History tells us that in the long run, technology is a net creator of jobs.

Is this time different?

Technology adoption can, and often does, cause significant short-

term labor displacement, but history shows that in the longer run, it
creates a multitude of new jobs and unleashes demand for existing
ones, more than offsetting the number of jobs it destroys, even as it
raises labor productivity.

An examination of the historical record highlights several lessons. Here

are five.

1. Employment in some sectors can decline sharply, but

new jobs created elsewhere have absorbed those that have
been displaced.

All advanced economies have experienced profound sectoral shifts in

employment, first in agriculture and more recently in manufacturing,
even as overall employment has grown. In the United States, the
agricultural share of total employment declined from 60 percent in
1850 to less than 5 percent by 1970, while manufacturing fell from 26
percent of total US employment in 1960 to below 10 percent today.
Other countries have experienced even faster declines: one-third of
China’s workforce moved out of agriculture between 1990 and 2015.
Throughout these large shifts of workers across occupations and
sectors, overall employment as a share of the population has continued
to grow. New industries and occupations have emerged to absorb
workers displaced by technology.

2. Employment shifts can be painful.

Even if enough new jobs have been created to offset those displaced by
technology, the shifts can have painful consequences for some workers.
During the Industrial Revolution in England, average real wages
stagnated for decades, even as productivity rose. Eventually, wage
1
growth caught up to and then surpassed productivity growth. But the
transition period was difficult for individual workers and eased only
after substantial policy reforms.

3. Technology creates more jobs than it destroys, including

some you can’t imagine at the outset.

New technologies have spurred the creation of many more jobs than
they destroyed, and some of the new jobs will be in occupations that
cannot be envisioned at the outset; one study found that 0.56 percent
of new jobs in the United States each year are in new occupations.
What the future of work will mean for jobs, skills, and wages
Most jobs created by technology are outside the technology-producing
sector itself. We estimate that the introduction of the personal
computer, for instance, has enabled the creation of 15.8 million net new
jobs in the United States since 1980, even after accounting for jobs
displaced. About 90 percent of these are in occupations that use the PC
in other industries, such as call-center representatives, financial
analysts, and inventory managers.

4. Technology raises productivity growth, which in turn

boosts demand and creates jobs.

Robust aggregate demand and economic growth are essential for job
creation. New technologies have raised productivity growth, enabling
companies to lower prices for consumers, pay higher wages, or
distribute profits to shareholders. This stimulates demand across the
economy, boosting job creation. Rising productivity is usually
accompanied by employment growth: it raises incomes, which are then
spent, creating demand for goods and services across the economy.

2
5. We all work less and play more thanks to technology.

Over the long term, productivity growth enabled by technology has

reduced the average hours worked per week and allowed people to
enjoy more leisure time. Across advanced economies, the length of the
average workweek has fallen by nearly 50 percent since the early 1900s,
reflecting shorter working hours, more paid days off for personal time
and vacations, and the recent rise of part-time work. This growth in
leisure has led to the creation of new industries, from golf to video
games to home improvement.

Although the historical record is largely comforting, some people worry

that automation today will be more disruptive than in the past. Could it
be different? Or will historical precedent hold? Our current view is that
the answer depends on the time horizon considered (decades or
centuries) and on the pace of future technological progress and
adoption.

On many dimensions, we find similarities between the scope and

effects of automation today compared with earlier waves of technology
disruption, going back to the Industrial Revolution. However,
automation going forward might prove to be more disruptive than in
recent decades—and on par with the most rapid changes in the past—in
two ways. First, if technological advances continue apace and are
adopted rapidly, the rate of worker displacement could be faster.
Second, if many sectors adopt automation simultaneously, the
percentage of the workforce affected by it could be higher.

In short, history is quite reassuring about the impact of technology on

employment. While for some workers new technology can be highly
disruptive, in the long run, if the past is any indication, creation will
triumph over destruction.

************************************************************

3
 In an era marked by rapid advances in automation and artificial
intelligence, new research assesses the jobs lost and jobs gained under
different scenarios through 2030.

The technology-driven world in which we live is a world filled with

promise but also challenges. Cars that drive themselves, machines that
read X-rays, and algorithms that respond to customer-service inquiries
are all manifestations of powerful new forms of automation. Yet even as
these technologies increase productivity and improve our lives, their
use will substitute for some work activities humans currently perform—
a development that has sparked much public concern.

Play Video
Automation and the new world of work

Powerful new technologies are increasing productivity, improving lives,

and reshaping our world. But what happens to our jobs?

Building on our January 2017 report on automation, McKinsey Global

Institute’s latest report, Jobs lost, jobs gained: Workforce transitions
in a time of automation, assesses the number and types of jobs that
might be created under different scenarios through 2030 and compares
that to the jobs that could be lost to automation.

The results reveal a rich mosaic of potential shifts in occupations in the

years ahead, with important implications for workforce skills and
wages. Our key finding is that while there may be enough work to
maintain full employment to 2030 under most scenarios, 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.

