The global workforce currently faces a major transition. According to a recent McKinsey Global Institute report, by 2030 roughly 14% of the global workforce may need to switch occupational categories as digitisation, automation, and advances in artificial intelligence disrupt the world of work. The kinds of skills companies require will shift, with profound implications for the career paths individuals will need to pursue.
According to the report, Jobs lost, jobs gained: Workforce transitions in a time of automation, in terms of who must find new jobs, it is an unknown territory. The speed of change is fast and the task confronting every economy, particularly advanced economies, will likely be to retrain and redeploy tens of millions of midcareer, middle-age workers. As the report notes, “there are few precedents in which societies have successfully retrained such large numbers of people”.
So far, growing awareness of the scale of the task ahead has yet to translate into action. Indeed, public spending on labour-force training and support has fallen steadily for years in most member countries of the Organisation for Economic Co-Operation and Development (OECD). Nor do corporate-training budgets appear to be on any kind of upswing. But that may be about to change.
Among companies on the front lines, according to a recent McKinsey survey, executives increasingly see investing in retraining and upskilling existing workers as an urgent business priority—and they also believe that this is an issue where corporations, not governments, must take the lead.
According to the survey, 66% see addressing potential skills gaps related to automation/digitisation within their workforces as at least a top-ten priority. The driver behind this sense of urgency is the accelerating pace of enterprise-wide transformation. Looking back over the past five years, only about a third of executives said technological change had caused them to retrain or replace more than a quarter of their employees. But when they look out over the next five years, that narrative changes.
62% of executives believe they will need to retrain or replace more than a quarter of their workforce between now and 2023 due to advancing automation and digitisation. The threat looms larger in the United States and Europe (64% and 70% respectively) than in the rest of the world (only 55%)—and it is felt especially acutely among the biggest companies. 70% of executives at companies with more than $500 million in annual revenues see technological disruption over the next five years affecting more than a quarter of their workers.
Appropriately, this keen sense of the challenge ahead comes with a strong feeling of ownership. While they clearly do not expect to solve this alone—forging creative partnerships with a wide range of relevant players, for example, will be critical—by a nearly a 5:1 margin, the executives believe that corporations, not governments, educators, or individual workers, should take the lead in trying to close the looming skills gap.
As for solutions, 82% of executives at companies with more than $100 million in annual revenues believe retraining and reskilling must be at least half of the answer to addressing their skills gap.
Main barriers to upskilling and reskilling
Now the bad news: only 16% of private-sector business leaders in this group feel “very prepared” to address potential skills gaps, with roughly twice as many feeling either “somewhat unprepared” or “very unprepared.” The majority felt “somewhat prepared”—hardly a clarion call of confidence.
What are the main barriers? About one-third of executives feel an urgent need to rethink and upgrade their current HR infrastructure. Many companies are also struggling to figure out how job roles will change and what kind of talent they will require over the next five to 10 years. Some executives who saw this as a top priority admit they currently lack a good understanding of how automation and/or digitisation will affect their future skills needs.
For many companies, cracking the code on reskilling is partly about retaining their licence to operate by empowering employees to be more productive. 38% of executives in the survey, across all regions, cited the desire to “align with our organisation’s mission and values” as a key reason for taking action. In a similar vein, at the World Economic Forum in Davos, 80% of CEOs who were investing heavily in artificial intelligence also publicly pledged to retain and retrain existing employees.
As digitisation, automation, and artificial intelligence (AI) reshape whole industries and every enterprise, the only way to realise the potential productivity dividends from that investment will be to have the people and processes in place to capture it. Managing this transition well, in short, is not just a social good; it’s a competitive imperative. That’s why a resounding majority of respondents said the main reason they were willing to invest in retraining was to increase employee productivity.
At the moment, most top executives have far more questions than answers about what it will take to meet the reskilling challenge at the kind of scale the next decade will likely demand.
According to McKinsey, success will require an understanding of how technology will change the skill requirements within a company. Once this is understood, the next step will be deciding whether to tap into new models of online and offline learning and training or partner with traditional educational providers.
Policy makers will need to consider new forms of unemployment income and worker transition support, and foster more intensive and innovative collaboration between the public and private sectors.
Individuals will need to step up too, as will governments. Depending on the speed and scale of the coming workforce transition, many countries may need to undertake major initiatives. But for now, there is some comfort in the clear message of McKinsey’s survey: among large companies, senior executives see an urgent need to rethink and retool their role in helping workers develop the right skills for a rapidly changing economy—and their will to meet this challenge is strong.
Source: McKinsey Global Institute, January 2018