A new future of work: The race to deploy AI and raise skills in Europe and beyond

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A new future of work: The race to deploy AI and raise skills in Europe and beyond

By Eric Hazan et al., | McKinsey & Company | May 21, 2024

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Amid tightening labor markets and a slowdown in productivity growth, Europe and the United States face shifts in labor demand, spurred by AI and automation. McKinsey’s updated modeling of the future of work finds that demand for workers in STEM-related, healthcare, and other high-skill professions would rise, while demand for occupations such as office workers, production workers, and customer service representatives would decline. By 2030, in a midpoint adoption scenario, up to 30 percent of current hours worked could be automated, accelerated by generative AI (gen AI). Efforts to achieve net-zero emissions, an aging workforce, and growth in e-commerce, as well as infrastructure and technology spending and overall economic growth, could also shift employment demand.

By 2030, Europe could require up to 12 million occupational transitions, double the prepandemic pace. In the United States, required transitions could reach almost 12 million, in line with the prepandemic norm. Both regions navigated even higher levels of labor market shifts at the height of the COVID-19 period, suggesting that they can handle this scale of future job transitions. The pace of occupational change is broadly similar among countries in Europe, although the specific mix reflects their economic variations.

Businesses will need a major skills upgrade. Demand for technological and social and emotional skills could rise as demand for physical and manual and higher cognitive skills stabilizes. Surveyed executives in Europe and the United States expressed a need not only for advanced IT and data analytics but also for critical thinking, creativity, and teaching and training—skills they report as currently being in short supply. Companies plan to focus on retraining workers, more than hiring or subcontracting, to meet skill needs.

Workers with lower wages face challenges of redeployment as demand reweights toward occupations with higher wages in both Europe and the United States. Occupations with lower wages are likely to see reductions in demand, and workers will need to acquire new skills to transition to better-paying work. If that doesn’t happen, there is a risk of a more polarized labor market, with more higher-wage jobs than workers and too many workers for existing lower-wage jobs.

Choices made today could revive productivity growth while creating better societal outcomes. Embracing the path of accelerated technology adoption with proactive worker redeployment could help Europe achieve an annual productivity growth rate of up to 3 percent through 2030. However, slow adoption would limit that to 0.3 percent, closer to today’s level of productivity growth in Western Europe. Slow worker redeployment would leave millions unable to participate productively in the future of work.

The adoption of automation technologies will be decisive in protecting businesses’ competitive advantage in an automation and AI era. To ensure successful deployment at a company level, business leaders can embrace four priorities:  Understand the potential.  Plan a strategic workforce shift.  Prioritize people development.  And pursue the executive-education journey on automation technologies.

2 key takeaways from the article

1. Amid tightening labor markets and a slowdown in productivity growth, Europe and the United States face shifts in labor demand, spurred by AI and automation. McKinsey’s updated modeling of the future of work finds that demand for workers in STEM-related, healthcare, and other high-skill professions would rise, while demand for occupations such as office workers, production workers, and customer service representatives would decline. By 2030, in a midpoint adoption scenario, up to 30 percent of current hours worked could be automated, accelerated by generative AI (gen AI). 
2. Some of the key highlights of the report are: By 2030, Europe could require up to 12 million occupational transitions, double the prepandemic pace. In the United States, required transitions could reach almost 12 million, in line with the prepandemic norm.  Businesses will need a major skills upgrade.  Workers with lower wages face challenges of redeployment as demand reweights toward occupations with higher wages in both Europe and the United States.  And choices made today could revive productivity growth while creating better societal outcomes. 

Full Report

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Topics:  Technology, Artificial Intelligence, Productivity