs. In the United States, Western Europe, and
across advanced economies, market incomes (from wages and capital) stagnated or fell for about two-thirds of
households in 2005–14, a period marked by deep recession and slow recovery
after the 2008 financial crisis. This was the first time incomes stopped
advancing on such a scale since the stagflation era of the 1970s, and it may
have helped stir popular opposition to globalization. The recession was a
leading cause of the abrupt end to income advancement, but other longer-run
factors also contributed, including a decline in the share of national income
that is paid to workers, the so-called wage share. This has fallen across
advanced economies despite rising productivity, suggesting a decoupling between
productivity and incomes.
The decline is due in
part to the growth of corporate profits as a share of national income, rising
capital returns to technology investments, lower returns to labor from
increased trade, rising rent incomes from home ownership, and increased
depreciation on capital. Policy makers in the affected countries took action
during the downturn to compensate for the income squeeze, in the former of lower
taxes and higher transfers, but these were largely one-off measures to buoy
disposable income in response to the recession, and not sustainable.
Globalization has
brought numerous benefits, including lifting millions of people in emerging
economies into the consuming class. But it also has had an impact in some
sectors like manufacturing in advanced economies, with some jobs moving
offshore. Better support could have been provided to help affected workers
build new skills and transition into new sectors or occupations.
A survey we conducted
in France, the United Kingdom, and the United States showed a significant
proportion of those whose incomes stagnated are worried about their children’s
economic prospects—a sharp departure after many decades in which it was an
article of faith that every generation would enjoy higher living standards than
their parents. Middle-income households have been the most affected, and young
and less educated people are especially vulnerable. Across all age groups,
medium- and low-skill workers have done worse than those with a college
education. Many blame governments, global institutions, corporations, and
establishment “elites” around the world, and the principles of free trade and
open borders are under attack.
Skills, jobs, and locations do not always match, limiting
income-earning opportunities for many
Educational systems
have not kept pace with the changing nature of work, resulting in many
employers saying they cannot find enough workers with the skills they need. In
a McKinsey survey of young people and employers in nine countries, 40 percent
of employers said lack of skills was the main reason for entry-level job
vacancies. Sixty percent said that new graduates were not adequately prepared
for the world of work. There were gaps in technical skills such as STEM subject
degrees but also in soft skills such as communication, teamwork, and punctuality.
Conversely, even those in work may not be realizing their potential. In a
recent global survey of job seekers conducted by LinkedIn, 37 percent of
respondents said their current job does not fully utilize their skills or
provide enough challenge.
Some of the mismatching
is locational: where there is demand for work, there may not be available and
qualified workers to be found. This geographic mismatch can be seen across
regions within countries, and between countries.
Cross-border migration fills some skill gaps but can
create tensions
Cross-border migration
has been a natural consequence of a world in which people do not find
attractive work opportunities in their country of origin, at a time when other
economies are not adequately filling their skills gaps. Migration boosts global productivity, but its consequences are often feared by native
workers, who face labor market disconnects and a lack of well-paid jobs.
In 2015, approximately
247 million people lived in a country not of their birth—a number that has
almost tripled in the past 50 years. Most have gravitated to places where they believe they will find better jobs. More than 90 percent have moved voluntarily, and about
half have moved from developing to developed countries. In the period 2000 to
2014, migration has provided about 40 percent of labor force growth in Canada,
Spain, the United Kingdom, and the United States.
Migrants made an
absolute contribution to global output of roughly $6.7 trillion, or 9.4 percent
of global GDP in 2015. However, migrant workers, on average, earn wages that
are 20 to 30 percent lower than those of comparable native-born workers. More effective integration approaches could lay the groundwork for economic gains of up
to $1 trillion globally, benefiting both economies and individuals.
In the context of
challenging labor market conditions, popular sentiment has moved against
immigration. Surveys conducted by MGI suggest that a significant proportion of middle-
and low-income groups in advanced economies who are experiencing flat or
falling real incomes are pessimistic about the future and likely to hold
particularly negative views about immigrants.
2.
