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A FUTURE THAT WORKS: AUTOMATION, EMPLOYMENT, AND PRODUCTIVITY JANUARY 2017 EXECUTIVE SUMMARY Since its founding in 1990, the McKinsey Global Institute (MGI) has sought to develop a deeper understanding of the evolving global economy. As the business and economics research arm of McKinsey & Company, MGI aims to provide leaders in the commercial, public, and social sectors with the facts and insights on which to base management and policy decisions. The Lauder Institute at the University of Pennsylvania ranked MGI the world’s number-one private-sector think tank in its 2015 Global Think Tank Index. MGI research combines the disciplines of economics and management, employing the analytical tools of economics with the insights of business leaders. Our “micro-to-macro” methodology examines microeconomic industry trends to better understand the broad macroeconomic forces affecting business strategy and public policy. MGI’s in-depth reports have covered more than 20 countries and 30 industries. Current research focuses on six themes: productivity and growth, natural resources, labor markets, the evolution of global financial markets, the economic impact of technology and innovation, and urbanization. Recent reports have assessed the economic benefits of tackling gender inequality, a new era of global competition, Chinese innovation, and digital globalization. MGI is led by four McKinsey & Company senior partners: Jacques Bughin, James Manyika, Jonathan Woetzel, and Frank Mattern, MGI’s chairman. Michael Chui, Susan Lund, Anu Madgavkar, Sree Ramaswamy, and Jaana Remes serve as MGI partners. Project teams are led by the MGI partners and a group of senior fellows and include consultants from McKinsey offices around the world. These teams draw on McKinsey’s global network of partners and industry and management experts. Input is provided by the MGI Council, which coleads projects and provides guidance; members are Andres Cadena, Richard Dobbs, Katy George, Rajat Gupta, Eric Hazan, Eric Labaye, Acha Leke, Scott Nyquist, Gary Pinkus, Shirish Sankhe, Oliver Tonby, and Eckart Windhagen. In addition, leading economists, including Nobel laureates, act as research advisers. The partners of McKinsey fund MGI’s research; it is not commissioned by any business, government, or other institution. For further information about MGI and to download reports, please visit www.mckinsey.com/mgi. Copyright © McKinsey & Company 2017 A FUTURE THAT WORKS: AUTOMATION, EMPLOYMENT, AND PRODUCTIVITY JANUARY 2017 James Manyika | San Francisco Michael Chui | San Francisco Mehdi Miremadi | Chicago Jacques Bughin | Brussels Katy George | New Jersey Paul Willmott | London Martin Dewhurst | London IN BRIEF A FUTURE THAT WORKS: AUTOMATION, EMPLOYMENT, AND PRODUCTIVITY Advances in robotics, artificial intelligence, and machine Technical, economic, and social factors will determine learning are ushering in a new age of automation, as the pace and extent of automation. Continued machines match or outperform human performance in a technical progress, for example in areas such range of work activities, including ones requiring cognitive as natural language processing, is a key factor. capabilities. In this report, part of our ongoing research Beyond technical feasibility, the cost of technology, into the future of work, we analyze the automation competition with labor including skills and supply and potential of the global economy, the factors that will demand dynamics, performance benefits including determine the pace and extent of workplace adoption, and beyond labor cost savings, and social and and the economic impact associated with its potential. regulatory acceptance will affect the pace and scope of automation. Our scenarios suggest that half of Automation of activities can enable businesses today’s work activities could be automated by 2055, to improve performance, by reducing errors and but this could happen up to 20 years earlier or later improving quality and speed, and in some cases depending on the various factors, in addition to other achieving outcomes that go beyond human wider economic conditions. capabilities. Automation also contributes to productivity, as it has done historically. At a time People will need to continue working alongside of lackluster productivity growth, this would give a machines to produce the growth in per capita GDP needed boost to economic growth and prosperity to which countries around the world aspire. Our and help offset the impact of a declining share of the productivity estimates assume that people displaced working-age population in many countries. Based by automation will find other employment. The on our scenario modeling, we estimate automation anticipated shift in the activities in the labor force is could