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On Workforce Displacement due to Automation

As the adaption rate of automation technologies is rising, concerns about potential workforce displacement are gaining ground with new statistical studies presenting unsettling numbers. Before we deep-dive into the challenge of workforce displacement due to automation, let’s try to understand how we arrived here in the first place.

The Context

There are three major drivers of automation: productivity, competition and workforce. With aging working population, the increase in productivity (a key driver of economic growth) has slowed down in the past decade in many established economies. Due to severe global competition, low production costs and new business models have become a source of competitive advantage. Meanwhile, low employee engagement rates and younger workforce with higher expectations towards work opportunities and environment have prepared the ground for changes in the workplace.  Since automation has potential to address these challenges, it has been put on the map by businesses as a highly feasible business strategy.

Moreover, further adaption of automation is the most likely outcome. The increased productivity it creates can boost economic growth resulting in GDP growth, income growth and creation of more wealth.  The attempts to slow down the adaption of automation can have negative economic consequences.

The Impact

With further adaption of automation, the concern related to potential displacement of specific workforce groups  is gaining more relevance.

Recent PWC report reveals that automation will take shape in three waves – Algorithm Wave, Augmented Wave and Autonomy Wave – which will impact 2-3%, 20% and 30% of UK jobs respectively. PWC predicts that automation will first affect financial, professional and technical services as well as information and communications sectors, moving to all sectors in the Augmented Wave and impacting transport, manufacturing and retail the most with the Autonomy Wave. Female workers will be the first ones to get exposed to these changes due to higher representation in clerical jobs, while male workers and workers with low/medium education level will be impacted the most at later stages.

On the positive side, automation has also potential to create more jobs – mainly technical or requiring soft skills. Given increased productivity, higher income and wealth generated from automation, increased demand and spending on human labor are very possible future outcomes. It is important to note that, historically, technological advancement has been displacing one workforce group just to give way to another to emerge. Not only new jobs emerged but new businesses were built around those new technologies.

The Solution

Automation has a number of positive economic impacts on the overall population in the long-run. This is why it is important to embrace the change. At the same time, it is also important not to forget that individual lives are affected. Thus, potential workforce displacements are not to be ignored.

The solution to workforce displacement due to automation comes down to effective facilitation of the transition, which will require:

  • higher educational level, training, greater cognitive ability and good soft skills among impacted groups and people that will join the workforce in the future;
  • a tighter collaboration among key stakeholders (such as businesses and their HR departments, labor organizations, governments and educational institutions) with the goal to address education, training and cognitive gaps as well as to determine which experiences, skills and knowledge are needed for the future;
  • proactivity and intention of these stakeholders to prioritize, plan, finance and facilitate this transition manifested in robust policies and change plans.

Final Thoughts

It’s worth noting that the shift towards automation presents us with these opportunities:

  • re-think and re-design the organization, the workplace and the educational system in the new future-proof vision;
  • make human labour more fulfilling, while making better use of inherently human capabilities.

Just like any other complex change, the shift towards automation has an upside and a downside. It requires us to embrace the change in order to reap the benefits while addressing the risks.

We would like to learn about your opinion on the impact of automation. Please share your comments below.

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