How automation and
technology are affecting work
New technologies have
the potential to upend much of what we know about the way people work. But
disruption is an opportunity as well as a challenge—given the promise of
digital talent platforms and new options for independent work, for example.
Many activities that workers carry out today have the
potential to be automated
Technological change
has reshaped the workplace continually over the past two centuries since the
Industrial Revolution, but the speed with which automation technologies are
developing today, and the scale at which they could disrupt the world of work,
are largely without precedent.
MGI research on the automation potential of
the global economy, focusing on 46 countries representing about 80 percent of
the global workforce, has examined more than 2,000 work activities and
quantified the technical feasibility of automating each of them. The proportion
of occupations that can be fully automated using currently demonstrated
technology is actually small—less than 5 percent. An additional important
finding is that even if whole occupations are not automated, partial automation
(where only some activities that make up an occupation are automated) will
affect almost all occupations to a greater or lesser degree. The impact will be
felt not just by factory workers and clerks but also by landscape gardeners and
dental lab technicians, fashion designers, insurance sales representatives, and
even CEOs.
We find that about 60
percent of all occupations have at least 30 percent of activities that
are technically automatable, based on currently demonstrated technologies. This
means that most occupations will change, and more people will have to work with
technology. Highly skilled workers working with technology will benefit. While
low-skilled workers working with technology will be able to achieve more in
terms of output and productivity, these workers may experience wage pressure,
given the potentially larger supply of similarly low-skilled workers, unless
demand for the occupation grows more than the expansion in labor supply.
On a global scale, we
calculate that the adaptation of currently demonstrated automation technologies could affect 50 percent of the world economy, or 1.2 billion employees and
$14.6 trillion in wages. Just four countries—China, India, Japan, and the
United States—account for just over half of these totals. There are sizable
differences in automation potential between countries, based mainly on the
structure of their economies, the relative level of wages, and the size and
dynamics of the workforce.
As machines evolve and
acquire more advanced performance capabilities that match or exceed human
capabilities, the adoption of automation will pick up. However, the
technical feasibility to automate does not automatically translate into the
deployment of automation in the workplace and the automation of jobs. Technical
potential is only the first of several elements that must be considered. A
second element is the cost of developing and deploying both the hardware and
the software for automation. The supply-and-demand dynamics of labor are a
third factor: if workers with sufficient skills for the given occupation are in
abundant supply and significantly less expensive than automation, this could
slow the rate of adoption. A fourth to be considered are the benefits of
automation beyond labor substitution—including higher levels of output, better
quality and fewer errors, and capabilities that surpass human ability.
Finally, regulatory and
social issues, such as the degree to which machines are acceptable in any
particular setting, must also be weighed. It is for these various reasons that
go beyond purely technical feasibility of automation that our estimates for
“whole-job” automation are lower than other estimates. Our scenarios suggest
that it may take at least two decades before automation reaches 50 percent of all of today’s work activities, taking into
account regions where wages are relatively low.
Technology can help labor markets: Digital talent
platforms improve matching between workers and jobs
Digital talent platforms have the potential to improve the ways workers and
jobs are matched, creating transparency and efficiency in labor markets, and
potentially raising GDP. They can raise labor participation and working hours;
evidence from around the world suggests that some people would work more hours
if they could. A US survey, for example, reports that three-quarters of
stay-at-home mothers would be likely to work if they had flexible options. Even
if a small fraction of inactive youth and adults use these platforms to work a
few hours per week, the economic impact would be significant.
With their powerful
search capabilities and sophisticated screening algorithms, online talent
platforms can also speed the hiring process and cut the time individuals spend
searching between jobs, reducing unemployment. By aggregating data on
candidates and job openings across entire countries or regions, they may
address some geographic mismatches and enable matches that otherwise would not
have come about.
Finally, online talent
platforms help put the right people in the right jobs, thereby increasing their
productivity along with their job satisfaction. They can draw people who are
engaged in informal work into formal employment, especially in emerging
economies. Both of these effects could increase output per worker, raising
global GDP.
