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Automation threatens 800 million jobs, but technology could still save us, says report

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New analysis says governments need to act now to help a labor force in flux

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A new report predicts that by 2030, as many as 800 million jobs could be lost worldwide to automation. The study, compiled by the McKinsey Global Institute, says that advances in AI and robotics will have a drastic effect on everyday working lives, comparable to the shift away from agricultural societies during the Industrial Revolution. In the US alone, between 39 and 73 million jobs stand to be automated — making up around a third of the total workforce.

But, the report also states that as in the past, technology will not be a purely destructive force. New jobs will be created; existing roles will be redefined; and workers will have the opportunity to switch careers. The challenge particular to this generation, say the authors, is managing the transition. Income inequality is likely to grow, possibly leading to political instability; and the individuals who need to retrain for new careers won’t be the young, but middle-aged professionals.

The changes won’t hit everyone equally. Only 5 percent of current occupations stand to be completely automated if today’s cutting-edge technology is widely adopted, while in 60 percent of jobs, one-third of activities will be automated. Quoting a US government commission from the 1960s on the same topic, McKinsey’s researchers summarize: “technology destroys jobs, but not work.” As an example, it examines the effect of the personal computer in the US since 1980, finding that the invention led to the creation of 18.5 million new jobs, even when accounting for jobs lost. (The same might not be true of industrial robots, which earlier reports suggest destroy jobs overall.)

As with previous studies on this topic, there’s much to be said for taking a skeptical view. Economic forecasting is not an exact science, and McKinsey’s researchers are keen to stress that their predictions are just that. The figure of 800 million jobs lost worldwide, for example, is only the most extreme of possible scenarios, and the report also suggests a middle estimate of 400 million jobs.

Nevertheless, this study is one of the most comprehensive in recent years, modeling changes in more than 800 occupations, and taking in some 46 countries, accounting for 90 percent of world GDP. Six nations are also analyzed in detail — the US, China, Germany, Japan, India, and Mexico — with these countries representing a range of economic situations and differently organized workforces.

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Industrial robots are only one part of automation. Many factors — like software that handles digital data — are comparatively invisible.
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The report stresses that the effects of automation on work will differ from country to country. Developed economies like the US and Germany are likely to be hit hardest by the coming changes, as higher average wages incentivizes automation. In America, the report predicts that employment in industries like health care will increase, as society copes with an aging population; while rote jobs that involve physical labor (machinist, cooks) or data processing (payroll clerks, data entry) are most at risk of automation.

In developed economies like the US, automation is also likely to lead to increased inequality. High-paying creative and cognitive jobs will be at a premium, while the demand for middle and low-skill occupations will decline. The result, says McKinsey, will be a “two-tiered labor market.” Previous reports have come to the same conclusion, finding that individuals in higher income brackets are more able to adapt to a changing job market, and that social mobility will suffer as a result, as traditional “stepping-stone jobs” (like a clerk working in a law firm) are eliminated.

It’s not all doom and gloom, though, as McKinsey states that the worst effects of this transition can be mitigated if governments take an active role. Michael Chui, the lead author of the report, compared the level of action needed to the Marshall Plan — an American initiative that pumped some $140 billion into Western Europe after WWII, helping countries rebuild and industrialize.

The report uses America’s transition out of agriculture as a historical example, pointing out that the decrease in farming jobs in the US was accompanied by major spending on secondary education and new laws enforcing compulsory attendance. In 1910, only 18 percent of children aged 14 to 17 went to high school; by 1940 this figure was 73 percent. The resulting increase in educated workers helped create a booming manufacturing industry and buoyant middle-class. A similar push is needed today, says McKinsey, yet over the last few decades, spending on labor force training and support has fallen. The conclusion of the report seems to be: automation doesn’t have to be a disaster, but only if politics keeps pace.