1. What impact will automation have on work?

2. What are possible scenarios for employment growth?

3. Will there be enough work in the future?

4
4. What will automation mean for skills and wages?

5. How do we manage the upcoming workforce transitions?

1. What impact will automation have on work?

We previously found that about half the activities people are paid to do
globally could theoretically be automated using currently demonstrated
technologies. Very few occupations—less than 5 percent—consist of
activities that can be fully automated.

However, in about 60 percent of occupations, at least one-third of the

constituent activities could be automated, implying substantial
workplace transformations and changes for all workers.

While technical feasibility of automation is important, it is not the only

factor that will influence the pace and extent of automation adoption.
Other factors include the cost of developing and deploying automation
solutions for specific uses in the workplace, the labor-market dynamics
(including quality and quantity of labor and associated wages), the
benefits of automation beyond labor substitution, and regulatory and
social acceptance.

Taking these factors into account, our new research estimates that
between almost zero and 30 percent of the hours worked globally could
be automated by 2030, depending on the speed of adoption. We mainly
use the midpoint of our scenario range, which is automation of 15
percent of current activities. Results differ significantly by country,
reflecting the mix of activities currently performed by workers and
prevailing wage rates.

The potential impact of automation on employment varies by

occupation and sector (see interactive above). Activities most
susceptible to automation include physical ones in predictable
environments, such as operating machinery and preparing fast food.

5
Collecting and processing data are two other categories of activities that
increasingly can be done better and faster with machines. This could
displace large amounts of labor—for instance, in mortgage origination,
paralegal work, accounting, and back-office transaction processing.

It is important to note, however, that even when some tasks are

automated, employment in those occupations may not decline but
rather workers may perform new tasks.

Automation will have a lesser effect on jobs that involve managing

people, applying expertise, and social interactions, where machines are
unable to match human performance for now.

Jobs in unpredictable environments—occupations such as gardeners,

plumbers, or providers of child- and eldercare—will also generally see
less automation by 2030, because they are technically difficult to
automate and often command relatively lower wages, which makes
automation a less attractive business proposition.

2. What are possible scenarios for employment growth?

Workers displaced by automation are easily identified, while new jobs

that are created indirectly from technology are less visible and spread
across different sectors and geographies. We model some potential
sources of new labor demand that may spur job creation to 2030, even
net of automation.

For the first three trends, we model only a trendline scenario based on
current spending and investment trends observed across countries.

Rising incomes and consumption, especially in emerging economies

We have previously estimated that global consumption could grow by

$23 trillion between 2015 and 2030, and most of this will come from
the consuming classes in emerging economies. The effects of these new
consumers will be felt not just in the countries where the income is

6
generated but also in economies that export to these countries.
Globally, we estimate that 250 million to 280 million new jobs could be
created from the impact of rising incomes on consumer goods alone,
with up to an additional 50 million to 85 million jobs generated from
higher health and education spending.

Aging populations

By 2030, there will be at least 300 million more people aged 65 years
and older than there were in 2014. As people age, their spending
patterns shift, with a pronounced increase in spending on healthcare
and other personal services. This will create significant new demand for
a range of occupations, including doctors, nurses, and health
technicians but also home-health aides, personal-care aides, and
nursing assistants in many countries. Globally, we estimate that
healthcare and related jobs from aging could grow by 50 million to 85
million by 2030.

Development and deployment of technology

Jobs related to developing and deploying new technologies may also

grow. Overall spending on technology could increase by more than 50
percent between 2015 and 2030. About half would be on information-
technology services. The number of people employed in these
occupations is small compared to those in healthcare or construction,
but they are high-wage occupations. By 2030, we estimate that this
trend could create 20 million to 50 million jobs globally.

For the next three trends, we model both a trendline scenario and a
step-up scenario that assumes additional investments in some areas,
based on explicit choices by governments, business leaders, and
individuals to create additional jobs.

7
Investments in infrastructure and buildings

Infrastructure and buildings are two areas of historic underspending

that may create significant additional labor demand if action is taken
to bridge infrastructure gaps and overcome housing shortages. New
demand could be created for up to 80 million jobs in the trendline
scenario and, in the event of accelerated investment, up to 200 million
more in the step-up scenario. These jobs include architects, engineers,
electricians, carpenters, and other skilled tradespeople, as well as
construction workers.

Investments in renewable energy, energy efficiency, and climate

adaptation

Investments in renewable energy, such as wind and solar; energy-

efficiency technologies; and adaptation and mitigation of climate
change may create new demand for workers in a range of occupations,
including manufacturing, construction, and installation. These
investments could create up to ten million new jobs in the trendline
scenario and up to ten million additional jobs globally in the step-up
scenario.

