The Age of Automation

As employers are grappling with the effects of the lack of skilled job candidates (also known as the Silver Tsunami, Demographic Drought, and Sansdemic), there has been an increasing interest in workforce automation. According to the World Economic Forum, “US companies ordered more robots than ever before in the first nine months of 2021, as they struggled to recruit staff” (Wood, 2021). In an article from NBC, it has been reported that the demand for “automated machines” that “cut specialty materials like carbon fiber and fiberglass” from Eastman Machine Company has increased by 30% and their backlog for “a new device extends to June”—their longest backlog “in company history” (Popken, 2021).


Clearly, we are entering the age of automation. Employers who can’t find new employees are looking to automation for assistance and looking for new ways to fulfill the duties of many unclaimed jobs in the current market.



Rainer Strack’s prediction

Workforce shortage

In 2014, Rainer Strack predicted some of the challenges facing our current workforce and marketplace in his TED Talk, “The Workforce Crisis of 2030 – and How to Start Solving it Now.” Although his predictions apply to the year 2030, some of his predictions ring true for the post-Covid workforce. Using data specific to Germany, Strack predicts that Germany “will run into a major talent shortage very quickly” and that there will be a large gap between the labor demand and labor supply. Examining global data, Strack predicts that by 2030, there will be a “global workforce crisis in most of our largest economies” and that there would be “even higher shortfalls for high-skilled people and a partial surplus for low-skilled workers.”


Technology’s role

Strack points to the potential that technology has as an aid in these workforce shortages. He states that “technology will replace a lot of jobs, regular jobs. Not only in the production industry but even office workers.” He explains that in some, but not all, ways technology will “help us to solve this global workforce crisis.” According to Strack, “technology will replace a lot of jobs, but we will also see a lot of new jobs and new skills on the horizon, and that means technology will worsen our overall skill mismatch. And this kind of de-averaging reveals the crucial challenge for governments and businesses.”

Business response

Strack explains that future businesses will have to put immense focus on attracting “high-skilled people” by understanding their needs, job preferences, and wants. He believes that in response to the looming workforce shortage, companies should have a “people strategy” that includes four parts:

  1. Forecasting workforce supply and demand

  2. How to attract great people

  3. Educating and upskilling employees

  4. How to retain great people

“Paradox of automation: the more efficient the automated system, the more crucial the contribution of the human operators of that system.” - Josh Kaufman

Key statistics

Below we outline key statistics regarding automation of the workforce, productivity, and the current stance of the workforce today.

  • 66% of companies are at least piloting automation strategies, a 9% increase since 2018 (Herzberg et al., 2020)

  • The most common automation technologies deployed are business-process-management platforms and robotic process automation (Herzberg et al., 2020)

  • The global Business Process Automation market is estimated to grow from $9.8 billion in 2020 to $19.6 billion by 2026 (Akujuo, 2022)

  • 69% of employees report that automation reduces wasted time and 59% believe that they would have over 6 spare hours per week if repetitive jobs were automated (Akujuo, 2022)

  • 75% of all companies use at least one form of marketing automation (SocialMediaToday, 2019)

  • The majority of jobs that are the most likely to be automated are those in the service and labor industries (Broady et al., 2021)

  • 36 million Americans are at high risk of losing their jobs to automation (Broady et al., 2021)

  • In 2020, 2.7 million industrial robots were operating in factories (Vega, 2022)

  • Up to 30% of jobs in all industries could be automated by 2030 (Hawksworth et al., 2018)

  • “The labor force participation rate is projected to continue to trend down, declining from 61.7 percent in 2020 to 60.4 percent in 2030” (Maurer, 2021)

  • In December of 2021, there were 0.6 unemployed persons available for each available job opening, continuing a decline in workforce participation since 2019 (BLS, n.d.)

  • Almost 90% of organizations are facing difficulties in filling open positions (SHRM, n.d.)

  • 60% of all occupations have at least 30% technically automatable activities (Manyika et al., 2017)

  • Less than 5% of all occupations are 100% automatable (Manyika et al., 2017)

  • Collecting data, processing data, and predictable physical actions are the workplace activities most vulnerable to automation (Manyika et al., 2017)

The role of automation in today’s workforce

Employers are currently facing a shortage in the workforce. In response, many businesses have started examining how to fill these vacant roles with automated machines, AI, and other technologies. In a survey by the World Economic Forum, 43% of businesses stated that they are set to “reduce their workforce due to technology integration, 41% plan to expand their use of contractors for task-specialized work, and 34% plan to expand their workforce due to technology integration” (WorldEconomicForum, 2020).