Digitally-enabled independent work is on the rise
While independent work
is nothing new (and self-employment is still the predominant form of work in
emerging economies), the digital enablement of it is. MGI research finds that
20 to 30 percent of the working age population in the United States and the
European Union is engaged in independent work. Just over half of these workers supplement their
income and have traditional jobs, or are students, retirees, or caregivers.
While 70 percent choose this type of work, 30 percent use it out of necessity
because they cannot find a traditional job at all, or one that meets their
income and flexibility needs. The proportion of independent work that is
conducted on digital platforms, while only about 15 percent of independent work
overall, is growing rapidly, driven by the scale, efficiency, and ease of use
for workers and customers that these platforms enable. Such platforms include
Uber, Etsy, Didi, and others. While those who pursue independent work
(digitally enabled or not) out of preference are generally satisfied; those who
pursue it out of necessity are unsatisfied with the income variability and the
lack of benefits typically associated with traditional work. Policy makers and
innovators will need to grapple with solutions to these challenges.
Not to be forgotten—technology creates new jobs and
income possibilities
Even while technologies
replace some jobs, they are creating new work in industries that most of us
cannot even imagine, and new ways to generate income. One-third of new jobs
created in the United States in the past 25 years were types that did not
exist, or barely existed, in areas including IT development, hardware
manufacturing, app creation, and IT systems management. The net impact of new
technologies on employment can be strongly positive. A 2011 study by McKinsey’s Paris office found that the Internet had destroyed 500,000 jobs
in France in the previous 15 years—but at the same time had created 1.2 million
others, a net addition of 700,000, or 2.4 jobs created for every job destroyed.
The growing role of big data in the economy and business will create a
significant need for statisticians and data analysts; we estimate a shortfall of up to 250,000 data scientists in the United
States alone in a
decade.
Digital technology also
can enable new forms of entrepreneurial activity. Workers in small businesses
and self-employed occupations can benefit from higher income earning
opportunities. A new category of knowledge-enabled jobs will become possible as
machines embed intelligence and knowledge that less-skilled workers can access
with a little training. In India, for example, Google is rolling out the
Internet Saathi (Friends of the Internet) program in which rural women are
trained to use the Internet, and then become local agents who provide services
in their villages through Internet-enabled devices. The services include
working as local distributors for telecom products (phones, SIM cards, and data
packs), field data collectors for research agencies, financial-services agents,
and paratechnicians who help local people access government schemes and
benefits through an Internet-based device.
3.
The challenges of
digitization—and possible solutions
We have yet to reach
the full potential of digitization across the global economy. Making sure that
digital gains are accessible to all could provide significant value. And though
other challenges, too, remain, they could be addressed by exploring several
solution spaces—for instance, through evolving education systems or by pursuing
public-private partnerships to stimulate investment in enabling infrastructure.
We are only starting to capture the opportunities from
digitizing economies at the sector and company level
Digital technologies are creating major new opportunities for workers and companies, in
both advanced and developing economies, but there are significant variations
within and across countries and sectors. Our use of the term digitization (and
our measurement of it), encompasses:
1. Digitization of assets, including infrastructure,
connected machines, data, and data platforms;
2. Digitization of operations, including processes, payments
and business models, and customer and supply chain interactions; and
3. Digitization of the workforce, including worker use of
digital tools, digitally skilled workers, and new digital jobs and roles.
In measuring each of
these various aspects of digitization, we find relatively large disparities
even among big companies Based on these measures, a few sectors are highly
digitized—for example, financial services, media, and the tech sector itself.
These tend to be among the sectors with the highest productivity growth and
wage growth. Many others are much less digitized, including healthcare,
education, and even retail. These tend to be the largest share of the economy
in terms of GDP and the lowest-productivity sectors. Similarly, companies are
digitizing unevenly.
Companies that are
digital leaders in their sectors have faster revenue growth and higher
productivity than their less-digitized peers. Their profits and margins can
increase three times as fast, and workers within these companies enjoy double
the wage growth. Digitization will continue to change how companies organize
work, as well as the mix of work in any given sector. All this will require
ongoing adaptation and transition by workers in terms of skills, activities,
companies, and even the sectors they work in.
