Preparing for an Automated FutureOctober 5, 2020 How much education is enough? This is a question everyone faces as they chart a career path. The same question has become increasingly important for businesses. As technology advances, it is inevitable that industries’ current ways of doing business will be disrupted. While some opportunities will be lost, other opportunities will emerge. So how do we begin to understand what level of education and training is enough?
The Individual Perspective
Let’s begin by examining the current levels of education in the Mid-Valley. The percent of the population that has a high school diploma or higher has risen marginally over the past five years (from an estimated 86.1 percent in 2014 to 87.3 percent in 2018). The portion of the population which has not pursued education beyond high school has decreased; while the portion of individuals who have achieved a degree after high school has increased.
The motivation for this apparent trend is at least partially found in economic outcomes. As seen in the second graph, data from the Bureau of Labor Statistics indicates individuals with higher education earn more income and experience lower unemployment rates. Whether an individual is contemplating entering the labor market or an existing worker is surveying the current labor market landscape, greater income potential and better employment outlooks are powerful incentives to pursue additional education.
The Business Perspective
Businesses must consider both their own profitability as well as the potential threat of competition. In light of this, strategic plans should consider structural shifts in both labor markets and the production processes brought about by rapid changes in technology. In 2017, PricewaterhouseCoopers published an international analysis, “Will Robots Really Steal Our Jobs?” that suggests three waves of disruption will impact industries: an algorithm wave, augmentation wave, and autonomy wave.
The algorithm wave, which automates simple computational tasks, is already underway. The augmentation wave, they argue, will automate repeatable tasks such as filling out forms and statistical analysis and is estimated to reach its peak in the 2020s. Finally, the autonomy wave will automate physical tasks tied to manual dexterity and problem solving. This last wave, they estimate, will be prevalent across the economy sometime in the 2030s. For each of these waves, businesses will need to either retrain current employees or hire people who already have the skills to interface with new technologies. These waves are expected to impact all industries to varying degrees.
While no industry is immune, consider the top-five most impacted industries as reported in a 2019 World Economic Forum article, “These are the industries most likely to be taken over by robots”. These businesses represent approximately 45 percent of private nonfarm employment in the Mid-Valley.
Applying the percent of “time spent in task that could be automated” from the last graph to these five industries implies that roughly 26 percent of Mid-Valley jobs are at risk of automation. Looking at risk of automation at the state level, a June 2019 report, “How Robots Change the World”, published by Oxford Economics, estimates Oregon to be the most vulnerable U.S. state to an acceleration of robot installation. While the risk of automation in Oregon and the Mid-Valley is real, automation will not just cause labor disruptions, it will also create demand for employees to work with new technologies.
Are the potential changes automation may cause, with regards to required employee skills, important to businesses? If so, how do businesses plan to address those skills gaps? According to a McKinsey Global Institute 2018 report, “Retraining and Reskilling Workers in the Age of Automation”, 77 percent of the U.S. companies surveyed cited the potential skills gaps created by technology as a top 10 priority. Of those companies, 27 percent planned to address the skills gaps mainly through retraining, 35 percent through a mix of retraining and hiring, and 30 percent mainly by hiring the needed employees.
Technology is both a destroyer and creator of jobs. According to an article, “Technology, jobs, and the future of work”, published by the McKinsey Global Institute in 2017, “One-third of new jobs created in the United States in the past 25 years were types that did not exist, or barely existed, in areas including IT development, hardware manufacturing, app creation, and IT systems management.”
This reality points to an imperative for businesses and workers: investing in training and retraining will be increasingly important going forward. The upheaval to labor markets caused by technological changes may well be on par with that of the Industrial Revolution. To meet these challenges workers, businesses, and communities will need to invest in education and training. This may well be an ongoing process, with workers needing to learn new skills throughout their careers. Through continued acquisition of new skills, both laborers and businesses will be positioned to take advantage of new opportunities.