According to CNBC, some fast food chains are now piloting test robots named “Flippy 1” and “Flippy 2” to manage fry stations and other various roles (Rogers, 2021). Even major companies such as Amazon have started implementing automation and have more machines than human employees at some warehouses (Hetrick, 2021).


According to Manyika and Sneader of McKinsey & Co, the “deployment of AI and automation technologies can do much to lift the global economy and increase global prosperity, at a time when aging and falling birth rates are acting as a drag on growth…” (2018). They state that AI and automation could be accountable for 60% of a 2% increase in “productivity growth” from 2018 to 2028 (Manyika & Sneader, 2018).


“Automation applied to an inefficient operation will magnify the inefficiency.” - Bill Gates

Is automation the silver bullet?

Can automation solve all of the problems associated with a workforce smaller than the labor demand? Unfortunately, the solution is not that simple. Automated machines, AI, and other technologies cannot replace highly skilled workers—a category of employees that are currently in high demand but are in low supply. While automation can fulfill job duties that are repetitive and do not require complex cognitive skills, it also increases the demand for skilled labor.


Automation requires an increase in highly skilled labor

As employers implement automation into the modern workplace, the demand for highly skilled workers also increases (Dizikes, 2020). Machines must be managed, fine-tuned, and monitored. In an article from Automation.com, Claudia Jarrett explains that automation increases “the levels of skill required. In other words, companies must invest in, and train, their staff to get the most from” their automation strategies (Jarrett, 2020). She explains that AI and automation will reduce the physical labor required by employees and increase the importance of “human decision-making.” Other studies also suggest that the “demand for advanced technological skills such as programming will grow rapidly” with the adoption of automation (Manyika & Sneader, 2018).


Furthermore, research from Mckinsey & Co indicates that certain skills such as technological, cognitive, and social/emotional skills will increase in demand (Bughin et al., 2018). In summary, while automation can fill the gaps left by low skilled labor, it also creates a demand for highly skilled labor as the skill needs for an organization shift.


Automation can produce economic disparities between skilled and unskilled workers

Economist Daron Acemoglu of MIT is quoted as stating that “automation is critical for understanding inequality dynamics” (Dizikes, 2020). According to an article from MIT, when automation is implemented in the workforce, “low-skill workers” are “hurt by [the] displacement” of their jobs, and the new jobs created by automation are “coming slower and benefitting high-skill workers” (Dizikes, 2020).


According to McKinsey & Co, up to 15% of the global workforce “could be displaced by automation” between 2016 and 2030 (Manyika & Sneader, 2018). Historically, the effects of automation on low-skill workers are predominantly negative. Acemoglu states that “wage inequality is associated with disruptive changes for workers” (Dizikes, 2020). Furthermore, an article from Harvard Business Review points out, that while high-skilled workers are affected by automation, the effects are more drastic for low-skill employees. High-skill employees can leave their current employers due to automation and “find new jobs faster.” Meanwhile, low-skill workers displaced by automation face greater difficulty in finding new employment and economic loss due to unemployment (Bessen & Kossuth, 2019).


When implementing automation policies and machinery, it is important to consider the effects that it will have on low-skilled staff and members of your surrounding communities. Just as important is considering skill-specific training programs for those in low-skill positions for equal economic and career opportunities across skill levels.


“Automation does not need to be our enemy. I think machines can make life easier for men, if men do not let the machines dominate them.” - John F. Kennedy

The effects of automation vary per industry

According to McKinsey & Co, in all sectors of businesses surveyed, there were several areas of each business that were said to be “vulnerable to digital disruption” (Galven et al., 2021). Consider their graphic below outlining the various areas of business most vulnerable to digital disruptions such as automation.


Source: McKinsey & Company

Not all business sectors and industries respond to automation in the same way. Because of this, it is important to examine the effects of automation at every level of a business. Using the graphic above, business leaders of different industries can see the areas of their business that are particularly vulnerable to disruption due to automation. Furthermore, different workplace activities are particularly susceptible to automation. Consider the following graph from Mckinsey and Co which visualizes the different activities in each industry that are most susceptible to automation (Manyika et al., 2017).


Source: US Bureau of Labor Statistics; McKinsey Global Institute analysis

A response to automation

Understanding that automation cannot solve all of the problems associated with declining workforce participation is the first step in creating a successful response to incorporating automation in the workplace. By using this knowledge, business leaders can implement guidelines and procedures that overcome the side effects of automation while taking advantage of the benefits. Below, we further reflect on Rainer Strack’s “people strategy” and how business leaders can use this model in the post-Covid workplace.