‘Marketization’ of previously unpaid domestic work

The last trend we consider is the potential to pay for services that
substitute for currently unpaid and primarily domestic work. This so-
called marketization of previously unpaid work is already prevalent in
advanced economies, and rising female workforce participation
worldwide could accelerate the trend. We estimate that this could
create 50 million to 90 million jobs globally, mainly in occupations
such as childcare, early-childhood education, cleaning, cooking, and
gardening.

When we look at the net changes in job growth across all countries, the
categories with the highest percentage job growth net of automation
include the following:
8
 healthcare providers

 professionals such as engineers, scientists, accountants, and

analysts

 IT professionals and other technology specialists

 managers and executives, whose work cannot easily be replaced

by machines

 educators, especially in emerging economies with young

populations

 “creatives,” a small but growing category of artists, performers,

and entertainers who will be in demand as rising incomes create
more demand for leisure and recreation

 builders and related professions, particularly in the scenario that

involves higher investments in infrastructure and buildings

 manual and service jobs in unpredictable environments, such as

home-health aides and gardeners

Upcoming workforce transitions could be very large

The changes in net occupational growth or decline imply that a very

large number of people may need to shift occupational categories and
learn new skills in the years ahead. The shift could be on a scale not
seen since the transition of the labor force out of agriculture in the early
1900s in the United States and Europe, and more recently in in China.

Seventy-five million to 375 million may need to switch

occupational categories and learn new skills.
We estimate that between 400 million and 800 million individuals
could be displaced by automation and need to find new jobs by 2030
around the world, based on our midpoint and earliest (that is, the most
rapid) automation adoption scenarios. New jobs will be available, based

9
on our scenarios of future labor demand and the net impact of
automation, as described in the next section.

However, people will need to find their way into these jobs. Of the total
displaced, 75 million to 375 million may need to switch occupational
categories and learn new skills, under our midpoint and earliest
automation adoption scenarios; under our trendline adoption scenario,
however, this number would be very small—less than 10 million
(Exhibit 1).

In absolute terms, China faces the largest number of workers needing

to switch occupations—up to 100 million if automation is adopted
rapidly, or 12 percent of the 2030 workforce. While that may seem like
a large number, it is relatively small compared with the tens of millions
of Chinese who have moved out of agriculture in the past 25 years.

For advanced economies, the share of the workforce that may need to
learn new skills and find work in new occupations is much higher: up to
one-third of the 2030 workforce in the United States and Germany,
and nearly half in Japan.

3. Will there be enough work in the future?

Today there is a growing concern about whether there will be enough

jobs for workers, given potential automation. History would
suggest that such fears may be unfounded: over time, labor markets
adjust to changes in demand for workers from technological
disruptions, although at times with depressed real wages (Exhibit 2)

We address this question about the future of work through two

different sets of analyses: one based on modeling of a limited number
of catalysts of new labor demand and automation described earlier, and
one using a macroeconomic model of the economy that incorporates
the dynamic interactions among variables.

10
If history is any guide, we could also expect that 8 to 9 percent of 2030
labor demand will be in new types of occupations that have not existed
before.

Both analyses lead us to conclude that, with sufficient economic

growth, innovation, and investment, there can be enough new job
creation to offset the impact of automation, although in some advanced
economies additional investments will be needed as per our step-up
scenario to reduce the risk of job shortages.

A larger challenge will be ensuring that workers have the skills and
support needed to transition to new jobs. Countries that fail to manage
this transition could see rising unemployment and depressed wages.

The magnitude of future job creation from the trends described

previously and the impact of automation on the workforce vary
significantly by country, depending on four factors.

Wage level

Higher wages make the business case for automation adoption

stronger. However, low-wage countries may be affected as well, if
companies adopt automation to boost quality, achieve tighter
production control, move production closer to end consumers in high-
wage countries, or other benefits beyond reducing labor costs.

Demand growth

Economic growth is essential for job creation; economies that are

stagnant or growing slowly create few if any net new jobs. Countries
with stronger economic and productivity growth and innovation will
therefore be expected to experience more new labor demand.

11
Demographics

Countries with a rapidly growing workforce, such as India, may enjoy a

“demographic dividend” that boosts GDP growth—if young people are
employed. Countries with a shrinking workforce, such as Japan, can
expect lower future GDP growth, derived only from productivity
growth.

Mix of economic sectors and occupations

The automation potential for countries reflects the mix of economic

sectors and the mix of jobs within each sector. Japan, for example, has
a higher automation potential than the United States because the
weight of sectors that are highly automatable, such as manufacturing, is
higher.

Automation will affect countries in different ways

The four factors just described combine to create different outlooks for
the future of work in each country (see interactive heat map). Japan is
rich, but its economy is projected to grow slowly to 2030. It faces the
combination of slower job creation coming from economic expansion
and a large share of work that can be automated as a result of high
wages and the structure of its economy.

However, Japan will also see its workforce shrink by 2030 by four
million people. In the step-up scenario, and considering the jobs in new
occupations we cannot envision today, Japan’s net change in jobs could
be roughly in balance.

