We live in an era when the world is predominantly driven by technology.
This technology-driven world is filled with promise but also presents its own challenges.
The world today is heavily automated with self-driving cars, machines that read X-rays, and chatbots.
But isn’t this great?
But, there’s a downside to automation.
As these automated processes boost productivity and improve the lifestyle of the general population, what are doing is replacing some work activities that required human labour till now. There is a big impact of automation on employment.
In January 2017, McKinsey Global Institute published a report on automation, Jobs lost, jobs gained: Workforce transitions in a time of automation.
This report predicts the number and types of jobs that are likely to be created until 2030. It then compares this to the jobs that could be lost due to automated services.
The McKinsey report reveals that there will be a shift in occupations in the upcoming years.
Although there might be adequate jobs available to ensure full employment till 2030, what is believed to be challenging is the transitions.
In the next few years, the world will be heavily impacted by automation. The effects of automation have already been felt in many industries. Some countries will experience this effect more than others.
Various studies highlight varying degrees of job losses or job creation, yet these scenarios are dependent on factors that will facilitate positive or negative change.
Automation will boost the creation of existing goods and demands and will give rise to new industries and new jobs.
It has been researched that half of the activities that people get paid to do could theoretically be automated by using existing technologies.
Very few occupations, around less than 5 per cent, consist of activities that can be completely automated.
However, in around 60% of global occupations, a minimum of one-third of constituent activities could be automated, implying substantial workplace transformations and changes for all workers.
Technical feasibility of automation is not the only factor that will influence the pace and extent of automation adoption.
Other factors such as the cost of development and deployment of automation solutions, labour-market dynamics, the benefits of automation beyond labour substitution, and regulatory and social acceptance are responsible too.
Taking these factors into account, McKinsey Global Institute research estimates show that anything between 0 and 30 per cent of the total hours worked globally could be automated by 2030.
What are the areas that will be most affected by automation?
The impact of automation on employment varies by occupation and sector.
The activities that are most susceptible to automation are physical activities in predictable environments, such as operating machinery and fast food preparation.
The collection and processing of data are two categories of activities that can be done better and faster with the help of machines.
This could potentially displace large amounts of labour in the mortgage, origination, paralegal work, accounting, and back-office transaction processing.
However, it is important that we note that when some tasks are automated, the employment in those occupations may not decline but rather be diverted to perform new tasks.
What are the areas where automation will not have a significant impact?
Jobs that involve people management, application of expertise, and social interactions are the ones on which automation will have minimal impact on. These are sectors where machines are unable to match human performance for now.
Occupations in unpredictable environments such as gardeners, plumbers, or providers of child and eldercare, will also see less automation by 2030. This is because these occupations are difficult to automate and often command relatively lower wages, which makes automation a less attractive business proposition.
Will Automation kill Jobs?
Not at all.
There will be an impact of automation on employment but it’s not as bad as you’d think.
The population that is displaced by automation are easily identified. The new jobs that are created indirectly from technology are less visible and spread across different sectors and geographies.
Let’s take a look at some sources of new labour that will boost job creation till 2030, even net of automation.
Rising incomes and consumption, especially in emerging economies
McKinsey Global Institute has estimated that global consumption between 2015 and 2030 will grow by $23 trillion.
Most of this increased consumption will come from the consuming classes in emerging economies.
The impact of these new consumers will not just be felt in the countries where the income is generated but in the countries that export to these countries.
It is estimated that around 250 million to 280 million new jobs could be created from the impact of rising incomes on consumer goods alone, with up to an additional 50 million to 85 million jobs generated from higher health and education spending.
At least 300 million more people will be over the age of 65 by 2030 than they were in 2014.
As people grow older, there is a shift in spending patterns, with a pronounced increase in spending on services such as healthcare and other personal services.
This will boost up significant demand for multiple occupations such as doctors, nurses and health technicians. There will also be an increased demand for home-health aides, personal-care aides, and nursing assistants in many countries. Globally, it is estimated that healthcare and related jobs from ageing could grow by 50 million to 85 million by 2030.
