Underemployment & automation
Preparing for Jobs of the Future
A new age is upon us. The fourth industrial revolution—or Industry 4.0 for short—is the name given to the current trend in technological advancements that interact with the physical world. Following revolutions in mechanization, mass production, and computerization, Industry 4.0 is disrupting the workforce across all industries and sectors. We can’t predict all the changes this new age will bring, but we can be prepared for the future of work.
In the Knowledge Innovation Center’s series on the nature of underemployment in the United States, we have looked at what underemployment is, and how the underutilization of skills and labor affects recent college graduates and contingent, or part-time, workers. As technology more closely integrates machines with human capabilities, jobs—and the skills required for them—will continue to shift also.
Exhibit 1: Percentage of Automatable Activities in the Current Workforce
Source: Jobs lost, jobs gained: What the future of work will mean for jobs, skills, and wages. McKinsey Global Institute. November 2017
Will Industry 4.0 lead to increased rates of underemployment in America? How can we prepare for the changes that mass automation will bring? Here we discuss how companies and individuals can prepare for the future. We argue that despite the growing fear of unemployment, automation will likely lead to higher productivity across the board. Shifts in jobs for human workers will allow people to engage in meaningful work, thereby decreasing underemployment rates if the right measurements are taken.
How will Industry 4.0 change jobs of the future?
Industry 4.0 is changing the job market in ways we couldn’t have predicted. McKinsey Global Institute determines that 50% of work activities today are automatable and that 6 out of 10 occupations have more than 30% of activities that can be automated.1 As technology advances, artificial intelligence will lead to ever-smarter machines, which, in turn, will change the skills required of human workers.2 Big data analytics, cloud computing, the Internet of Things, and 3D printing will have a lasting impact on service industries such as marketing, finance, entertainment and medicine.3 Companies will be able to perfect tasks at a higher rate with the use of machines, and our increasing reliance on technology will require us to assess the skills needed of human workers.
In this new world of work, technology will de-bundle jobs into smaller tasks. Sandrine Kergroach writes in her 2017 article on Industry 4.0 that technologies have encouraged “the fragmentation of employment into units of self-employment,” which has changed the model of the standard nine-to-five job.4 Today there is a large number of people employed in the gig economy who take up temporary or part-time work with platform service apps such as Uber, Lyft, Grubhub and Handy. Writing for the Washington Post in summer 2018, Abha Bhattarai argues that even though “the unemployment rate is at a 17-year low, stagnant wages, chronic underemployment and growing inequality are leading more Americans to take on so-called side hustles.5
Bhattarai believes that the rise of on-demand work is creating a new class of employers that fill their labor pool with on-call temporary workers. Non-standard work is often associated with lower wages and lower skills, but in the future, part-time, temporary, and contractual labor will become the norm, with employees being hired for specialized skills.6 Currently, non-standard work does not offer the benefits of medical health care that the traditional model often provides. Our perception of non-standard work may need to re-assessed because part-time and temporary labor will become more prevalent and highly valued in coming decades.
How can we prepare for Industry 4.0?
In an ideal world, individuals will work alongside machines to increase productivity and revenue for companies. But the shift to automation must be properly managed to ensure that people are not displaced or devalued. According to the Organisation for Economic Co-operation and Development (OECD), non-standard work such as part-time, temporary and self-employment already accounts for 1/3 jobs, but new technologies will provide freedom as to when and how the work is carried out. 9% of jobs in OECD countries are at a high risk of automation, and another 25% of jobs could change significantly because associated tasks could be automated.7 So how do we prepare for what the future holds?
Companies and individuals can take several steps to ensure that workers do not become redundant in the new age of Industry 4.0. Representing 15 million workers globally, companies surveyed by the World Economic Forum for the Future of Jobs 2018 report indicated three main ways that they will cope with the challenges of automation. Companies will hire new permanent staff who have skills relevant to new technologies; they will also automate some tasks completely and will re-train existing employees. Interestingly, a small but significant number of companies also stated that they will allocate labor to “specialist contractors, freelance and temporary workers.”8 Individuals will need to develop a new range of skills to keep up with these developments.