The United States and Germany could also face significant workforce
displacement from automation by 2030, but their projected future
growth—and hence new job creation—is higher. The United States has
a growing workforce, and in the step-up scenario, with innovations
leading to new types of occupations and work, it is roughly in balance.
Germany’s workforce will decline by three million people by 2030, and

12
it will have more than enough labor demand to employ all its workers,
even in the trendline scenario.

At the other extreme is India: a fast-growing developing country with

relatively modest potential for automation over the next 15 years,
reflecting low wage rates. Our analysis finds that most occupational
categories are projected to grow in India, reflecting its potential for
strong economic expansion.

However, India’s labor force is expected to grow by 138 million people

by 2030, or about 30 percent. India could create enough new jobs to
offset automation and employ these new entrants by undertaking the
investments in our step-up scenario.

China and Mexico have higher wages than India and so are likely to see
more automation. China is still projected to have robust economic
growth and will have a shrinking workforce; like Germany, China’s
problem could be a shortage of workers.

Mexico’s projected rate of future economic expansion is more modest,

and it could benefit from the job creation in the step-up scenario plus
innovation in new occupations and activities to make full use of its
workforce.

Displaced workers will need to be reemployed quickly to avoid rising

unemployment

To model the impact of automation on overall employment and wages,

we use a general equilibrium model that takes into account the
economic impacts of automation and dynamic interactions.
Automation has at least three distinct economic impacts. Most
attention has been devoted to the potential displacement of labor. But
automation also may raise labor productivity: firms adopt automation
only when doing so enables them to produce more or higher-quality
output with the same or fewer inputs (including material, energy, and
labor inputs). The third impact is that automation adoption raises

13
investment in the economy, lifting short-term GDP growth. We model
all three effects. We also create different scenarios for how quickly
displaced workers find new employment, based on historical data.

The results reveal that, in nearly all scenarios, the six countries that are
the focus of our report (China, Germany, India, Japan, Mexico, and the
United States) could expect to be at or very near full employment by
2030. However, the model also illustrates the importance of
reemploying displaced workers quickly.

If displaced workers are able to be reemployed within one year, our

model shows automation lifting the overall economy: full employment
is maintained in both the short and long term, wages grow faster than
in the baseline model, and productivity is higher.

However, in scenarios in which some displaced workers take years to

find new work, unemployment rises in the short to medium term. The
labor market adjusts over time and unemployment falls—but with
slower average wage growth. In these scenarios, average wages end up
lower in 2030 than in the baseline model, which could dampen
aggregate demand and long-term growth.

4. What will automation mean for skills and wages?

In general, the current educational requirements of the occupations

that may grow are higher than those for the jobs displaced by
automation. In advanced economies, occupations that currently require
only a secondary education or less see a net decline from automation,
while those occupations requiring college degrees and higher grow.

In India and other emerging economies, we find higher labor demand

for all education levels, with the largest number of new jobs in
occupations requiring a secondary education, but the fastest rate of job
growth will be for occupations currently requiring a college or advanced
degree.

14
Workers of the future will spend more time on activities that machines
are less capable of, such as managing people, applying expertise, and
communicating with others. They will spend less time on predictable
physical activities and on collecting and processing data, where
machines already exceed human performance. The skills and
capabilities required will also shift, requiring more social and emotional
skills and more advanced cognitive capabilities, such as logical
reasoning and creativity.

Wages may stagnate or fall in declining occupations. Although we do

not model shifts in relative wages across occupations, the basic
economics of labor supply and demand suggests that this should be the
case for occupations in which labor demand declines.

Our analysis shows that most job growth in the United States and other
advanced economies will be in occupations currently at the high end of
the wage distribution. Some occupations that are currently low wage,
such as nursing assistants and teaching assistants, will also increase,
while a wide range of middle-income occupations will have the largest
employment declines.

Income polarization could continue. Policy choices such as increasing

investments in infrastructure, buildings, and energy transitions could
help create additional demand for middle-wage jobs such as
construction workers in advanced economies.

The wage-trend picture is quite different in emerging economies such

as China and India, where our scenarios show that middle-wage jobs
such as retail salespeople and teachers will grow the most as these
economies develop. This implies that their consuming class will
continue to grow in the decades ahead.

5. How do we manage the upcoming workforce transitions?

The benefits of artificial intelligence and automation to users and

businesses, and the economic growth that could come via their

15
productivity contributions, are compelling. They will not only
contribute to dynamic economies that create jobs but also help create
the economic surpluses that will enable societies to address the
workforce transitions that will likely happen regardless.

Faced with the scale of worker transitions we have described, one

reaction could be to try to slow the pace and scope of adoption in an
attempt to preserve the status quo. But this would be a mistake.
Although slower adoption might limit the scale of workforce
transitions, it would curtail the contributions that these technologies
make to business dynamism and economic growth. We should embrace
these technologies but also address the workforce transitions and
challenges they bring. In many countries, this may require an initiative
on the scale of the Marshall Plan, involving sustained investment, new
training models, programs to ease worker transitions, income support,
and collaboration between the public and private sectors.

