Director, McKinsey Global Institute (MGI); Senior Partner, McKinsey & Company
The idea that robots could replace humans in the workplace dates back to science fiction writers a century ago, and it has been a recurring theme in political life for almost as long. Back in 1964, US President Lyndon B. Johnson created a national commission to examine the impact of automation on the economy and employment. Automation should be viewed as an ally, not an enemy, he said at the time. “If we understand it, if we plan for it, if we apply it well, automation will not be a job destroyer or a family displaced. Instead, it can remove dullness from the work of man and provide him with more than man has ever had before.”
A half century later, technology has advanced at breakneck speed—who back then could have imagined the legions of robots at work today in manufacturing, Amazon’s drone shipments, or the artificial intelligence (AI) algorithms now being used to detect cancers? Machines today increasingly match or outperform human performance in a range of work activities, including ones requiring cognitive capabilities. Yet while the technology has changed, the issues that were such fraught topics 50 years ago have not. Will robots replace humans in the workplace? And if so, how quickly?
In that context, it is important to separate fact from fiction. The McKinsey Global Institute has just published a report on automation and its potential effects on productivity and the global economy, part of ongoing research into the future of work. It is based on an analysis of more than 2,000 workplace activities across 800 occupations, and 46 countries accounting for about 80% of the global economy.
Among our findings is that almost half the activities we pay people about $16 trillion in wages to do in the global economy have the potential to be automated using currently demonstrated technology. The most automatable activities involve data collection, data processing, and physical work in predictable environments like factories, which make up 51% of employment activities and $2.7 trillion of wages in the US and are most prevalent in sectors such as manufacturing, food services, transportation and warehousing, and retail.
But here’s the twist: More jobs will change than will be automated away in the short to medium term. Only a small proportion of all occupations, about 5%, can be automated entirely using these demonstrated technologies over the coming decade, although the proportion is likely to be higher in occupations in middle-skill job categories. But we find that about 30% of the activities in 60% of all occupations could be automated, and that will affect everyone from welders to landscape gardeners, mortgage brokers–and CEOs; we estimate about 25% of their time is currently spent on activities that machines could do, such as analyzing reports and data to inform decisions.
As companies deploy automation, we thus need to think more about mass redeployment rather than unemployment, and also to think about people working alongside machines and the skills that will be needed for the workforce of today and tomorrow—skills that will include a much closer interaction between humans and machines in the workplace. They include capabilities that are inherently human, including managing and developing people, and social and emotional reasoning.
It’s quite instructive to look back at how the economy has continued to prosper—and people have continued to work—since the 1960s, even as the workplace itself has been reshaped by technology. New jobs that could not have been imagined at the time, such as app developers or MRI technicians, have replaced obsolete ones like switchboard operators. That’s a pattern we have seen since the beginning of the Industrial Revolution two centuries ago, when more than 60% of Americans worked on the land; today’s it’s less than 2%. Could things be different this time?
Like President Johnson, we see that automation could make a major contribution to productivity and prosperity. Our research suggests that future automation could raise productivity growth globally by between 0.8% and 1.4% annually—which can make a meaningful contribution to global economic growth and compensate for the demographic headwinds of aging populations, although by itself is not sufficient to meet the aspirations of faster-growing emerging economies such as India or Indonesia.
For companies around the world, automation will also offer the potential to capture substantial value—and not just from labor substitution. The technologies enable higher throughput, enhanced quality, better outcomes, greater safety, and the opportunity to scale up or adopt new business models.
Just because the technical potential to automate a workplace activity exists does not mean that it will happen anytime soon, however. The pace and extent of automation will depend on a range of factors of which technical feasibility is only one—and there are still some important barriers to overcome, including the ability of computers to generate and understand natural language. Other factors include the dynamics of labor supply and demand. If there is no shortage in the labor market of cooks, it may not make business sense to replace them with an expensive machine.
The benefits for business are relatively clear, but for policy makers the issues are more complicated. They should embrace the opportunity for their economies to benefit from the productivity growth potential and put in place policies to encourage investment and market incentives to encourage continued progress and innovation. That includes modernizing regulations to meet the speed of progress. At the same time, they must evolve and innovate policies that help workers and institutions adapt to the impact on employment. This will likely include rethinking education and training, income support and safety nets, as well as transition support for those dislocated. Above all, a focus on the skills needed to thrive in this new era will be paramount, so that automation does indeed remain an ally. Not to be forgotten is the lesson from history that innovation, investment, and growth create demand and jobs that may once have seemed like science fiction.