July 2019 The future of work in America: People and places, today and tomorrow The future of work in America People and places, today and tomorrowMcKinsey Global Institute Since its founding in 1990, the McKinsey Global Institute (MGI) has sought to develop a deeper understanding of the evolving global economy. As the business and economics research arm of McKinsey it is not commissioned by any business, government, or other institution. For further information about MGI and to download reports, please visit mckinsey/mgi. mckinsey/mgi Download and listen to MGI podcasts on iTunes or at mckinsey/mgi/publications/multimedia/ Cover image: Stocksy UnitedThe future of work in America People and places, today and tomorrow Susan Lund | Washington, DC James Manyika | San Francisco Liz Hilton Segel | New York André Dua | New York Bryan Hancock | Washington, DC Scott Rutherford | Washington, DC Brent Macon | Atlanta July 2019Preface Automation technologies promise to deliver major productivity benefits that are too substantial to ignore. They are also beginning to reshape the American workplace, and this evolution will become more pronounced in the next decade. Some occupations will shrink, others will grow, and the tasks and time allocation associated with every job will be subject to change. The challenge will be equipping people with the skills that will serve them well, helping them move into new roles, and addressing local mismatches. This report represents the next stage in our ongoing body of research into the capabilities, potential, and economic impact of these technologies. This work began with A future that works: Automation, employment and productivity, in which we analyzed the automation potential of every occupation by looking at the extent to which its constituent activities can be handled by currently demonstrated technologies. In Jobs lost, jobs gained: Workforce transition in a time of automation, we examined the potential for both job displacement and job growth to assess the potential net impact in multiple countries, as well as the implications for occupations, skills, and wages. Earlier this year, we published The future of women at work: Transitions in the age of automation, exploring more targeted demographic effects in countries around the world by looking through the lens of gender. Now this report continues our exploration by examining the impact on local economies and demographic groups in the United States, placing automation in the context of other ongoing labor market trends that have affected places and people. Its starting point is a geographic segmentation produced for America at work: A national mosaic and roadmap for tomorrow, a research collaboration between McKinsey James Manyika, chairman and director of MGI, based in San Francisco; Liz Hilton Segel, a New Yorkbased senior partner who serves as managing partner for McKinsey in North America; André Dua, an MGI Council member and a senior partner in New York; Bryan Hancock, a partner in Washington, DC; and Scott Rutherford, a senior partner in Washington, DC. Brent Macon led the project team, which included Veena Advani, E.B. Armstrong, Stephanie Bell, Shannon Glick, Megan Hastings, Josh Roberts, and Kelsey Schroeder. Arthur Bianchi, Gurneet Singh Dandona, Ryan Luby, Vivien Singer, Alok Singh, and Soyoko Umeno were instrumental in providing modeling, analytics, and data support. We are grateful to the academic advisers who challenged our thinking and added new insights: Martin Neil Baily, the Bernard L. Schwartz Chair in Economic Policy Development and a Senior Fellow in Economic Studies at the Brookings Institution; and Laura Tyson, distinguished professor of the graduate school and faculty director of the Institute for Business McKinsey colleagues Steve Begley and Cassidy Tanner; and MGI colleagues Michael Chui, Mekala Krishnan, and Sree Ramaswamy. Along the way, we received valuable insight from conversations with employers and local leaders across the country and from our involvement in taskforces including the Aspen Institute Future of Work Initiative and the Markle Foundations Rework America Initiative. This report was produced by MGI executive editor Lisa Renaud, editorial production manager Julie Philpot, senior graphic designer Patrick White, and designer Laura Brown. We also thank our colleagues Dennis Alexander, Tim Beacom, Deadra Henderson, Richard Johnson, Lauren Meling, and Rebeca Robboy for their contributions and support. This report contributes to MGIs mission to help business and policy leaders understand the forces transforming the global economy and prepare for the next wave of growth. As with all MGI research, this work is independent, reflects our own views, and has not been commissioned by any business, government, or other institution. We welcome your comments on the research at