Automation, demographics and inequality have the potential to dramatically reshape our world. Karen Harris, managing director of Bain’s Macro Trends Group, discusses the convergence of these three trends and the expected effect on the labor force through this decade.
Read the Bain Report: Labor 2030: The Collision of Demographics, Automation and Inequality
Read the transcript below.
KAREN HARRIS: So much has been written about automation, about demographics and about inequality separately. But at Bain what we saw was no one had looked at the confluence of those three important trends and what that confluence will mean for the next one to two decades.
When we looked at that, we started looking at demographics, and what we saw was that the labor force will experience a very steep deceleration. Working longer will help take the edge off, but not enough. All things being equal, that should be good news in terms of inequality as the workforce is smaller, wages rise, and the historically high levels of inequality we have today should abate.
But automation, and in particular service sector automation, short-circuits that process. In the beginning, the automation wave will feel buoyant. In fact, in the US alone, we expect to see $8 trillion worth of spend on infrastructure to both build and deploy that automation. But underneath that buoyancy is the erosion of jobs. We'll see either jobs being eliminated, or jobs that would have been formed that aren't formed, or wages being reduced or capped at the rate at which a worker becomes more expensive than a robot.
Ultimately, through this transition, we expect to see as much as 20% to 25% displacement in the workforce and wage suppression for another, potentially, up to 80% of workers -- which leaves all of the benefits of this period going to that top 20%, as we define it, which creates even more inequality.
This sounds scary, and it is scary. The last time we saw a transition of this magnitude was agriculture to industry. That took place over about 40 years, was twice as long, and half of the impact that we expect to see in the next 20-year period.
Of course, there is some good news. At the end of a period of transition like that, the quality of life is improved by unimaginable amounts. Welfare is improved, and we have new industries and new opportunities. But in the meantime, during that transition period, businesses, governments, workers and investors need to prepare themselves for a future that's older and more automated.
Demographics, automation and inequality could dramatically reshape our world in the 2020s and beyond. Our insights discuss how executives can prepare for the new global economy.