raise productivity growth globally by 0.8 to of a similar order of magnitude as the long-term shift 1.4 percent annually. away from agriculture and decreases in manufacturing share of employment in the United States, both of Almost half the activities people are paid almost which were accompanied by the creation of new types $16 trillion in wages to do in the global economy of work not foreseen at the time. have the potential to be automated by adapting currently demonstrated technology, according For business, the performance benefits of automation to our analysis of more than 2,000 work activities are relatively clear, but the issues are more across 800 occupations. While less than 5 percent complicated for policy-makers. They should embrace of all occupations can be automated entirely using the opportunity for their economies to benefit from the demonstrated technologies, about 60 percent of all productivity growth potential and put in place policies occupations have at least 30 percent of constituent to encourage investment and market incentives to activities that could be automated. More occupations encourage continued progress and innovation. At the will change than will be automated away. same time, they must evolve and innovate policies that help workers and institutions adapt to the impact Activities most susceptible to automation involve on employment. This will likely include rethinking physical activities in highly structured and predictable education and training, income support and safety environments, as well as the collection and processing nets, as well as transition support for those dislocated. of data. In the United States, these activities make up Individuals in the workplace will need to engage 51 percent of activities in the economy accounting for more comprehensively with machines as part of their almost $2.7 trillion in wages. They are most prevalent everyday activities, and acquire new skills that will be in manufacturing, accommodation and food service, in demand in the new automation age. and retail trade, and include some middle-skill jobs. A global force that will transform economies and the workforce Technical automation potential by adapting currently demonstrated technologies Wages associated with technically automatable activities While few occupations are fully automatable, 60 percent of all occupations $ trillion have at least 30 percent technically automatable activities United States Remaining 2.7 Share of roles countries 5.1 ACTIVITIES WITH HIGHEST 100% = 820 roles AUTOMATION POTENTIAL: About 60% of occupations 100% = have at least 30% of 100 $15.8T Predictable physical activities 81% their activities that 4.1 91 1.1 China Processing data 69% are automatable India 1.1 Collecting data 64% 1.7 73 Japan Big 5 in Europe1 62 Labor associated with technically 51 automatable activities <5% of occupations consist 42 Million full-time equivalents (FTEs) of activities that are 34 100% automatable 26 Remaining 18 countries 332 China 394 8 100% = 1 1.1B Japan 35 54 100 >90 >80 >70 >60 >50 >40 >30 >20 >10 >0 1 Big 5 in Europe 60 233 Technical automation potential, % United States India 1 France, Germany, Italy, Spain, and the United Kingdom. Five factors affecting pace and Automation will boost global extent of adoption productivity and raise GDP G19 plus Nigeria 1 2 3 4 5 TECHNICAL COST OF LABOR ECONOMIC REGULATORY Productivity growth, % FEASIBILITY DEVELOPING MARKET BENEFITS AND SOCIAL Automation can help provide some of the productivity needed Technology AND DYNAMICS Include higher ACCEPTANCE to achieve future economic growth has to be DEPLOYING The supply, throughput Even when invented, SOLUTIONS demand, and and increased automation Employment growth, % integrated, Hardware costs of quality, makes will slow drastically because of aging and adapted and software human labor alongside business into solutions costs affect which labor cost sense, for specific activities will savings adoption can case use be automated take time Last 50 years Next 50 years Next 50 years Growth aspiration Potential impact of automation Scenarios around time spent on current work activities, % Adoption, Adoption, Technical automation Technical automation 1.8 Early scenario Late scenario potential, Early scenario potential, Late scenario 2.8 100 Technical automation 80 potential 1.7 1.4 must precede 0.8 adoption 60 0.1 0.1 0.1 40 Technical, 3.5 2.9 1.5 0.9 economic, and social Historical Required to Early Late 20 factors affect achieve scenario scenario pace of projected growth 0 adoption 2020 2030 2040 2050 2060 2065 in GDP per capita © Starship Technologies viii McKinsey Global Institute EXECUTIVE SUMMARY Automation is not a new phenomenon, and questions about its promise and effects have long accompanied
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