The future of work

The world of work is in a state of flux, which is causing considerable anxiety—and with good reason. There is growing polarization of labor-market opportunities between high- and low-skill jobs, unemployment and underemployment especially among young people, stagnating incomes for a large proportion of households, and income inequality. Migration and its effects on jobs has become a sensitive political issue in many advanced economies. And from Mumbai to Manchester, public debate rages about the future of work and whether there will be enough jobs to gainfully employ everyone.

The development of automation enabled by technologies including robotics and artificial intelligence brings the promise of higher productivity (and with productivity, economic growth), increased efficiencies, safety, and convenience. But these technologies also raise difficult questions about the broader impact of automation on jobs, skills, wages, and the nature of work itself.

Many activities that workers carry out today have the potential to be automated. At the same time, job-matching sites such as LinkedIn and Monster are changing and expanding the way individuals look for work and companies identify and recruit talent. Independent workers are increasingly choosing to offer their services on digital platforms including Upwork, Uber, and Etsy and, in the process, challenging conventional ideas about how and where work is undertaken.

For policy makers, business leaders, and workers themselves, these shifts create considerable uncertainty, alongside the potential benefits. This briefing note aims to provide a fact base on the multiple trends and forces buffeting the world of work drawing on recent research by the McKinsey Global Institute and others

Developments in employment, income, and skills

Challenges in labor markets are growing, household incomes in advanced economies have been stagnating, and there are increasing skill gaps among workers.

 Skills, jobs, and locations do not always match, limiting income-earning opportunities for many

Educational systems have not kept pace with the changing nature of work, resulting in many employers saying they cannot find enough workers with the skills they need. In a McKinsey survey of young people and employers in nine countries, 40 percent of employers said lack of skills was the main reason for entry-level job vacancies. Sixty percent said that new graduates were not adequately prepared for the world of work. There were gaps in technical skills such as STEM subject degrees but also in soft skills such as communication, teamwork, and punctuality. Conversely, even those in work may not be realizing their potential. In a recent global survey of job seekers conducted by LinkedIn, 37 percent of respondents said their current job does not fully utilize their skills or provide enough challenge.

Some of the mismatching is locational: where there is demand for work, there may not be available and qualified workers to be found. This geographic mismatch can be seen across regions within countries, and between countries.

Labor markets are under strain, and talent is underutilized

Unemployment and underemployment are high around the world. In the United States and the 15 core European Union countries (EU-15), there are 285 million adults who are not in the labor force—and at least 100 million of them would like to work more. Some 30 to 45 percent of the working-age population around the world is underutilized—that is, unemployed, inactive, or underemployed. This translates into some 850 million people in the United States, the United Kingdom, Germany, Japan, Brazil, China, and India alone. Most attention is paid to the unemployed portion of this number, and not enough to the underemployed and the inactive portions, which make up the majority of untapped human potential.

Almost 75 million youth are officially unemployed. Women represent one of the largest pools of untapped labor: globally, 655 million fewer women are economically active than men. In a “best-in-region” scenario in which all countries match the rate of improvement in gender gaps (in labor force participation, hours worked, and sector mix of employment) of the best-performing country in their region, $12 trillion more of annual GDP would be realized in 2025, equivalent in size to the current GDP of Japan, Germany, and the United Kingdom combined.