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McKinsey: Automation may wipe out 1/3 of America’s workforce by 2030

Summary:
As I’ve been working on my new book, The Age of Transformation, the chapter on the future of work has been the most challenging one to think and write about; and so I’m always on the lookout for good thinking and new data. Now, McKinsey & Co. has come out with a comprehensive report on the predicted near-future effects of automation on employment. International in scope, the report, entitled “Jobs Lost, Jobs Gained: Workforce Transitions in a Time of Automation,” takes us a big step closer to understanding the massive impacts of the transformation we are now embarked upon.  Since the report itself is 160 pages long (but very readable), today’s Outside the Box is a helpful review of the report that appeared this morning on the Axios site. The review’s

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As I’ve been working on my new book, The Age of Transformation, the chapter on the future of work has been the most challenging one to think and write about; and so I’m always on the lookout for good thinking and new data. Now, McKinsey & Co. has come out with a comprehensive report on the predicted near-future effects of automation on employment.

McKinsey: Automation may wipe out 1/3 of America’s workforce by 2030

International in scope, the report, entitled “Jobs Lost, Jobs Gained: Workforce Transitions in a Time of Automation,” takes us a big step closer to understanding the massive impacts of the transformation we are now embarked upon. 

Since the report itself is 160 pages long (but very readable), today’s Outside the Box is a helpful review of the report that appeared this morning on the Axios site. The review’s author, Steve LeVine, has this to say about the scope of the employment challenge:

The transition compares to the U.S. shift from a largely agricultural to an industrial-services economy in the early 1900s forward. But this time, it’s not young people leaving farms, but mid-career workers who need new skills. “There are few precedents in which societies have successfully retrained such large numbers of people,” the report says, and that is the key question: how do you retrain people in their 30s, 40s and 50s for entirely new professions?

Good question! Since the bulk of those displaced will have been doing what McKinsey terms “predictable physical” labor, and since the new jobs that are created will, the report says, “require social and emotional skills, creativity, [and] high-level cognitive capabilities,” there is likely to be severe stress on our existing educational and job-training systems.

McKinsey estimates that up to 30% of the hours worked globally may be automated by 2030, with more workers displaced in advanced than in emerging countries. A third of the US workforce could be seeking new employment. If our middle class is on shaky ground now – and creating seismic social and political pressures – where will be after 12 more years of technological disruption?

Good question. This is all part of a theme that I have been writing about: the fragmentation of society. I am more and more concerned. There is a tremendous amount of frustration in this country now. I don’t see the “tax reform” that seems to be working its way through the peristaltic innards of Congress making the middle class feel any better. 

I am in Tulsa, in the maternity ward with my daughter Amanda and my new granddaughter, Brynlee. The second picture is with Shane and me. Not sure what her employment choices will look like in 2040, but right now she is looking awesome.

McKinsey: Automation may wipe out 1/3 of America’s workforce by 2030

McKinsey: Automation may wipe out 1/3 of America’s workforce by 2030

I’m hitting the send button and going back to what’s important. You have a great week. I am.

Your thinking the world is pretty good analyst,

John Mauldin, Editor
Outside the Box

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By Steve LeVine
November 29, 2017
Originally published here

In a new study that is optimistic about automation yet stark in its appraisal of the challenge ahead, McKinsey says massive government intervention will be required to hold societies together against the ravages of labor disruption over the next 13 years. Up to 800 million people—including a third of the work force in the U.S. and Germany—will be made jobless by 2030, the study says.

The bottom line: The economy of most countries will eventually replace the lost jobs, the study says, but many of the unemployed will need considerable help to shift to new work, and salaries could continue to flatline. "It's a Marshall Plan size of task," Michael Chui, lead author of the McKinsey report, tells Axios.

In the eight-month study, the McKinsey Global Institute, the firm's think tank, found that almost half of those thrown out of work—375 million people, comprising 14% of the global work force—will have to find entirely new occupations, since their old one will either no longer exist or need far fewer workers. Chinese will have the highest such absolute numbers—100 million people changing occupations, or 12% of the country's 2030 work force.

I asked Chui what surprised him the most of the findings. "The degree of transition that needs to happen over time is a real eye opener," he said.

McKinsey: Automation may wipe out 1/3 of America’s workforce by 2030

The details:
  • Up to 30% of the hours worked globally may be automated by 2030.
  • The transition compares to the U.S. shift from a largely agricultural to an industrial-services economy in the early 1900s forward. But this time, it's not young people leaving farms, but mid-career workers who need new skills. "There are few precedents in which societies have successfully retrained such large numbers of people," the report says, and that is the key question: how do you retrain people in their 30s, 40s and 50s for entirely new professions?
  • Just as they are now, wages may still not be sufficient for a middle-class standard of living. But "a healthy consumer class is essential for both economic growth and social stability," the report says. The U.S. should therefore consider income supplement programs, to establish a bottom-line standard of living.
  • Whether the transition to a far more automated society goes smoothly rests almost entirely "on the choices we make," Chui said. For example, wages can be exacerbated or improved. Chui recommended "more investment in infrastructure, and that those workers be paid a middle wage."

Do not attempt to slow the rollout of AI and robotization, the report urged, but instead accelerate it, because a slowdown "would curtail the contributions that these technologies make to business dynamism and economic growth."

John Mauldin

Each week, investors and financial professionals around the globe turn to John Mauldin to better understand Wall Street, global markets, and the drivers of the world economy. And for good reason. John is a noted financial expert, a New York Times best-selling author, a pioneering online commentator, and the publisher of one of the first publications to provide investors with free, unbiased information and guidance—Thoughts from the Frontline—one of the most widely read investment newsletters in the world.

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