Will There Be Enough Work in the Future?

Will there be enough work in the future?  Opinions are fairly divided between those who believe that technology advances will reduce human jobs, and those who believe that technology advances will produce as many jobs as they displace.  It’s easier to predict the jobs that will be automated away by technology, but much more difficult to predict the new jobs that these same technologies will create.  In the end, we don’t really know.

In December of 2017, the McKinsey Global Institute published Jobs Lost, Jobs Gained: Workforce Transition in a Time for Automation, a report that directly addresses this question.  The McKinsey study examined in great detail the work that’s likely to be displaced by automation through 2030, as well as the jobs that are likely to be created over the same period.  It analyzed data from 46 countries comprising almost 90 percent of global GDP, focusing particularly on six countries: China, Germany, India, Japan, Mexico and the US.  For each of this six countries, the study modeled the potential for employment changes in more than 800 occupations based on different scenarios for the pace of automation adoption and for future labor demand.

The report’s overall conclusion is that a growing technology-based economy will create a significant number of new occupations, - as has been the case in the past, - which will more than offset declines in occupations displaced by automation.  However, “while there may be enough work to maintain full employment to 2030 under most scenarios, the transitions will be very challenging - matching or even exceeding the scale of shifts out of agriculture and manufacturing we have seen in the past.”

Let me briefly discuss some of the report’s key findings.

Automation will transform a large number of occupations

Most occupations involve a number of activities or tasks.  Some of these activities are more routine in nature,- and thus more susceptible to automation, - while others require judgement, social skills and other hard-to-automate human capabilities.  But just because some of the activities in a job have been automated, does not imply that the whole job has disappeared.  While almost half of all activities could be feasibly automated by 2030 by adapting currently available technologies, few occupations are likely to disappear entirely.  Instead, a growing percentage of occupations will experience significant changes.

The McKinsey study analyzed the impact of automation on jobs taking into account not just technical feasibility, but also other factors including labor market dynamics, social acceptance and regulatory issues.  Their research estimated that, on average, 15% of occupations could be significantly impacted by automation, with the percentage rising to 30% for the fastest rates of automation adoption.

These results differ significantly by country.  Advanced economies will experience the largest displacements, with Japan the highest at 26% for average rate of automation adoption, the US around 23% and the UK at 20%.  Emerging economies are significantly lower on average, with India at 9%, Brazil at 14% and China around 16%.

The impact of automation also differs by occupation and industry sector, as previous research has shown.  Occupations based on more routine activities will experiences the greatest displacement, such as operating machinery, preparing fast food and collecting and processing data.  Automation will have a much lesser effect on physical work in unpredictable environments - such as child and elder-care, gardeners, plumbers and electricians, - and on occupations requiring management expertise, decision making, planning, social skills and creative tasks.

Potential new occupations and employment growth

The report identified several trends of new labor demand that may result in net job creation through 2030.

Rising incomes and consumption, especially in emerging economies.   Previous Mckinsey research has estimated that over the next decade an additional one billion people will have enough discretionary income to become consumers, mostly from emerging economies.  Such global consumption could grow by $23 trillion between 2015 and 2030.  “As incomes rise, consumers spend more on all categories.  But their spending patterns also shift, creating more jobs in areas such as consumer durables, leisure activities, financial and telecommunication services, housing, health care, and education.”  This could add over 300 million new jobs around the world.

Aging populations.  The study estimates that by 2030 there will be over 300 million more people aged 65 and over than there were in 2014.  “As people age, their spending patterns shift, with a pronounced increase in spending on health care and other personal services.  This will create significant demand for a range of occupations, including doctors, nurses, and health technicians, but also home health aides, personal care aides and nursing assistants in many countries.”  Caring for aging populations around the world could generate between 80 million and 130 million additional jobs by 2030.

Development and deployment of technology.  “Overall spending on technology could increase by more than 50 percent between 2015 and 2030.  About half would be on information technology services, both in-house IT workers within companies and external or outsourced tech consulting jobs… By 2030,  we estimate this trend could create 20 to 50 million jobs globally.”  While these numbers are relatively small, they are high-wage occupations including computer scientists, engineers and IT administrators.

Investments in infrastructure and building.   McKinsey estimates that the world needs to invest an average of $3.3 trillion per year in infrastructure compared to the current annual spending of $2.5 trillion.  “This includes both developing countries that are urbanizing and industrializing, and advanced economies that have underinvested in maintaining their infrastructure and buildings.”  These investments could create from 80 million to 200 million jobs, including architects, engineers, skilled tradespeople and construction workers.

Investments in renewable energy, energy efficiency, and climate adaptation.  Such investments could create between 10 and 20 million additional jobs in a range of new occupations.

Marketization of previously unpaid domestic work.  “About 75 percent of the world’s total unpaid care is undertaken by women and amounts to as much as $10 trillion of output per year, roughly equivalent to 13 percent of global GDP.”  Most of it is domestic work, - including cooking, child care and cleaning.  Given the rising female labor force participation, much of this currently unpaid work will require paying for services, which could create between 50 million and 90 million additional jobs around the world.

Job creation can offset the impact of automation, but the transition must be properly managed through education and worker training

Throughout the Industrial Revolution there were periodic panics about the impact of automation on jobs, going back to the so-called Luddites, - textile workers who in the 1810s smashed the new machines that were threatening their jobs.  Automation anxieties have understandably accelerated in recent years, as our increasingly smart machines are now being applied to activities requiring intelligence and cognitive capabilities that not long ago were viewed as the exclusive domain of humans.

“History would suggest that such fears may be unfounded: over time, labor markets adjust to changes in demand for workers from technological disruptions, although at times with depressed real wages,” says the report.  “[I]f history is any guide, we could expect 8 to 9 percent of 2030 labor demand will be in new types of occupations that have not existed before.”

Based on its research, Mckinsey concludes that “with sufficient economic growth, innovation, and investment, there can be enough new job creation to offset the impact of automation, although in some advanced economies additional investments will be needed… to reduce the risk of job shortages.  But a larger challenge will be ensuring that workers have the skills and support needed to transition to new jobs.  Countries that fail to manage this transition could see rising unemployment and depressed wages.”

“Automation represents both hope and challenge,” notes the report in conclusion.  “The global economy needs the boost to productivity and growth that it will bring, especially at a time when aging populations are acting as a drag on GDP growth.  Machines can take on work that is routine, dangerous, or dirty, and may allow us all to use our intrinsically human talents more fully.  But to capture these benefits, societies will need to prepare for complex workforce transitions ahead.  For policy makers, business leaders, and individual workers the world over, the task at hand is to prepare for a more automated future by emphasizing new skills, scaling up training, especially for midcareer workers, and ensuring robust economic growth.”

External URL: http://blog.irvingwb.com/blog/2018/02/will-there-be-enough-work-in-the-future.html

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