All societies will need to address four key areas.

Maintaining robust economic growth to support job creation

Sustaining robust aggregate demand growth is critical to support new

job creation, as is support for new business formation and innovation.
Fiscal and monetary policies that ensure sufficient aggregate demand,
as well as support for business investment and innovation, will be
essential. Targeted initiatives in certain sectors could also help,
including, for example, increasing investments in infrastructure and
energy transitions.

Scaling and reimagining job retraining and workforce skills

development

Providing job retraining and enabling individuals to learn marketable

new skills throughout their lifetime will be a critical challenge—and for
some countries, the central challenge. Midcareer retraining will become

16
ever more important as the skill mix needed for a successful career
changes. Business can take a lead in some areas, including with on-the-
job training and providing opportunities to workers to upgrade their
skills.

Improving business and labor-market dynamism, including mobility

Greater fluidity will be needed in the labor market to manage the

difficult transitions we anticipate. This includes restoring now-waning
labor mobility in advanced economies. Digital talent platforms can
foster fluidity, by matching workers and companies seeking their skills
and by providing a plethora of new work opportunities for those open
to taking them. Policy makers in countries with inflexible labor markets
can learn from others that have deregulated, such as Germany, which
transformed its federal unemployment agency into a powerful job-
matching entity.

Providing income and transition support to workers

Income support and other forms of transition assistance to help

displaced workers find gainful employment will be essential. Beyond
retraining, a range of policies can help, including unemployment
insurance, public assistance in finding work, and portable benefits that
follow workers between jobs.

We know from history that wages for many occupations can be

depressed for some time during workforce transitions. More
permanent policies to supplement work incomes might be needed to
support aggregate demand and ensure societal fairness. More
comprehensive minimum-wage policies, universal basic income, or
wage gains tied to productivity growth are all possible solutions being
explored.

Policy makers, business leaders, and individual workers all have

constructive and important roles to play in smoothing workforce

17
transitions ahead. History shows us that societies across the globe,
when faced with monumental challenges, often rise to the occasion for
the well-being of their citizens.

Yet over the past few decades, investments and policies to support the
workforce have eroded. Public spending on labor-force training and
support has fallen in most member countries of the Organisation for
Economic Co-operation and Development (OECD). Educational
models have not fundamentally changed in 100 years. It is now critical
to reverse these trends, with governments making workforce
transitions and job creation a more urgent priority.

We will all need creative visions for how our lives are
organized and valued in the future, in a world where the role
and meaning of work start to shift.
Businesses will be on the front lines of the workplace as it changes. This
will require them to both retool their business processes and reevaluate
their talent strategies and workforce needs, carefully considering which
individuals are needed, which can be redeployed to other jobs, and
where new talent may be required. Many companies are finding it is in
their self-interest—as well as part of their societal responsibility—to
train and prepare workers for a new world of work.

Individuals, too, will need to be prepared for a rapidly evolving future

of work. Acquiring new skills that are in demand and resetting intuition
about the world of work will be critical for their own well-being. There
will be demand for human labor, but workers everywhere will need to
rethink traditional notions of where they work, how they work, and
what talents and capabilities they bring to that work.

The technical potential for automation differs dramatically across

sectors and activities.

18
As automation technologies such as machine learning and robotics
play an increasingly great role in everyday life, their potential effect on
the workplace has, unsurprisingly, become a major focus of research
and public concern. The discussion tends toward a Manichean guessing
game: which jobs will or won’t be replaced by machines?

In fact, as our research has begun to show, the story is more nuanced.
While automation will eliminate very few occupations entirely in the
next decade, it will affect portions of almost all jobs to a greater or
lesser degree, depending on the type of work they entail. Automation,
now going beyond routine manufacturing activities, has the potential,
as least with regard to its technical feasibility, to transform sectors such
as healthcare and finance, which involve a substantial share of
knowledge work.

ay Video
From science fiction to business fact

McKinsey’s Michael Chui explains how automation is transforming

work.

These conclusions rest on our detailed analysis of 2,000-plus work

activities for more than 800 occupations. Using data from the US
Bureau of Labor Statistics and O*Net, we’ve quantified both the
amount of time spent on these activities across the economy of the
United States and the technical feasibility of automating each of them.
The full results, forthcoming in early 2017, will include several other
countries,1but we released some initial findings late last year and are
following up now with additional interim results.

Last year, we showed that currently demonstrated technologies could

automate 45 percent of the activities people are paid to perform and
that about 60 percent of all occupations could see 30 percent or more
of their constituent activities automated, again with technologies
available today. In this article, we examine the technical feasibility,
using currently demonstrated technologies, of automating three groups
of occupational activities: those that are highly susceptible, less
19
susceptible, and least susceptible to automation. Within each category,
we discuss the sectors and occupations where robots and other
machines are most—and least—likely to serve as substitutes in activities
humans currently perform. Toward the end of this article, we discuss
how evolving technologies, such as natural-language generation, could
change the outlook, as well as some implications for senior executives
who lead increasingly automated enterprises.

