The future of work in Europe Automation, workforce transitions, and the shifting geography of employment by Sven Smit, Tilman Tacke, Susan Lund, James Manyika and Lea Thiel published by McKinsey & Global Institute (6/2020).
“The future of work in Europe
The COVID-19 crisis has strongly affected Europe’s labor markets, and it may take years for employment to return to its pre-crisis levels. But the pandemic will not be the only trend shaping the future of work on the continent. This research takes an in-depth look at almost 1,100 local economies across the 27 EU countries plus the United Kingdom and Switzerland. We assess how automation and AI may reshape the mix of occupations, the skills required to work, and the transitions workers face. In the aftermath of the pandemic, emerging evidence from companies suggests that technology adoption and other workforce shifts could accelerate. Among our key findings:
Europe is a patchwork of highly varied local labor markets that have seen increasing geographic concentration of employment growth in the past. Forty-eight dynamic cities, including Amsterdam, Copenhagen, London, Madrid, Munich, and Paris, which are home to 20 percent of Europe’s population, generated 43 percent of Europe’s GDP growth, 35 percent of its net job growth, and 40 percent of its population growth between 2007 and 2018. By contrast, 438 shrinking regions with 30 percent of the population, mostly in Eastern and Southern Europe, have declining workforces, older populations, and lower educational attainment. The remaining half of the population lives in a wide range of economies that have been largely stable, with modest job growth prior to the pandemic.
The COVID-19 crisis ended years of strong employment growth marked by greater mobility. The crisis put up to 59 million European jobs, or 26 percent of the total, at risk in the short term, through reductions in hours or pay, furloughs, and permanent layoffs. This marks a sharp reversal in employment rates, which prior to the crisis had risen in 85 percent of the regions. Mobility had also been rising: while most migration took place within countries, the number of Europeans working in another European country doubled to 16 million from 2003 to 2018, as Eastern European countries joined the EU and Southern Europeans moved north.
Once the economy recovers, Europe may have a shortage of skilled workers, despite a growing wave of automation. A key reason is the declining supply of labor: Europe’s working-age population will likely shrink by 13.5 million (or 4 percent) due to aging by 2030. The trend of shorter workweeks could reduce labor supply by an additional 2 percent. Scenarios we have developed for the pace of automation adoption show that 22 percent of current work activities (equivalent to 53 million jobs) could be automated by 2030, assuming a midpoint scenario. A large share of potential job losses (if not all) could be compensated by job growth from sources such as technology, rising incomes, and investments in healthcare. Even a 4 percent decline in the total number of jobs to 2030 would leave a shortage of workers to fill available positions. This is especially true in dynamic growth hubs. Unless the push to work from home that was a consequence of the COVID crisis fundamentally changes urbanization patterns, these 48 cities could capture more than 50 percent of Europe’s potential job growth in the next decade, continuing and intensifying the geographic concentration we have seen over the past decade. In that case, they may need to attract workers from other areas to fill more than 2.5 million jobs.
More than half of Europe’s workforce will face significant transitions. Automation will require all workers to acquire new skills. About 94 million workers may not need to change occupations but will especially need retraining, as technology handles 20 percent of their current activities. While some workers in declining occupations may be able to find similar types of work, 21 million may need to change occupations by 2030. Most of them lack tertiary education. Newly created jobs will require more sophisticated skills that are already scarce today. Our analysis of job profiles shows that Europeans frequently switch jobs, but they typically move from one growing occupation to another or from one declining occupation to another, with little crossover. However, we also identify promising transitions from declining into in-demand roles. Workers most likely to be displaced by automation are also those most at risk in the COVID-19 pandemic, and the crisis could accelerate some of the displacement. The overlap will be especially pronounced in a number of key sectors, such as wholesale and retail.
Overcoming labor market mismatches in a post-COVID world will be a key challenge, with potentially different solutions for each community. Four broad imperatives stand out: addressing skills shortages; improving access to jobs in dynamic growth hubs, potentially through an increase in remote working; revitalizing and supporting shrinking labor markets (since 40 percent of Europeans will live in regions where jobs are declining over the coming decade); and increasing labor participation. Employers will need to make adept decisions about strategy, skills, and social responsibility; their choices will need to reflect the skills, occupational mix, and geographic footprint of their workforces. Helping individuals connect with new opportunities and prepare for the jobs of tomorrow is a common task for every region across the EU…”
