Impact of new technology

Disruptive changes to business models will have a profound impact on the employment landscape over the coming years. Many of the major drivers of transformation currently affecting global industries are expected to have a significant impact on jobs, ranging from significant job creation to job displacement, and from heightened labour productivity to widening skills gaps. In many industries and countries, the most in-demand occupations or specialties did not exist 10 or even five years ago, and the pace of change is set to accelerate. (World Economic Forum, 2016)

We are on the cusp of a new 'automation age'. In a study of the scale of change that could be expected from recent developments in robotics, artificial intelligence, and machine learning, the McKinsey Global Institute developed a template for estimating the automation potential across 2000 work activities and more than 800 occupations within the United States.

Results are shown below. This summarises the potential impact of automation across the global economy.

Information for this chart was sourced from McKinsey Global Institute (January 2017) A future that works: Automation, Employment, and Productivity – Executive Summary.

The X axis (horizontal) represents 820 (100 per cent) occupations, expressed as an overall percentage.

Those occupations have been broken down into a number of distinct activities based on a list of 2000 activities.

An occupation can share a number of common activities.

For example, data analysis is an activity undertaken by an economist, or a market researcher or a scientist, among others.

The Y axis (vertical) represents the proportion of each occupation that could be automated, based on the activities that make up that role. In other words, its technical automation potential.

As the chart shows, the McKinsey Global Institute study found that while less than five per cent of occupations are fully automatable, 60 per cent of all occupations have at least 30 per cent technically automatable activities (McKinsey Global Institute, 2017).

The study also looked at possible technology adoption scenarios. The modelling produced significantly different results.

In the earliest scenario, automation could account for more than 50 per cent of working hours in two-thirds of countries within just 20 years. In the latest scenario, more than half of all countries will have 50 per cent automation or more within 50 years.

These findings reflect uncertainty about the speed of take up of automation technologies across activities and sectors.  

Regardless of the speed of adoption, the study concluded that the greatest impact will be experienced in a few advanced economies, especially Germany, Japan, and the United States. These countries have both high wages and industries with high potential for activities to be automated.

In all economies, including New Zealand, the decision when to automate will depend on the costs of integrating technology in the workplace relative to wages.

Other factors which will determine the speed of take up are the impact on production and service quality, and customer acceptance.

References

World Economic Forum (2016). The future of jobs – employment, skills and workforce strategy for the Fourth Industrial Revolution (PDF 9.60MB). [accessed 06/11/2017]

McKinsey Global Institute. (2017). A future that works: automation, employment, and productivity (2017) (PDF 8.6MB). [accessed 06/11/2017]