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Future of Work Summary - McKinsey Report Feb 18 2021

Debayan Ganguly (Dev Ayan) is an MBA with 2 years of experience in B2B sales. He likes to write and spread his learnings through blogs.

The basis of the analysis

The study worked on four groups of work viz. 'Leisure and Travel', 'Onsite Customer Interaction', 'Computer-based Office-Work', and 'Production and Warehousing'. The division is based on the amount of proximity required for performing the works. These arenas have varied requirement for a human to human interaction and proximity. While Computer-based office work could entirely shift to working remotely, sectors under 'Onsite Customer Interaction' like Healthcare, Personal Care, Retail need the physical presence of people at higher proximity.

The arenas of work for consideration in the decreasing order of proximity required include Medical Care, Personal Care, Onsite Customer Interaction, Leisure and Travel, Home Support, Indoor Production and Warehousing, Computer-Based Office Work, Classroom and Training, Transportation of Goods, Outdoor Production and Maintenance.

MGI considered eight countries for their sampling viz. China, France, Germany, India, Japan, Spain, the United Kingdom, and the United States, covering almost 50% of the world population and 62% of world GDP.


The 3 Trends that Emerged in the Pandemic

The pandemic pushed for many changes to our approach to working. We have been forced to adapt to changes in the work environments. Our Consumer Behaviour needed change at a personal level, and we depended more on getting things delivered; we avoided going out to the extent possible. The report says that the adoption of newer technology sees a 'sharp discontinuity' between the pre and post-pandemic times. The increase in the adoption of digital life transcended expert predictions.

Among the changes we had seen in the past two years, three significant trends are likely to continue even after the rage of the pandemic has subsided.

The three trends include:

1. Hybrid Remote Work: The findings say that much more work could be achieved through remote work, unlike previously predicted. Jobs of sales, legal arbitrations, classroom teaching, real estate tours, and even expert guidance in services could be delivered remotely.

Working remotely also enables a single expert person to do the task of many individuals. 20-25% of the workforce could work from home 3-5 days a week without losing productivity. In advanced economies, this percentage could even be higher.

Business travel may see a dip from pre-pandemic levels, reduced by about 20%.

2. Delivery Economy: The share of e-commerce sales grew 2-5 times from its earlier levels. This growth is likely to sustain as 75% of the late majority who adopted digital retails for their goods are likely to continue with the same.

Other forms of online consumptions include telemedicine, OTT platform, online banking, all of which has taken off well in the pandemic. Even doctors are willing to provide consultancy over a video call.

This transition will give rise to jobs like transportation, and warehousing, while employment in retail will see a downfall. Many of these jobs will be created by the gig economy - the economy of renting - and will give rise to independent workers.

3. Automation and AI: Routine jobs had declined even during the 2008 recession by reconfiguring the workforce, and in this pandemic, the dip will be due to technology adoption. Automation can result in lowering the dependence on the human labour force. Companies have begun investing in Artificial Intelligence, Augmented Reality, and Automating their process to achieve greater efficiencies. 2/3rd of the company executives are thinking to increase their investment in automation and Artificial Intelligence. More significant deployment of robots will happen in areas that require higher proximity.

Once the pandemic subsides, the companies will continue to cash in on their investments and likely to refrain from hiring workforce to the pre-pandemic level.


Effects of the Changing Trends

The change in economic trends will have many socio-economic repercussions that need to be taken care of in advance at personal, corporate, and governance levels to ensure the shocks are well absorbed and smooth transitions.

There will be changes in the pattern of migration. The increase in the adoption of remote work would stop the urban migration and migration into bigger cities of labour. There may also be cases of reverse migration as the workforce may prefer working from their hometown. This scenario emerged in the United States, where the residential rents in the bigger cities decreased while that of suburbs and smaller towns increased as the demands for rental homes changed.

The Gig workforce will increase. Many independent workers will take up jobs, and companies will prefer them over hiring employees. The independent force could do multiple jobs without being exclusively attached to one company. There will be an increase in their income and savings for the companies.

The most significant change will emerge in the mix of employment. The AI and digital adoptions will render many manual labours unemployed, while in certain areas like health care worker, transportation, the jobs will rise.

The report predicts that there will be a decline in low paying jobs, and there will be a rise in high paying occupations. There will be a fall by 4.3 Million in the requirement of customer service jobs in the US, and transportation will see a rise in demand professionally by 800,000.

The need of the hour is to achieve retraining of the workforce to make everyone employable.

Steps to Ensure Smooth Reskilling

As reskilling is imperative, making the process smooth and effective should be our concern at this moment. We need to understand the areas where reskilling is required, the demography of the citizens who would opt for reskilling, and how best to reach out.

Someone with a college degree may not need reskilling like some without one may need, and illiterate immigrants may need reskilling, so do the ethnic minorities and women.

Corporates and policymakers must come together to make changes in the current scenario to provide an equitable transition to the workforce to suit the required employment mix.

Companies need to identify what work can be done remotely without harming the efficiency and what job needs employees to be on site. They need to change policies so that both works continue in cohesion. Reskilling and training that the companies did previously needs a revamp. The requirement for training will increase. The hiring process requires a change, with a focus on skills instead of degrees. To reach out to minorities and socially backward people, they could emphasise diversity inclusion practices.

Policymakers need to expand the digital infrastructure to enable the digital transition to avoid uncontrollable unemployment. Even a percentage of rural household in advanced economies lack access to the internet. They can provide income support to those undergoing retraining so that the transition doesn't result in a dip in demand.

Furthermore, they can revamp their labour policies and make them friendly for the independent labour force. Licensing and Certification could be restructured so that people lacking an academic degree but having skills can take up employment. Many nurses were allowed to provide services only doctors can provide. Revamping licenses also help reduce the barrier for new entrants. Finally, the local government need to use this opportunity of reverse migration to improve their local economy by providing real estate and other services, the much-needed boost to suburbs and rural areas.

This content is accurate and true to the best of the author’s knowledge and is not meant to substitute for formal and individualized advice from a qualified professional.

© 2021 Dev Ayan

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