Generative artificial intelligence is gaining attention worldwide due to its potential to automate tasks that previously required advanced cognitive skills.
This raises the real possibility that many highly educated and experienced workers could be replaced by algorithms: What if machines were to take on the jobs of screenwriters, lawyers, middle managers and even senior executives rather than handloom weavers and car mechanics?
One response is to assume that skills no longer matter, or that education should be downplayed. On the contrary, human-machine interaction has more potential than ever to increase productivity and income for all, but we humans need to work harder. We need to get better at understanding context, thinking outside the box, managing relationships with other humans, and all the other things that computers are bad at.
According to a recent report from the McKinsey Global Institute, in a moderate automation scenario, up to 30% of current work hours in developed countries could be automated by 2030. While automation has been squeezing workers for decades, generative AI heralds a significant acceleration and heartbreaking change for many who thought their careers were stable.
In the United States and the European Union, the number of people employed as office workers, manufacturing workers and customer service representatives will almost certainly decline as generative AI becomes more widespread. The report looks at nine EU countries that account for 75% of the European workforce – the Czech Republic, Denmark, France, Germany, Italy, the Netherlands, Poland, Spain and Sweden – as well as the UK.
But it's not all bad news. The report predicts that these countries are likely to see increased demand for workers in highly skilled occupations such as healthcare, clean energy, and scientific research and development. Of course, other factors are at work here, including efforts to achieve net-zero emissions, which are crucial for new job creation in all developed countries, an aging workforce, especially in Europe, the continued expansion of private sector e-commerce, and government-funded infrastructure strengthening.
Pressure to change jobs
Rather than mass unemployment, it is most likely that many people will soon face pressure to change jobs. Under reasonable assumptions, Europe could see up to 12 million job changes over the next six years.
The projected annual rate of occupational transitions (0.8% of employed persons) is lower than the relatively high rate observed in Europe during the COVID-19 pandemic (1.2%), but twice as high as the pre-pandemic norm (0.4%). In the United States, employment transitions over the same period could also reach about 12 million, but this is likely to be more manageable as the United States already had a high pre-pandemic transition rate compared to Europe (1.2%).
Executives on both sides of the Atlantic are already concerned about existing skills shortages and mismatches amid a tightening labor market. The growing demand for social and emotional skills, along with new technological developments, is good news for those with the right qualifications. More than 1,100 executives surveyed by a McKinsey team in Europe and the United States highlighted the need for more workers with advanced information technology and data analytics skills, as well as critical thinking, creativity, and “education and training.”
The impact on wages will be significant. Labour demand will shift towards already higher paying occupations in both Europe and the US, and there is a real risk of job losses in low paying white collar occupations. These workers will need to learn new skills to get higher paying jobs. If they can acquire these skills (on their own, through their employers or with government support), they will have the chance to move up the wage ladder.
However, there is a real risk that the labour market will become even more polarised, with more high-paying job vacancies than there are qualified workers (leading to a further rise in the top wage) while more workers compete for an increasingly scarce number of low-paying jobs (leading to a further fall in the lower end of the wage distribution). This outcome would be an unfortunate reversal of the narrowing wage gap in the post-pandemic labour market. Fortunately, this is avoidable.
For policymakers, the key lesson is that human capital is more important than ever to national competitiveness and shared prosperity. Some manual labor will remain with humans; robots are relatively bad at many basic transportation and cleaning tasks. But business executives are now convinced that they will need to retrain many workers to meet all skill needs. Public policy should encourage employers to maintain this stance as much as possible and to retrain rather than replace workers.
New technologies have the potential to deliver significant productivity gains and shared prosperity, especially in Europe, but only if their adoption is accompanied by improved human skills and more active redeployment of workers.
To achieve this in the age of generative AI, employers should be as open as possible about emerging skills gaps, and governments should focus on making it as easy as possible for all workers to upgrade their skills in a timely and appropriate manner.
Simon Johnson is a former chief economist at the International Monetary Fund and currently a professor at the MIT Sloan School of Management and author, with Daron Acemoglu, of “Power and Progress: The Millennial Struggle for Technology and Prosperity.” Eric Hazan is a senior partner at McKinsey & Company and a member of the McKinsey Global Institute Council.
© Project Syndicate 2024
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