Human value in the future workplace
There is a growing fear of unemployment and underemployment due to automation, but new technologies will also bring opportunities for companies and individuals to work more efficiently. The Future of Jobs 2018 report indicates that human labor will not become obsolete due to automation. 75 million jobs may be displaced by a shift in the division of labor “between humans, machines and algorithms,” but another 133 million new roles will emerge by the year 2022.9 The study also found that 54% of employees at the companies surveyed will need significant re-skilling and up-skilling to keep up with the opportunities that automation will bring. By 2030, there will be a demand for higher cognitive skills such as creativity, critical thinking, decision-making and complex information processing. Soft skills including management, teamwork, and communication will also become increasingly important.10
As machines take over tasks associated with jobs, we need to re-think the standard nine-to-five workday by placing more value on a person’s skills and willingness to learn. Workers need to engage in life-long learning to re-train and expand their existing skill sets. In this new world, labor will become fragmented into smaller units, and underemployment in the number of hours worked will no longer become relevant. Individuals whose skills are underutilized on the job or who are employed in roles that do not fit their education, work experience, and skill set will experience increased opportunities as new and more challenging roles open. The future is uncertain in the new age of automation, but we can have hope that our work as humans will become more creative, efficient and productive in the years to come.
Resources
- Manyika, James, Susan Lund, Michael Chui, Jacques Bughin, Jonathan Woetzel, Parul Batra, Ryan Ko, Saurabh Sanghvi. (2017). Jobs lost, jobs gained: What the future of work will mean for jobs, skills, and wages. McKinsey Global Institute. November 2017. Available at: https://www.mckinsey.com/featured-insights/future-of-work/jobs-lost-jobs-gained-what-the-future-of-work-will-mean-for-jobs-skills-and-wages. [Accessed 24 October 2018].
- Bughin, Jacques, Eric Hazan, Susan Lund, Peter Dahlstrӧm, Anna Wiesinger, and Amresh Subramaniam. (2018). Skills shift: Automation and the future of the workforce. McKinsey Global Institute. May 2018. Available at: https://www.mckinsey.com/featured-insights/future-of-work/skill-shift-automation-and-the-future-of-the-workforce. [Accessed 24 October 2018].
- Kergroach, Sandrine. (2017). Industry 4.0: New Challenges and Opportunities for the Labor Market. Foresight and STI Governance. Vol 11. Nov 4. Available at: https://foresight-journal.hse.ru/data/2018/01/09/1160538630/0-Kergroach-6-8.pdf. [Accessed 25 October 2018].
- Ibid.
- Abha Bhattarai. (2018). Now hiring, for a one-day job: The gig economy hits retail. The Washington Post. May 2018. Available at: https://www.washingtonpost.com/business/economy/now-hiring-for-a-one-day-job-the-gig-economy-hits-retail/2018/05/04/2bebdd3c-4257-11e8-ad8f-27a8c409298b_story.html?utm_term=.d44009f375b5. [Accessed 28 October 2018].
- Kergroach, Sandrine. (2017). Industry 4.0: New Challenges and Opportunities for the Labor Market. Foresight and STI Governance. Vol 11. Nov 4. Available at: https://foresight-journal.hse.ru/data/2018/01/09/1160538630/0-Kergroach-6-8.pdf. [Accessed 25 October 2018].
- Organisation for Economic Cooperation and Development. (2017). Going Digital: The Future of Work for Women—Policy Brief on the Future of Work. OECD. Available at: https://www.oecd.org/employment/Going-Digital-the-Future-of-Work-for-Women.pdf. [Accessed 25 October 2018].
- World Economic Forum. (2018). The Future of Jobs Report 2018. World Economic Forum. Available at: http://www3.weforum.org/docs/WEF_Future_of_Jobs_2018.pdf. [Accessed 25 October 2018].
- Ibid.
- Bughin, Jacques, Eric Hazan, Susan Lund, Peter Dahlstrӧm, Anna Wiesinger, and Amresh Subramaniam. (2018). Skills shift: Automation and the future of the workforce. McKinsey Global Institute. May 2018. Available at: https://www.mckinsey.com/featured-insights/future-of-work/skill-shift-automation-and-the-future-of-the-workforce. [Accessed 24 October 2018].
