Skills: AI, automation changing the core nature of work, warns McKinsey

Skills: AI, automation changing the core nature of work, warns McKinsey

The average worker of the future is a socially adept leader, entrepreneur, and life-long learner with transferrable technology skills, who is also happy to work in a team, suggests a new McKinsey report. Chris Middleton looks at whether organisations can really find such people.

Reports about the growing IT skills gap in organisations have been circulating for as long as the internet has existed as a business tool, suggesting that the supposed urgency of tackling the problem has not been an impediment to many successful organisations.

However, a new report from management consultancy McKinsey suggests that the rapid introduction of automation and artificial intelligence systems within companies is changing the very nature of work itself, as technologies increasingly augment some human skills, and replace others completely.

Over the next decade, this will force companies to reconsider how work is organised internally, and the types of people they employ.

The 84-page report, Skill Shift: Automation and the Future of the Workforce, has been produced by the McKinsey Global Institute. It identifies a strong move towards technological, social and emotional skills – including leadership and management – and a moderate shift towards higher cognitive abilities, especially creativity.

At the same time, McKinsey forecasts a dramatic fall in the need for basic cognitive abilities – such as data input and processing – and for physical and manual skills. In short, a schism is opening up in the future workforce.

Sector shifts

The McKinsey report focuses on banking and insurance, energy and mining, healthcare, manufacturing, and retail in the US and in five European countries.

Overall, it finds that automation will accelerate a transformation in the workforce skills that companies have relied on so far this century. “Our research finds that the strongest growth in demand will be for technological skills, the smallest category today, which will rise by 55 percent and by 2030 will represent 17 percent of hours worked, up from 11 percent in 2016,” explains the report.

“This surge will affect demand for basic digital skills, as well as advanced technological skills, such as programming.”

Demand for social and emotional skills, such as leadership and managing others, will rise by 24 percent, to 22 percent of hours worked, says the report, which adds, “Among all the skill shifts our analysis indicated, the rise in demand for entrepreneurship and initiative-taking will be the fastest growing, with a 33 percent increase in the United States and a 32 percent rise in Europe.”

Overall, basic cognitive skills, which include data input and processing, will decline by 15 percent, falling from 18 to 14 percent of hours worked.

“Demand for physical and manual skills, which include general equipment operation, will also drop, by 14 percent, but will remain the largest category of workforce skills in 2030 in many countries, accounting for 25 percent of the total hours worked,” predicts the report.

However, in three of the countries McKinsey looked at – France, Germany, and the UK – the share of physical and manual skills in the economy will decline by 2030 to such an extent that this is no longer the largest skills group.

“In France and the United Kingdom, it is overtaken by social and emotional skills, while in Germany, it is overtaken as the largest category by higher cognitive skills,” explains the report.

These skill shifts will play out differently across sectors, suggests McKinsey. Healthcare, for example, will see a rising need for physical skills, even as demand for them declines in manufacturing and other sectors.

Culture shifts

Companies will need to make significant organisational changes at the same time as addressing these skill shifts to stay competitive.

McKinsey’s survey of more than 3,000 business leaders highlights a new emphasis on continuous learning for workers and a shift to more cross-functional and team-based work.

“As tasks change, jobs will need to be redefined and companies say they will need to become more agile. Independent work will likely grow,” says the report.

“Leadership and human resources will also need to adapt: almost 20 percent of companies say their executive team lacks sufficient knowledge to lead adoption of automation and artificial intelligence. Almost one in three firms are concerned that lacking the skills they need for automation adoption will hurt their future financial performance.”

Competition for high-skill workers will increase, says McKinsey, while displacement will be concentrated mainly on low-skill workers, continuing a trend that has already exacerbated income inequality and reduced middle-wage jobs this century – especially in the wake of the 2008-09 recession.

However, there is a caveat, warns the report. “A still-unanswered question about AI and the latest automation technologies is whether they will continue to favour high-skill workers over low-skill ones – or perhaps affect workers at all skill levels,” it says.

“One risk is that the recent decline of middle-income jobs and growing inequality could intensify as companies compete for talent to overcome both an excess supply of some skills and an excess demand for others.

“The impact on wages for different job profiles could be a greater polarisation even than today, with people who carry out non-repetitive, digital work seeing above average wages, while pay for repetitive, nondigital jobs might be below average.

“Today, we have the advantage of foreseeing the skill shifts to come, which gives us some time to anticipate and adjust for these and other social changes that may accompany automation and AI adoption,” adds the report.

Firms in the forefront of automation adoption expect to attract the talent they need, but slower adopters fear their options will be more limited. 

“Almost half of the companies we surveyed say they expect to take the lead in building the workforce of the future,” says the report, “but all stakeholders will need to work together to manage the large-scale retraining and other transition challenges ahead.”

The macro picture

So what can be done about these challenges at national level?

“Firms can collaborate with educators to reshape school and college curricula,” says McKinsey. “Industry associations can help build talent pipelines, while labour unions can help with cross-sector mobility.

“Governments will need to strengthen safeguards for workers in transition and encourage mobility, including with a shift to portable benefits, as ways of working and the workplace itself are transformed in the new era.”

Offer more attractive wages, urges McKinsey, hire away from competitors, broaden recruiting efforts, including from non-traditional sources, and use your industry connections.

Internet of Business says

Multiple reports on robotics and automation have made the same underlying point: that these new technologies risk creating greater economic disparity on two fronts. First, companies that are able to reap the rewards of automation first hand, versus those that are not; and second, the growing employability gap between those that have the transferrable or niche skills to succeed in the new world of work, and those that do not.

Other reports have suggested that automation, robotics, and AI will negatively impact human employment in regions that have already been worst hit by the recession, austerity, and a decline in traditional industries, such as manufacturing or fossil-fuel power.

However, the implication of the McKinsey report is that the most employable worker of the future will be a socially adept, entrepreneurial multi-tasker, leader, critical thinker, and ‘people person’, with technology skills that can be transferred from sector to sector.

The problem is that such people are already thin on the ground, and tend to run projects, rather than staff them. The current education and training system may not be suited to producing them en masse, without significant change – something that teachers, already tired of relentless tinkering with the system, may resist.

In the long term, the employment impact of robotics, AI, and automation may be neutral, as new types of work, new markets, and new businesses proliferate – as happened with ecommerce and mobility. But the short- to medium-term future may be far more difficult to navigate, and these challenges will coincide with other socio-economic effects.

So those reports from techUK and others suggesting that government needs to invest in life-long learning and training are brought into sharp relief by the McKinsey report: there really is no alternative, particularly as the West faces a future of ageing populations in ageing cities, while Asia and Africa face the inverse challenge: large populations of youth in young cities, as we explored in our recent report on robotics.

Asia in particular will throw down the gauntlet to the West. The vast investment by China and Japan in robotics, AI, and autonomous systems already dwarfs that of the US and Europe.