Robots Threaten Bigger Slice of Jobs in US, Other Rich Nations

The world is commonly divided into industrialized and emerging economies. A new study of how technology will transform demand for workers suggests we might talk of the automated and automating worlds instead.

Economic think tank McKinsey Global Institute forecast changes in demand for different kinds of labor across 45 countries as technologies improve to perform physical or office tasks. One key result: Robots pose a more immediate and disruptive threat to the US middle class than they do to middle-income workers in less developed countries like India.

The report warns that in the US technology will crimp demand for many types of work, such as office administration and operating construction equipment. That would add to the existing squeeze on middle-class incomes by displacing some workers, and likely push down wages for those still employed in less in-demand work. Meanwhile, automation is forecast to be less marked in countries such as India, where the relative cost of new technology is much higher and labor much cheaper. That will allow developing-world incomes and the ranks of the middle class to keep growing healthily, the report says.

Overall, the MGI report guesses that automation will displace the jobs of 400 million to 800 million people between now and 2030. But it also looked at potential sources of new demand for labor and came up with good news. Plenty of new jobs should be created by things like companies spending the additional earnings unlocked by deploying automation, and the healthcare demands from aging populations. “There will be enough jobs for all of us in most scenarios,” says Susan Lund, a co-author of the report.

The automation gap: rich countries are expected to automate a much larger percentage of work than poorer ones between now and 2030.

McKinsey Global Institute

MGI mapped possible futures for three rich, and three poor countries in particular detail—the US, Germany, Japan, Mexico, India, and China. In the most-likely scenario, 9 percent of work in India, 13 percent in Mexico, and 16 percent in China will be automated by 2030. In the US, Japan, and Germany, that figure will be closer to 25 percent.

The analysis suggests the prospects of traditionally middle-class occupations will differ markedly between rich and poorer countries in the next decade or so. In the three more prosperous countries, demand for office administrators is seen contracting 25 percent or more as software takes on more of that work, for example. But demand for such work will increase in the three poorer countries, the analysis finds, as incomes and consumer and business spending continue to grow.

China, which is more heavily industrialized than other emerging economies, sometimes occupies a middle ground in McKinsey’s view of the road ahead. It has automation causing demand for crane operators to decline by between 15 and 24 percent in the US, Germany, and Japan, and by 5 to 14 percent in China, while booming 25 percent or more in India and Mexico.

Lund, the report co-author, says matching displaced workers to newly created jobs is the biggest challenge facing policymakers in America and elsewhere. In the US, MGI projects that the number of jobs requiring a college degree or more will grow, while jobs requiring less education will shrink.

But government and corporate spending on worker training has declined over the past two decades, and a recent report by the Brookings Institution found that the country has a severe and immediate problem with workers lacking relatively basic digital skills, such as familiarity with spreadsheets. A recent pledge by Google to give $1 billion to projects that help workers with their digital skillsets appears well-aimed, but is unlikely to solve the problem alone.

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Developing economies have their own version of that retraining problem. Lund says India will face increased demand for workers with all levels of education between now and 2030, but particularly for people with high school diplomas. That will challenge the vast country’s school system.

Although the short-term disruption from automation may be smaller in developing countries than in richer countries, the developing nations face more difficult challenges in the longer term.

China has shown how low-cost manufacturing can provide a kind of step ladder that helps a country gradually climb into more complex and lucrative sectors, says Brad DeLong, an economics professor at University of California, Berkeley, who worked in the Clinton administration.

But as automation technology gets cheaper and more capable, more manufacturing likely will migrate back to countries like the US. “The fear is that China is the last country for which this will be a successful strategy,” DeLong says. Governments need to think not just about how automation affects workers, but their entire economic underpinnings.

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