Understanding automation potential

In discussing automation, we refer to the potential that a given activity

could be automated by adopting currently demonstrated technologies,
that is to say, whether or not the automation of that activity
is technically feasible.2Each whole occupation is made up of multiple
types of activities, each with varying degrees of technical feasibility.
Exhibit 1 lists seven top-level groupings of activities we have identified.
Occupations in retailing, for example, involve activities such as
collecting or processing data, interacting with customers, and setting
up merchandise displays (which we classify as physical movement in a
predictable environment). Since all of these constituent activities have a
different automation potential, we arrive at an overall estimate for the
sector by examining the time workers spend on each of them during the
workweek.

Technical feasibility is a necessary precondition for automation, but not

a complete predictor that an activity will be automated. A second factor
to consider is the cost of developing and deploying both the hardware
and the software for automation. The cost of labor and related supply-
and-demand dynamics represent a third factor: if workers are in
abundant supply and significantly less expensive than automation, this
could be a decisive argument against it. A fourth factor to consider is
the benefits beyond labor substitution, including higher levels of
output, better quality, and fewer errors. These are often larger than
those of reducing labor costs. Regulatory and social-acceptance issues,
such as the degree to which machines are acceptable in any particular

20
setting, must also be weighed. A robot may, in theory, be able to replace
some of the functions of a nurse, for example. But for now, the prospect
that this might actually happen in a highly visible way could prove
unpalatable for many patients, who expect human contact. The
potential for automation to take hold in a sector or occupation reflects a
subtle interplay between these factors and the trade-offs among them.

Even when machines do take over some human activities in an

occupation, this does not necessarily spell the end of the jobs in that
line of work. On the contrary, their number at times increases in
occupations that have been partly automated, because overall demand
for their remaining activities has continued to grow. For example, the
large-scale deployment of bar-code scanners and associated point-of-
sale systems in the United States in the 1980s reduced labor costs per
store by an estimated 4.5 percent and the cost of the groceries
consumers bought by 1.4 percent.3It also enabled a number of
innovations, including increased promotions. But cashiers were still
needed; in fact, their employment grew at an average rate of more than
2 percent between 1980 and 2013.

The most automatable activities

Almost one-fifth of the time spent in US workplaces involves

performing physical activities or operating machinery in a predictable
environment: workers carry out specific actions in well-known settings
where changes are relatively easy to anticipate. Through the adaptation
and adoption of currently available technologies, we estimate the
technical feasibility of automating such activities at 78 percent, the
highest of our seven top-level categories (Exhibit 2). Since predictable
physical activities figure prominently in sectors such as manufacturing,
food service and accommodations, and retailing, these are the most
susceptible to automation based on technical considerations alone.

In manufacturing, for example, performing physical activities or

operating machinery in a predictable environment represents one-third

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of the workers’ overall time. The activities range from packaging
products to loading materials on production equipment to welding to
maintaining equipment. Because of the prevalence of such predictable
physical work, some 59 percent of all manufacturing activities could be
automated, given technical considerations. The overall technical
feasibility, however, masks considerable variance. Within
manufacturing, 90 percent of what welders, cutters, solderers, and
brazers do, for example, has the technical potential for automation, but
for customer-service representatives that feasibility is below 30
percent. The potential varies among companies as well. Our work with
manufacturers reveals a wide range of adoption levels—from
companies with inconsistent or little use of automation all the way to
quite sophisticated users.

Manufacturing, for all its technical potential, is only the second most
readily automatable sector in the US economy. A service sector
occupies the top spot: accommodations and food service, where almost
half of all labor time involves predictable physical activities and the
operation of machinery—including preparing, cooking, or serving food;
cleaning food-preparation areas; preparing hot and cold beverages; and
collecting dirty dishes. According to our analysis, 73 percent of the
activities workers perform in food service and accommodations have
the potential for automation, based on technical considerations.

Some of this potential is familiar. Automats, or automated cafeterias,

for example, have long been in use. Now restaurants are testing new,
more sophisticated concepts, like self-service ordering or even robotic
servers. Solutions such as Momentum Machines’ hamburger-cooking
robot, which can reportedly assemble and cook 360 burgers an hour,
could automate a number of cooking and food-preparation activities.
But while the technical potential for automating them might be high,
the business case must take into account both the benefits and the costs
of automation, as well as the labor-supply dynamics discussed earlier.
For some of these activities, current wage rates are among the lowest in
the United States, reflecting both the skills required and the size of the

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available labor supply. Since restaurant employees who cook earn an
average of about $10 an hour, a business case based solely on reducing
labor costs may be unconvincing.