Clearly, we are still
in the early stages of how sectors and companies use digital technologies, and
there is considerable unevenness. From country to country, too, there are
significant divergences. Overall, for example, we estimate that the United
States has captured only 18 percent of its potential from digital technologies,
while Europe has captured only 12 percent. Emerging economies are even further behind, with
countries in the Middle East and Brazil capturing less than 10 percent of their
digital potential.
More than half the world’s population is still offline,
limiting the potential to benefit from digital
Rapid technology
adoption can unlock huge economic value, even as it implies major need for
retraining and redeployment of labor. In India, for example, digital technologies provide the foundation for
many innovations that could contribute $550 billion to $1 trillion of economic
impact per year in 2025. However, the value of digitization that is captured
depends on how many people and businesses have access to it.
More than four billion
people, or over half of the world’s population, is still offline. About 75 percent of this offline
population is concentrated in 20 countries, including Bangladesh, Ethiopia,
Nigeria, Pakistan, and Tanzania, and is disproportionately rural, low income,
elderly, illiterate, and female. The value of connecting these people is
significant, and as they enter the global digital economy, the world of work
will transform in fundamental ways and at an unprecedented pace. Access to the
technology alone is not enough; even in countries where a large majority of the
population has access, the literacy and skills needed to capture digital gains are
sometimes limited.
How to positively affect the future of work: Solution
spaces
The disruptions to the
world of work that digital technologies are likely to bring about could pose
significant challenges to policy makers and business leaders, as well as
workers. There are several solution spaces to consider:
·
Evolve education systems
and learning for a changed workplace. Policy
makers working with education providers (traditional and nontraditional) could
do more to improve basic STEM skills through the school systems, put a new
emphasis on creativity as well as critical and systems thinking, and foster
adaptive and life-long learning.
·
Determine how the private
sector can drive training. Companies face gaps
in skills they need in a more technology-enabled workplace. They could benefit
from playing a more active role in education and training, including providing
better information about needs to learners and the education and training
ecosystem, and proving better learning opportunities themselves.
·
Create incentives for
private-sector investment to treat human capital like other capital. Through tax benefits and other incentives, policy
makers can encourage companies to invest in human capital, including job
creation, learning and capability building, and wage growth.
·
Explore public-private
partnerships to stimulate investment in enabling infrastructure. The lack of digital infrastructure is holding back
digital benefits in many economies, both developing and developed;
public-private partnerships could help address market failures.
·
Rethink incomes. If automation (full or partial) does result in a
significant reduction in employment or greater pressure on wages, some ideas
such as universal basic income, conditional transfers, and adapted social
safety nets could be considered and tested.
·
Rethink transition support
and safety nets for workers affected. As
work evolves at higher rates of change between sectors, locations, activities,
and skill requirements, many workers will need assistance adjusting. Many best-practice
approaches to transition safety nets are available and should be adopted and
adapted, and new approaches considered and tested.
·
Embrace technology-enabled
solutions. Such solutions, including richer
information signals, can be used in the labor market to improve matching and
access and bridge skills gaps. Policy makers will need to address issues such
as benefits and variability that these digital platforms can raise.
·
Focus on job creation. Accelerate the creation of jobs in general through
stimulating investment in businesses, and accelerate the creation of digital
jobs in particular—and digitally enabled opportunities to earn income—including
through new forms of entrepreneurship.
·
Innovate how humans work
alongside machines. Greater interaction will raise
productivity but require different and often higher skills, new technology
interfaces, different wage models in some cases, and different types of
investments by businesses and workers to acquire skills.
·
Capture the productivity
benefits of technology. These can be
harnessed to create the economic growth, surpluses, and demand for work that
create room for creative solutions and ultimately benefit all.
This briefing note was
originally prepared for the Fortune + Time Global Forum in Vatican City in
December 2016; it was updated in May 2017.
By James Manyika
http://www.mckinsey.com/global-themes/employment-and-growth/technology-jobs-and-the-future-of-work?cid=other-eml-alt-mgi-mgi-oth-1705&hlkid=75769586c86e4a018917487459b7230e&hctky=1627601&hdpid=a09516c8-7f82-472b-aaa9-320f2a194dd2
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