As Europe and the United States grapple with tightening labor markets and a deceleration in productivity growth, the emergence of AI and automation presents both challenges and opportunities. To fully harness the potential of generative AI (gen AI) and other advanced technologies, both regions will need to address critical gaps in human capital while accelerating technology adoption. This article explores the upcoming shifts in labor demand, the anticipated impact of automation, and the urgent need for skill enhancements to navigate the evolving job landscape.
Shifts in Labor Demand: A Glimpse into the Future
Recent modeling of the future of work reveals significant changes in labor demand driven by technological advancements and broader societal trends. By 2030, Europe and the United States will see a rise in demand for workers in STEM fields, healthcare, and other high-skill professions. Conversely, occupations involving repetitive tasks, such as office work, production, and customer service, are expected to decline as automation becomes more prevalent.
The adoption of generative AI is anticipated to accelerate these trends. Our analysis suggests that up to 30% of current hours worked could be automated by 2030, significantly reshaping the labor market. In Europe, this could necessitate up to 12 million occupational transitions, doubling the pre-pandemic pace. In the U.S., similar transitions could reach nearly 12 million, aligning with historical norms. These projections underscore the need for both regions to prepare for a rapid evolution in job roles and skill requirements.
The Role of Skills in the AI Era
The shift in demand will bring about a profound transformation in the skills required by the workforce. Technological skills are set to experience substantial growth, with increases of 25% in Europe and 29% in the U.S. by 2030. Social and emotional skills, essential for roles in healthcare and management, will also see a rise, with a projected increase of 11% in Europe and 14% in the U.S.
Conversely, basic cognitive skills required for office support and customer service roles are expected to decline by 14%, as these tasks become increasingly automated. Higher cognitive skills, while still in demand, may also see a slight decrease, with a potential decline of 19% in advanced literacy and quantitative skills.
Surveyed executives across Europe and the U.S. report significant skills shortages, particularly in advanced IT, data analysis, and critical thinking. To address these gaps, companies plan to focus on retraining existing employees rather than solely relying on new hires or subcontracting. This approach is crucial for adapting to the new technological landscape and ensuring that workers can transition into roles that require advanced and adaptive skills.
Addressing the Challenges of Occupational Transitions
The rapid pace of occupational transitions will impact workers differently based on their wage levels. Lower-wage workers will face the greatest challenges, with a significantly higher likelihood of needing to change occupations compared to higher-wage earners. In the U.S., those in the lowest-wage brackets are up to 14 times more likely to face such transitions than their higher-earning counterparts. In Europe, the disparity is somewhat lower but still significant.
This shift underscores the importance of targeted retraining and support for workers transitioning to new roles. Without effective redeployment strategies, there is a risk of exacerbating labor market polarization, with a mismatch between high-wage job availability and the skills of the workforce.
Strategic Responses for Businesses and Policymakers
For businesses and policymakers, the choices made today will significantly influence future productivity and societal outcomes. Embracing rapid technology adoption and proactive worker redeployment could potentially increase annual productivity growth to 3% by 2030. Conversely, slower adoption and inadequate redeployment could limit productivity growth to just 0.3%, closely mirroring current levels.
Four Priorities for Companies:
- Understand the Potential: Leaders must grasp the full potential of AI and automation technologies, including their impact on role composition and skills requirements.
- Plan Strategic Workforce Shifts: Companies should assess their future talent needs based on identified use cases and plan for necessary recruitment, upskilling, or reskilling.
- Prioritize People Development: Developing AI capabilities in the workforce and adapting HR strategies to the new work environment are essential for sustaining company strategy.
- Pursue Executive Education: Business leaders should undertake their own education on automation technologies to drive effective change and model best practices within their organizations.
Conclusion
The future of work in Europe and the United States will be shaped by the rapid advancement of AI and automation technologies. While these changes present significant challenges, they also offer opportunities to boost productivity and enhance societal outcomes. The key to navigating this transformation lies in the simultaneous development of human capital and the strategic deployment of technology. By addressing skills gaps and adopting a forward-thinking approach, businesses and policymakers can turn these challenges into opportunities for growth and innovation in the new era of work.
Source: McKinsey & Company. «A New Future of Work: The Race to Deploy AI and Raise Skills in Europe and Beyond.» McKinsey Global Institute, August 2024: https://www.mckinsey.com/mgi/our-research/a-new-future-of-work-the-race-to-deploy-ai-and-raise-skills-in-europe-and-beyond
