The Countries Most (and Least) Likely to be Affected by Automation – Harvard Business Review

Executive Summary

Today, about half the activities that people are paid to do in the global economy have the potential to be automated by adapting currently demonstrated technology.In all, 1.2 billion full time equivalents and $14.6 trillion in wages are associated with activities that are technically automatable with current technology. This automation potential differs among countries, with the range spanning from 40% to 55%. Four economiesChina, India, Japan, and the United Statesdominate the total, accounting for just over half of the wages and almost two-thirds the number of employees associated with activities that are technically automatable by adapting currently demonstrated technologies.

Around the world, automation is transforming work, business, and the economy. China is already the largest market for robots in the world, based on volume. All economies, from Brazil and Germany to India and Saudi Arabia, stand to gain from the hefty productivity boosts that robotics and artificial intelligence will bring. The pace and extent of adoption will vary from country to country, depending on factors including wage levels. But no geography and no sector will remain untouched.

In our research we took a detailed look at 46 countries, representing about 80% of the global workforce. We examined their automation potential today whats possible by adaptingdemonstrated technologies as well as the potential similarities and differences in howautomation could take holdin the future.

How it will impact business, industry, and society.

Today, about half the activities that people are paid to do in the global economy have the potential to be automated by adapting demonstrated technology. As wevedescribed previously, our focus is on individual work activities, which we believe to be a more useful way to examine automation potential than looking at entire jobs, since most occupations consist of a number of activities with differing potential to be automated.

In all, 1.2 billion full-time equivalents and $14.6 trillion in wages are associated with activities that areautomatable with current technology. This automation potential differs among countries, rangingfrom 40% to 55%.

The differences reflect variations in sector mix and, within sectors, the mix of jobs with larger or smaller automation potential. Sector differences among economies sometimes lead to striking variations, as is the case with Japan and the United States, two advanced economies. Japan has an overall automation potential of 55% of hours worked, compared with 46% in the United States. Much of the difference is due to Japans manufacturing sector, which has a particularly high automation potential, at 71% (versus60% in the United States). Japanese manufacturing has a slightly larger concentration of work hours in production jobs (54% of hours versus the U.S.s 50%) and office and administrative support jobs (16% versus 9%). Both of these job titles comprise activities with a relatively high automation potential. By comparison, the United States has a higher proportion of work hours in management, architecture, and engineering jobs, which have a lower automation potential since they require application of specific expertise such as high-value engineering, which computers and robots currently are not able to do.

On a global level, four economies China, India, Japan, and the United States dominate the total, accounting for just over half of the wages and almost two-thirds the number of employees associated with activities that are technically automatable by adapting demonstrated technologies. Together, China and India mayaccount for the largest potential employment impact more than 700 million workers between them because of the relative size of their labor forces. Technical automation potential is also large in Europe: According to our analysis, more than 60 million full-time employee equivalents and more than $1.9 trillion in wages are associated withautomatable activities in the five largest economies (France, Germany, Italy, Spain, and the United Kingdom).

We also expect to see large differences among countries in the pace and extent of automation adoption. Numerous factors will determine automation adoption, of which technical feasibility is only one. Many of the other factors are economic and social, and include the cost of hardware or software solutions needed to integrate technologies into the workplace, labor supply and demand dynamics, and regulatory and socialacceptance. Some hardware solutions require significant capital expenditures and could be adopted faster in advanced economies than in emerging ones with lower wage levels, where it will be harder to make a business case for adoption because of low wages. But software solutions could be adopted rapidly around the world, particularly those deployed through the cloud, reducing the lag in adoption time. The pace of adoption will also depend on the benefits that countries expectautomation tobring for things other than labor substitution, such as the potential to enhance productivity, raise throughput, and improve accuracy and regulatory and social acceptance.

Regardless of the timing, automation could be the shot in the arm that the global economy sorely needs in the decades ahead. Declining birthrates and the trend toward aging in countries from China to Germany mean that peak employment will occur in most countries within 50 years. The expected decline in the share of the working-age population will open an economic growth gap thatautomation could potentially fill. We estimate that automation could increase global GDP growth by0.8% to1.4% annually, assuming that people replaced by automation rejoin the workforce and remain as productive as they were in 2014. Considering the labor substitution effect alone, we calculate that, by 2065, theproductivity growth that automation could add tothe largest economies in the world (G19 plus Nigeria) is the equivalent of an additional 1.1 billion to 2.2 billion full-time workers.

The productivity growth enabled by automation can ensure continued prosperity in aging nations and could provide an additional boost to fast-growing ones. However, automation on its own will not be sufficient to achieve long-term economic growth aspirations across the world. For that, additional productivity-boosting measures will be needed, including reworking business processes or developing new products, services, and business models.

How could automation play out among countries? We have divided our 46 focus nations into three groups, each of which could use automation to further national economic growth objectives, depending on itsdemographic trends and growth aspirations. The three groups are:

For all the differences between countries, many of automations challenges are universal. For business, the performance benefits are relatively clear, but the issues are more complicated for policy makers. They will need to find ways to embrace the opportunity for their economies to benefit from the productivity growth potential that automation offers, putting in place policies to encourage investment and market incentives to encourage innovation. At the same time, all countries will need to evolve and create policies that help workers and institutions adapt to the impact on employment.

Read the original post:

The Countries Most (and Least) Likely to be Affected by Automation - Harvard Business Review