MGImckinsey. Jacques Bughin Director, McKinsey Global Institute Senior Partner, McKinsey 94 million people live in these segments. These diverse starting points affect whether communities will have the momentum to offset automation-related displacement. The same 25 cities and peripheries that led the post-recession recovery could capture 60 percent of US job growth through 2030. The mixed middle and trailing cities are positioned for modest job gains, but rural counties could see a decade of flat or even negative net job growth. These shifts are occurring when geographic mobility is at historic lows. The next wave of automation will affect occupations across the country, displacing many office support, food service, transportation and logistics, and customer service roles. At the same time, the economy will continue to create jobs, particularly roles in healthcare, STEM fields, and business services, as well as work requiring personal interaction. While there could be positive net job growth at the national level, new jobs may not appear in the same places, and the occupational mix is changing. The challenge will be in addressing local mismatches and help workers gain new skills. Labor market outcomes vary across demographic groups today, and automation could amplify these patterns. Individuals with a high school degree or less are four times more likely to hold highly automatable roles than those with bachelors degrees. Given educational disparities, Hispanic and African-American workers may be hit hardest, with 12 million displaced. Nearly 15 million jobs held by young people could be lost, raising questions about career pathways. Workers over age 50 hold an additional 11.5 million at-risk jobs. The share of middle- wage jobs may shrink as growth concentrates at the high and low ends of the wage scale. Employers seeking to make the most of automation for innovation and productivity will need to manage complex transitions. The challenges vary depending on the nature, mix, and geographic footprint of their workforces, as we illustrate through profiles of six types of employers. The questions facing a retail or food chain with a distributed customer-facing workforce, for example, are not the same as those for an employer with a geographically concentrated white-collar workforce. All employers will need to make adept decisions about strategy, investment, technology, workflow redesign, talent needs and training, and the potential impact on the communities in which they operate. Communities need to prepare for this wave of change, focusing in particular on job matching and mobility, skills and training, economic development and job creation, and support for workers in transition. They can draw on a common toolbox of solutions, but the priorities vary from place to placefrom affordable housing in major cities to digital infrastructure that enables remote work in rural counties. Without bold, well-targeted interventions, automation could further concentrate growth and opportunity. But these trends are not set in stone. It is possible to turn this period of technological change into an occasion to create more rewarding jobs and build better learning systems and career pathways. The United States needs the energy and ingenuity of its private and public sectors, as well as local coalitions working on the ground in communities. A fresh commitment to investing in people and places can lift up more Americans from coast to coast. In Brief The future of work in America vi McKinsey Global Institute America is a mosaic of local economies on diverging trajectories 14.7M 11.5M 11.9M Potential workforce displacement in midpoint adoption scenario, 201730 Estimated net job growth in midpoint adoption scenario, 201730, % 4x Higher displacement risk for workers with high school diploma or less Young workers age 1834 Workers over age 50 Hispanics and African Americans Net growth, % >15 1015 510 05 <0 Automation could widen existing disparities 60% of job growth by 2030 could be concentrated in 25 cities and their peripheries Employment change for select community segments, % of 2007 employment 110 100 90 High-growth hubs Megacities Trailing cities Americana Distressed Americana 13 community segments have varying economic and demographic profiles Urban core 63 counties Periphery Niche cities Small powerhouses; Silver cities; College-centric towns Mixed middle Stable cities; Independent economies; Americas makers Low-growth/rural areas Trailing cities; Americana Distressed Americana; Rural outliers Economic dynamism Least Most 30% of US population Megacities; High-growth hubs Urban periphery 2,365 counties 24% of US population 271 counties 16% of US population 89 counties 6% of US population 325 counties 24% of US population 2007 08 09 2017 10 11 12 13 14 15 16 Source: McKinsey Global Institute analysis