Retailing is another sector with a high technical potential for

automation. We estimate that 53 percent of its activities are
automatable, though, as in manufacturing, much depends on the
specific occupation within the sector. Retailers can take advantage of
efficient, technology-driven stock management and logistics, for
example. Packaging objects for shipping and stocking merchandise are
among the most frequent physical activities in retailing, and they have a
high technical potential for automation. So do maintaining records of
sales, gathering customer or product information, and other data-
collection activities. But retailing also requires cognitive and social
skills. Advising customers which cuts of meat or what color shoes to
buy requires judgment and emotional intelligence. We calculate that 47
percent of a retail salesperson’s activities have the technical potential to
be automated—far less than the 86 percent possible for the sector’s
bookkeepers, accountants, and auditing clerks.

As we noted above, however, just because an activity can be automated

doesn’t mean that it will be—broader economic factors are at play. The
jobs of bookkeepers, accountants, and auditing clerks, for example,
require skills and training, so they are scarcer than basic cooks. But the
activities they perform cost less to automate, requiring mostly software
and a basic computer.

Considerations such as these have led to an observed tendency for

higher rates of automation for activities common in some middle-skill
jobs—for example, in data collection and data processing. As
automation advances in capability, jobs involving higher skills will
probably be automated at increasingly high rates.

The heat map in Exhibit 3 highlights the wide variation in how

automation could play out, both in individual sectors and for different
types of activities within them.4

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Activities and sectors in the middle range for automation

Across all occupations in the US economy, one-third of the time spent

in the workplace involves collecting and processing data. Both activities
have a technical potential for automation exceeding 60 percent. Long
ago, many companies automated activities such as administering
procurement, processing payrolls, calculating material-resource needs,
generating invoices, and using bar codes to track flows of materials. But
as technology progresses, computers are helping to increase the scale
and quality of these activities. For example, a number of companies
now offer solutions that automate entering paper and PDF invoices into
computer systems or even processing loan applications. And it’s not
just entry-level workers or low-wage clerks who collect and process
data; people whose annual incomes exceed $200,000 spend some 31
percent of their time doing those things, as well.

Financial services and insurance provide one example of this

phenomenon. The world of finance relies on professional expertise:
stock traders and investment bankers live off their wits. Yet about 50
percent of the overall time of the workforce in finance and insurance is
devoted to collecting and processing data, where the technical potential
for automation is high. Insurance sales agents gather customer or
product information and underwriters verify the accuracy of records.
Securities and financial sales agents prepare sales or other contracts.
Bank tellers verify the accuracy of financial data.

As a result, the financial sector has the technical potential to automate

activities taking up 43 percent of its workers’ time. Once again, the
potential is far higher for some occupations than for others. For
example, we estimate that mortgage brokers spend as much as 90
percent of their time processing applications. Putting in place more
sophisticated verification processes for documents and credit
applications could reduce that proportion to just more than 60 percent.

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This would free up mortgage advisers to focus more of their time on
advising clients rather than routine processing. Both the customer and
the mortgage institution get greater value.

Other activities in the middle range of the technical potential for

automation involve large amounts of physical activity or the operation
of machinery in unpredictable environments. These types of activities
make up a high proportion of the work in sectors such as farming,
forestry, and construction and can be found in many other sectors as
well.

Examples include operating a crane on a construction site, providing

medical care as a first responder, collecting trash in public areas,
setting up classroom materials and equipment, and making beds in
hotel rooms. The latter two activities are unpredictable largely because
the environment keeps changing. Schoolchildren leave bags, books, and
coats in a seemingly random manner. Likewise, in a hotel room,
different guests throw pillows in different places, may or may not leave
clothing on their beds, and clutter up the floor space in different ways.

These activities, requiring greater flexibility than those in a predictable

environment, are for now more difficult to automate with currently
demonstrated technologies: their automation potential is 25 percent.
Should technology advance to handle unpredictable environments with
the same ease as predictable ones, the potential for automation would
jump to 67 percent. Already, some activities in less predictable settings
in farming and construction (such as evaluating the quality of crops,
measuring materials, or translating blueprints into work requirements)
are more susceptible to automation.

Activities with low technical potential for automation

The hardest activities to automate with currently available technologies

are those that involve managing and developing people (9 percent
automation potential) or that apply expertise to decision making,
planning, or creative work (18 percent). These activities, often
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characterized as knowledge work, can be as varied as coding software,
creating menus, or writing promotional materials. For now, computers
do an excellent job with very well-defined activities, such as optimizing
trucking routes, but humans still need to determine the proper goals,
interpret results, or provide commonsense checks for solutions. The
importance of human interaction is evident in two sectors that, so far,
have a relatively low technical potential for automation: healthcare and
education.

Four fundamentals of workplace automation

Overall, healthcare has a technical potential for automation of about 36

percent, but the potential is lower for health professionals whose daily
activities require expertise and direct contact with patients. For
example, we estimate that less than 30 percent of a registered nurse’s
activities could be automated, based on technical considerations alone.
For dental hygienists, that proportion drops to 13 percent.

