AI Frontiers presentation | January 2017

A FUTURE THAT WORKS: AUTOMATION, EMPLOYMENT, AND PRODUCTIVITY

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2McKinsey & CompanySOURCE: Source

What is the technical potential of automation in the workplace?

3McKinsey & Company

Our approach focuses on activities and the capabilities of currently demonstrated technologies

SOURCE: Expert interviews; McKinsey analysis

NOTE: Analysis based on currently available of demonstrated technology capabilities as of 2016.

Occupations

Retail salespeople Social 1

Linguistic2

Cognitive3

Sensory perception4

Physical 5▪ ...▪ …▪ …

~800 occupations

Teachers

Health practitioners

Food and beverage service workers

Activities

Greet customers

▪ ...▪ …▪ …

Process sales and transactions

~2,000 activities assessed across all occupations

Clean and maintain work areas

Demonstrate product features

Answer questions about products and services

?

Capabilities

Based on currently demonstrated technology capabilities as of 2016

4McKinsey & Company

Most susceptible activities ▪ 51% of US economy ▪ $2.7 trillion in wages

Some activities have higher technical automation potential

7 14 16 12 17 16 18

Processdata

Predictablephysical

Collectdata

Manage Expertise Interface Unpredictablephysical

Time spent on activities that can be automated by adapting currently demonstrated technology %

918 20

26

64 6981

Time spent in all US occupations%

Total wages in US, 2014$ billion

596 1,190 896 504 1030 931 766

BASED ON DEMONSTRATED TECHNOLOGY

5McKinsey & Company

Some sectors have more automatable activities than othersTime spent in US occupations, %

50 25 10 5 1

Ability to automate, %0 50 100

Sectors by activity type

ManufacturingAgricultureTransportation and warehousingRetail tradeMiningOther servicesConstructionUtilitiesWholesale tradeFinance and insuranceArts, entertainment, and recreationReal estateAdministrativeHealth care and social assistancesInformationProfessionalsManagement

Accommodation and food services

Educational services

Manage InterfaceExpertiseUnpredictable

physical Collect data Process dataPredictable

physical

BASED ON DEMONSTRATED TECHNOLOGY

Automation potential

44%43%

49%

36%

41%

51%53%

47%

39%

44%

40%

36%

35%27%

35%

58%

73%60%

57%Mos

t au

tom

atab

leLe

ast

auto

mat

able

In th

e m

iddl

e

6McKinsey & Company

Automation potential spans from high to low wage occupations

120100

60

4020

40

600

20

100

80

80

0

Hourly wage$ per hour

Ability to technically automatePercentage of time on activities that can be automated by adapting currently demonstrated technology

BASED ON DEMONSTRATED TECHNOLOGY

File clerks

Chief executives

Landscaping and grounds-keeping workers

7McKinsey & Company

A small percentage of occupations can be fully automated by adapting current technologies, but almost all occupations have some activities that could be automated

Example occupations

100917362

514234261881

>20>30>70 >50>80>90 >60100 >40

Percent of automation potential

% of roles(100% = 820 roles)

>0%>10

SOURCE: US Bureau of Labor Statistics; McKinsey Global Institute analysis

Sewing machine operators

Assembly line workers

Stock clerks Travel agents Dental lab technicians

Bus drivers Nursing assistants Web developers

Fashion designers Chief executives Statisticians

Psychiatrists Legislators

While about

5% of occupations could have

100% of tasks automated,

More will have portions of their tasks automated e.g.

60% of occupations could have

30% of tasks automated

8McKinsey & Company

Automatability across economiesEmployee weighted overall % of activities that can be automated

All countries could be fundamentally impacted by automation

<45 45–47 47–49 49–51 >51 No data

Employee weighted overall % of activities that can be automated by adapting currently demonstrated technologies

9McKinsey & Company

Technical automation potential concentrated in countries with large populations and/or high wages

Wages associated with technically automatable activities$ trillion

Labor associated with technically automatable activitiesMillion FTE

1.7

United States

Japan

China

Big 5 in Europe

2.7

1.1

4.1

India1.1

Remaining countries

5.1

United StatesIndia

394

233

China

54

332

Big 5 in Europe

Remaining countries

60

Japan35

Potential impact due to automation, adapting currently demonstrated technology (46 countries)

100% =$15.8 trillion

100% =1,109 FTEs

10McKinsey & CompanySOURCE: Source

What factors affect the pace and extent of automation?

11McKinsey & Company

Five factors impact the pace and extent of automation

Cost of labor and related

supply-demand dynamics

Benefits including and

beyond labor

substitution

Regulatory and

social acceptance

Technical progression

Cost of developing

and deploying

12McKinsey & Company

Pace of the automation, Global% of time spent on activities that will potentially be automated

Pace and extent of automation could play out over decades

2016

Adoption Early scenarioLate scenario

Technical automationpotential

Early scenarioLate scenario

20

30

75

10

90

0

40

70

60

20

80

2100

50

90

100

85 95805525 655040 45 6035 7030

13McKinsey & CompanySOURCE: Source

How will automation impact productivity and economic growth?

14McKinsey & Company

40

450

2515

270

05 202000 10 3530 6050

90

360

0

180

20706545 55

FTEs required to maintain current GDP per capita

FTEs to achieve projectedGDP growth

Projected FTE

FTE automation output (United States example, 2000-2065)Millions

Automation can contribute to growth in GDP per capita

Year

SOURCE: The Conference Board Total Economy Database; International Labor Organization; United Nations Population Division; McKinsey Global Institute analysis

FTEs

Automation will be a significant contributor to the productivity boost needed to projected GDP per capita growth

Assuming zero productivity growth, based on demographic trends, the projected FTEs will be less than the FTEs required to maintain current level of GDP per capita

15McKinsey & Company

Benefits Challenges

Benefits and challenges of automation

Better performance, outcomes, quality, speed

Overcome human limits, Solve new problems, create new opportunities and innovations

Improve safety, utility, quality of life

For companies and users

For economies

Boost productivity growth GDP growth, and per capita GDP

Counter aging or shrinking workforce

Solve “moonshot” problems (e.g., climate)

Jobs and wages Skills and training Dislocation and

transitions Acceptance and safety

Social and economic

Transparency, openness and competition

Cybersecurity Biases New capital-labor mix

implications

Other Policy issues

16McKinsey & Company

Imperatives for all

Policymakers IndividualsCompanies▪ Embrace automation to

capture the benefits▪ Create jobs and reshape

jobs the enable people to work with machines

▪ Play role in redeploying labor through retraining and skill-raising programs

▪ Support development of automation technologies

▪ Promote measures to raise skills and promote job creation

▪ Rethink incomes and social safety nets

▪ Focus on acquiring skills throughout lifetime

▪ Make education and career choices, based on skills that will still be in demand in an automation world

▪ Become an AI scientist!

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