Vanguard’s chief global economist called it the most important trend of his lifetime. Nobel prize-winning economist Robert Shiller said it was the single-most worrisome issue about the economy’s prospects going forward.
Everywhere, analysts are watching the rise of automation, robotics and artificial intelligence for the impact they could have on the global economy, but even with that level of interest, people may not realize just how widespread the impact of these intertwined trends could be.
According to a new study by McKinsey & Co., the fallout from this issue could be tremendous, with tens of millions of jobs impacted worldwide in the coming years.
“Major transitions lie ahead that could match or even exceed the scale of historical shifts out of agriculture and manufacturing,” the report read. “Our scenarios suggest that by 2030, 75 million to 375 million workers (3 to 14 percent of the global workforce) will need to switch occupational categories. Moreover, all workers will need to adapt, as their occupations evolve alongside increasingly capable machines.”
The report suggested that in 60% of occupations, 30% of the job’s work activities could be automated in coming years. Such forecasts sound devastating for workers, but McKinsey suggested that the real story was jobs being changed, as opposed to their simply being lost.
“While about half of all work activities globally have the technical potential to be automated by adapting currently demonstrated technologies, the proportion of work actually displaced by 2030 will likely be lower, because of technical, economic, and social factors that affect adoption,” it wrote. “It will also create new occupations that do not exist today, much as technologies of the past have done.”
Such shifts are likely to be more concentrated in lower paying jobs. Last year, the White House’s annual economic report of the president (under President Barack Obama) forecast an 83% chance that automation will take a job with an hourly wage below $20, a 31% chance automation will take a job with an hourly wage between $20 and $40, and just a 4% chance automation will take a job with an hourly wage above $40. According to recent research cited by Vanguard’s economist, every industrial robot takes up to six jobs, with some six million jobs at risk of being lost to automation over the coming decade.
The concentration of this trend will also depend on geography. In the United States, for example, McKinsey suggests that by 2030, 23% of current work activity hours could be automated. Meanwhile 39 million workers could be displaced, while 13% of the work force may need to switch occupational groups as automation takes over their current one. Those figures, which McKinsey said illustrated a range of outcomes, as opposed to a forecast, are based on the “midpoint scenario” for technology improvement and adoption. In the “rapid scenario,” 44% of work hours could be automated, while 73 million are displaced and 33% have to switch occupational groups.
For China (in the midpoint scenario), 16% of work activity hours could be automated, while 118 million could be displaced. In Germany, 24% of hours could be automated, while 9 million workers are displaced.
Carl Benedikt Frey and Michael Osborne, professors at Oxford University, suggested that as early as 2022, 47% of U.S. jobs — which would translate to about 70 million people — could be automated. Among other major economies, 69% of jobs in India and 77% of jobs in China could face the same fate.
According to Allied Market Research, the global industrial robotics market is seen growing at an compound annual growth rate of 5.4% through 2020, reaching a size of $41.2 billion by that point.
An exchange-traded fund that tied to this theme, the Global X Robotics & Artificial Intelligence ETF BOTZ, -0.29% , is up more than 60% so far this year. A similar fund, the ROBO Global Robotics & Automation Index ETF ROBO, -0.29% , is up 45.5%. Both are well above the 17.3% rise of the S&P 500 SPX, -0.20%
This article was originally published on Nov. 30.