Nonetheless, some healthcare activities, including preparing food in

hospitals and administering non-intravenous medications, could be
automated if currently demonstrated technologies were adapted. Data
collection, which also accounts for a significant amount of working time
in the sector, could become more automated as well. Nursing
assistants, for example, spend about two-thirds of their time collecting
health information. Even some of the more complex activities that
doctors perform, such as administering anesthesia during simple
procedures or reading radiological scans, have the technical potential
for automation.

Of all the sectors we have examined, the technical feasibility of

automation is lowest in education, at least for now. To be sure, digital
technology is transforming the field, as can be seen from the myriad
classes and learning vehicles available online. Yet the essence of
teaching is deep expertise and complex interactions with other people.
Together, those two categories—the least automatable of the seven

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identified in the first exhibit—account for about one-half of the
activities in the education sector.

Even so, 27 percent of the activities in education—primarily those that

happen outside the classroom or on the sidelines—have the potential to
be automated with demonstrated technologies. Janitors and cleaners,
for example, clean and monitor building premises. Cooks prepare and
serve school food. Administrative assistants maintain inventory records
and personnel information. The automation of these data-collection
and processing activities may help to reduce the growth of the
administrative expenses of education and to lower its cost without
affecting its quality.

Looking ahead

As technology develops, robotics and machine learning will make

greater inroads into activities that today have only a low technical
potential for automation. New techniques, for example, are enabling
safer and more enhanced physical collaboration between robots and
humans in what are now considered unpredictable environments.
These developments could enable the automation of more activities in
sectors such as construction. Artificial intelligence can be used to
design components in engineer-heavy sectors.

One of the biggest technological breakthroughs would come if

machines were to develop an understanding of natural language on par
with median human performance—that is, if computers gained the
ability to recognize the concepts in everyday communication between
people. In retailing, such natural-language advances would increase the
technical potential for automation from 53 percent of all labor time to
60 percent. In finance and insurance, the leap would be even greater, to
66 percent, from 43 percent. In healthcare, too, while we don’t believe
currently demonstrated technologies could accomplish all of the
activities needed to diagnose and treat patients, technology will become
more capable over time. Robots may not be cleaning your teeth or

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teaching your children quite yet, but that doesn’t mean they won’t in
the future.

As stated at the outset, though, simply considering the technical

potential for automation is not enough to assess how much of it will
occur in particular activities. The actual level will reflect the interplay of
the technical potential, the benefits and costs (or the business case), the
supply-and-demand dynamics of labor, and various regulatory and
social factors related to acceptability.

Leading more automated enterprises

Automation could transform the workplace for everyone, including

senior management. The rapid evolution of technology can make
harnessing its potential and avoiding its pitfalls especially complex. In
some industries, such as retailing, automation is already changing the
nature of competition. E-commerce players, for example, compete with
traditional retailers by using both physical automation (such as robots
in warehouses) and the automation of knowledge work (including
algorithms that alert shoppers to items they may want to buy). In
mining, autonomous haulage systems that transport ore inside mines
more safely and efficiently than human operators do could also deliver
a step change in productivity.

Top executives will first and foremost need to identify where

automation could transform their own organizations and then put a
plan in place to migrate to new business processes enabled by
automation. A heat map of potential automation activities within
companies can help to guide, identify, and prioritize the potential
processes and activities that could be transformed. As we have noted,
the key question will be where and how to unlock value, given the cost
of replacing human labor with machines. The majority of the benefits
may come not from reducing labor costs but from raising productivity
through fewer errors, higher output, and improved quality, safety, and
speed.

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It is never too early to prepare for the future. To get ready for
automation’s advances tomorrow, executives must challenge
themselves to understand the data and automation technologies on the
horizon today. But more than data and technological savvy are required
to capture value from automation. The greater challenges are the
workforce and organizational changes that leaders will have to put in
place as automation upends entire business processes, as well as the
culture of organizations, which must learn to view automation as a
reliable productivity lever. Senior leaders, for their part, will need to “let
go” in ways that run counter to a century of organizational
development.5

Understanding the activities that are most susceptible to automation

from a technical perspective could provide a unique opportunity to
rethink how workers engage with their jobs and how digital labor
platforms can better connect individuals, teams, and projects.6It could
also inspire top managers to think about how many of their own
activities could be better and more efficiently executed by machines,
freeing up executive time to focus on the core competencies that no
robot or algorithm can replace—as yet.

Could a machine do your job? Find out on Tableau Public, where we

analyzed more than 800 occupations to assess the extent to which
they could be automated using existing technology.
About the author(s)

Michael Chui is a partner in McKinsey’s San Francisco office,

where James Manyikais a senior partner; Mehdi
Miremadi is a partner in the Chicago office.

The authors wish to thank Rick Cavolo for his contributions to

this article.

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