“The COVID-19 pandemic-induced lockdowns and related global recession of 2020 have created a highly uncertain outlook for the labour market,” said the World Economic Forum (WEF) in The Future of Jobs Report 2020. The pandemic has caused labor markets to change significantly faster than previously expected. What used to be considered the future of work has already arrived. As McKinsey noted in a May, 2020 article: “we have vaulted five years forward in consumer and business digital adoption in a matter of around eight weeks.”
The WEF report aims to shed light on the post-pandemic outlook for technology adoption, jobs and skills over the next five years, including detailed quantitative profiles on 15 industry sectors and 26 advanced and emerging countries. The report is based on a survey of senior executives from nearly 300 global companies which collectively employ 8 million workers. The survey asked 49 questions on the outlook for their companies’ workforce through 2025, including major trends affecting the labor market, the technologies their companies are adopting, the expected evolution of jobs and skills, their training and reskilling programs, and the near-term impact of the pandemic on their workforce.
“The global shift to a future of work is defined by an ever-expanding cohort of new technologies, by new sectors and markets, by global economic systems that are more interconnected than in any other point in history, and by information that travels fast and spreads wide. … As a new global recession brought on by the COVID-19 health pandemic impacts economies and labour markets, millions of workers have experienced changes which have profoundly transformed their lives within and beyond work, their well-being and their productivity. One of the defining features of these changes is their asymmetric nature - impacting already disadvantaged populations with greater ferocity and velocity.”
Let me summarize the report’s key findings and recommendations.
The pace of technology adoption is expected to remain unabated and may accelerate in some areas
As Rahm Emanuel famously said in a 2008 Wall Street Journal interview: “You never want a serious crisis to go to waste.” The Covid crisis has significantly accelerated the digital transformation of economies and societies. It’s ushered a new normal in which digital is increasingly central to every interaction, forcing individuals and institutions further up the adoption curve almost overnight.
Companies are embracing and scaling the changes they were forced to make to help them cope with the crisis. For example, a recent IDC study on the key trends that will shape the IT industry over the next five years predicted that 65%, of global GDP will be digitalized by 2022, driving $6.8 trillion of IT spending from 2020 to 2023; 80% of enterprises will accelerate their shift to cloud-centric infrastructures, applications and data services by the end of 2021,- twice as fast as pre-pandemic; an increasing number of organizations will deploy AI-based technologies in a variety of offerings, including customer service, fraud prevention, business process automation, physical asset management, healthcare, pharmaceutical research and entertainment; and by 2023, one-quarter of G2000 companies will acquire at least one AI software start-up to get access to skills and IP.
Although the number of jobs destroyed will be surpassed by the number of ‘jobs of tomorrow’ created, in contrast to previous years, job creation is slowing while job destruction accelerates
Opinions are fairly divided between the techno-pessimists, - who believe that technology advances will reduce human jobs, and the techno-optimists, - who believe that technology advances will produce as many jobs as they displace. After analyzing data from 46 countries, a 2017 McKinsey study concluded that a growing technology-based economy will create a significant number of new occupations, which will more than offset declines in occupations displaced by automation. But, the transitions will be very challenging - matching or even exceeding the scale of shifts out of agriculture and manufacturing we have seen in the past.”
The WEF report estimates that “by 2025, 85 million jobs may be displaced by a shift in the division of labour between humans and machines, while 97 million new roles may emerge that are more adapted to the new division of labour between humans, machines and algorithms.” However, “automation, in tandem with the COVID-19 recession, is creating a ‘double-disruption’ scenario for workers”: 43% of the companies surveyed plan to reduce their workforce, 41% expect to increase their use of contractors, and 34% expect to expand their workforce. “By 2025, the time spent on current tasks at work by humans and machines will be equal.”
In the absence of proactive efforts, inequality is likely to be exacerbated by the dual impact of technology and the pandemic recession
“Jobs held by lower wage workers, women and younger workers were more deeply impacted in the first phase of the economic contraction,” said the WEF report. “Comparing the impact of the Global Financial Crisis of 2008 on individuals with lower education levels to the impact of the COVID-19 crisis, the impact today is far more significant and more likely to deepen existing inequalities.”
A similar conclusion was reached by the recent MIT Work of the Future task force. “Amidst a technological ecosystem delivering rising productivity, and an economy generating plenty of jobs (at least until the COVID-19 crisis), we found a labor market in which the fruits are so unequally distributed, so skewed towards the top, that the majority of workers have tasted only a tiny morsel of a vast harvest,” wrote the task force in its final report. But, it further argued that with better policies in place, more people could enjoy good careers even as new technologies transform the very nature of work.
Skills gaps continue to be high as in-demand skills across jobs change in the next five years
A number of recent reports have highlighted how technology is reshaping the skills needed for a good, well-paying job. While the demands for routine blue- and white-collar skills that can be replaced by technology are declining, the demands for high cognitive and social skills, - such as complex problem-solving, adaptability, communications and team work, - have been rising.
“On average, companies estimate that around 40% of workers will require reskilling of six months or less and 94% of business leaders report that they expect employees to pick up new skills on the job,” notes the WEF report. The majority of employers surveyed recognize the value of investments in human capital and expect to offer reskilling to over 70% of their employees by 2025.
“A significant number of business leaders understand that reskilling employees, particularly in industry coalitions and in public-private collaborations, is both cost-effective and has significant mid- to long-term dividends - not only for their enterprise but also for the benefit of society more broadly. Companies hope to internally redeploy nearly 50% of workers displaced by technological automation and augmentation, as opposed to making wider use of layoffs and automation-based labour savings as a core workforce strategy.”
The public sector needs to provide stronger support for reskilling and upskilling for at-risk or displaced workers
“Currently, only 21% of businesses report being able to make use of public funds to support their employees through reskilling and upskilling. The public sector will need to create incentives for investments in the markets and jobs of tomorrow; provide stronger safety nets for displaced workers in the midst of job transitions; and to decisively tackle long-delayed improvements to education and training systems.”
“To address the substantial challenges facing the labour market today, governments must pursue a holistic approach, creating active linkages and coordination between education providers, skills, workers and employers, and ensuring effective collaboration between employment agencies, regional governments and national governments,” adds the WEF report in conclusion.
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