Development and deployment of technology
There will also be a growth in jobs that are related to the development and deployment of new technologies.
The total expenditure on technology could increase by more than 50 per cent in the period between 2015 and 2030.
The number of people employed in these occupations is small compared to those in healthcare or construction, but they are high-wage occupations. By 2030, we estimate that this trend could create 20 million to 50 million jobs globally.
Investments in infrastructure and buildings
Infrastructure and buildings are two areas of historic underspending that may create significant additional labour demand if action is taken to bridge infrastructure gaps and overcome housing shortages.
New demand could be created for up to 80 million jobs in the trendline scenario and, in the event of accelerated investment, up to 200 million more in the step-up scenario. These jobs include architects, engineers, electricians, carpenters, and other skilled tradespeople, as well as construction workers.
Investments in renewable energy, energy efficiency, and climate adaptation
Investments in renewable energy, such as wind and solar; energy-efficiency technologies; and adaptation and mitigation of climate change may create new demand for workers in a range of occupations, including manufacturing, construction, and installation.
These investments could create up to ten million new jobs in the trendline scenario and up to ten million additional jobs globally in the step-up scenario.
‘Marketization’ of previously unpaid domestic work
The last trend we consider is the potential to pay for services that substitute for currently unpaid and primarily domestic work.
This so-called marketization of previously unpaid work is already prevalent in advanced economies, and rising female workforce participation worldwide could accelerate the trend.
We estimate that this could create 50 million to 90 million jobs globally, mainly in occupations such as childcare, early-childhood education, cleaning, cooking, and gardening.
When we look at the net changes in job growth across all countries, the categories with the highest percentage job growth net of automation include the following:
Professionals such as engineers, scientists, accountants, and analysts.
IT professionals and other technology specialists.
Managers and executives, whose work cannot easily be replaced by machines.
Educators, especially in emerging economies with young populations.
“Creatives,” a small but growing category of artists, performers, and entertainers who will be in demand as rising incomes create more demand for leisure and recreation.
Builders and related professions, particularly in the scenario that involves higher investments in infrastructure and buildings.
Manual and service jobs in unpredictable environments, such as home health aides and gardeners.
What will automation mean for skills and wages?
The current educational requirements of occupations that may grow are higher than those for the jobs that are displaced by automation.
In advanced economies, occupations that currently require only a secondary education or less see a net decline from automation, while those occupations requiring college degrees and higher growth.
In economies like India and other emerging economies, there is higher labour demand available for all education levels.
The largest number of jobs require a secondary education at least. However, the fastest rate of job growth will be for jobs that are currently requiring a college or advanced degree.
As a consequence of automation, workers in the future will spend more time on the activities that machines are less capable of, activities such as people management, application of expertise and communicating with others.
They will spend less time on predictable physical activities and on collecting and processing data, where machines already exceed human performance.
The skills and capabilities required will also shift, requiring more social and emotional skills and more advanced cognitive capabilities, such as logical reasoning and creativity.
An analysis done by McKinsey Global Institute shows that the maximum job growth in the United States and other advanced economies will be in fields that are currently at the higher end of the wage distribution.
Some occupations that are currently low wages, such as nursing assistants and teaching assistants, will also increase, while a wide range of middle-income occupations will have the largest employment declines.
The wage-trend picture is quite different in emerging economies such as China and India, where our scenarios show that middle-wage jobs such as retail salespeople and teachers will grow the most as these economies develop. This implies that their consuming class will continue to grow in the decades ahead.
With increased automation of processes, businesses will be on the frontlines of the workplace as it changes.
They will be required to reevaluate their business processes and talent strategies and workforce needs. They will need to carefully consider which individuals are needed.
A lot of companies will find that it is in their self-interest as well as societal responsibility to train and prepare workers for a new world of work.
The above graph shows the effects of automation on employment.
Along with businesses, individuals will also be required to be prepared for a rapidly evolving future of work.
Upgrading themselves by learning new skills that are in high demand will prove to be critical for their own well-being.
Human labour will be in demand, but workers across the world will need to dispel traditional notions of where they work, how they work, and what talents and capabilities they bring to that work.
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