Forecast the supply and demand of your workforce

As discussed previously, when automation is implemented, there will be a shift in labor skill needs (Jarrett, 2020). Manyika and Sneader indicate that as skills shift and people change jobs, wages will also increase (2018). It is important to examine your specific workforce. What skills will your business need to increase? What predictions are there for wage increases? How many individuals in your corporation currently have these skills and how many individuals in the job market have these skills? What are the current statistics regarding your specific workforce? Is there a labor shortage or a labor surplus? Do economists and business analysts predict any changes in this? How can you adapt to these changes?


Educate and train your employees

Using the information from your workforce forecast, you can begin to examine how to train and educate your employees in regard to future skills needs. Jarrett summarizes this well, “companies that effectively improve their workers' skills are the ones that will get ahead. This is possible through the better use of data, data management and sharing and better reporting—and, therefore, better communication—in the plant” (2020). Manyika and Sneader of McKinsey & Co also recommend improving “basic STEM skills… creativity, critical and systems thinking, and adaptive and life-long learning” (2018).


Furthermore, research from Mckinsey & Co suggests that companies who focus on “automation-related capabilities of their personnel” are more likely to keep their employees. They also found that companies who implement their employees’ expertise into the “design of automation solutions” were more successful than those who did not (Herzberg et al., 2020). Putting people first ensures that training, education, and automation work for employees not instead of employees—ultimately increasing a businesses chance of success when implementing automation strategies.


Attract the right people

A key strategy for overcoming what some call The Great Resignation, Sansdemic, Silver Tsunami, and Demographic Drought, is attracting the right employees and job applicants. For more information on how to effectively identify and select qualified job candidates, listen to Arete Coach Podcast Episode 1055, Overcoming The Silver Tsunami: 20 Hiring Strategies To Find & Retain Talent.


Retain the right employees

Because of the increasing demand for skilled labor, it is important for business leaders to discover how to best retain their skilled employees. Consider what your employees’ needs and wants are. What effects has Covid-19 had on their mental, physical, and emotional wellbeing? Consider insights from Gallup's most recent, “State of the Global Workplace.” How can your employees in leadership positions be more empathetic and make the workplace more enjoyable, fulfilling, and enriching? How are you communicating empathy to your employees? What strategies can you implement to increase your employee retainment? How can you “redesign” your workplace to integrate automation in a way that is beneficial and productive for your employees (Manyika & Sneader, 2018)?


Cybersecurity

Manyika & Sneader from McKinsey & Co state that “the use of data must always take into account concerns including data security, privacy, malicious use…” (2018). Business leaders implementing automation strategies and new technologies must have secure cybersecurity practices to avoid financial losses due to hacking or other security breaches. What strategies can you put in place to better protect your business? How can you train your employees on cybersecurity? What is the state of your cybersecurity currently and how can it be improved?


The main takeaway

As we navigate the changing labor market, automation offers employers a key strategy for filling unclaimed job positions. However, it is important for employers to consider the side effects of automation and prepare their current workforce for these effects. While automation is not a silver bullet for all the challenges faced by employers with unfilled jobs, it can be helpful when used strategically. When considering automation strategies, it is important for employers to predict changes in the labor market, educate and train employees to avoid skill shortages, examine how to attract the right employees, and retain high-skilled employees.


“To succeed in this world, you have to change all the time.” - Sam Walton

References

Acs, G., & Loprest, P. (2009). Job Differences by Race and Ethnicity in the Low-Skill Job Market. The Urban Institute, 1–6. https://www.urban.org/sites/default/files/publication/30146/411841-Job-Differences-by-Race-and-Ethnicity-in-the-Low-Skill-Job-Market.PDF.


Akujuo, V. (2022). 26 Business Automation Statistics (2022): Mastering the Art of Business Automation. CRMside. https://crmside.com/business-automation-statistics/.


Bessen, J., & Kossuth, J. (2019, February 13). Research: Automation Affects High-Skill Workers More Often, but Low-Skill Workers More Deeply. Harvard Business Review. https://hbr.org/2019/02/research-automation-affects-high-skill-workers-more-often-but-low-skill-workers-more-deeply.


BLS. (n.d.). Number of unemployed persons per job opening, seasonally adjusted. Bureau of Labor Statistics. https://www.bls.gov/charts/job-openings-and-labor-turnover/unemp-per-job-opening.htm.


Broady, K. D. E. B. (2021, March 3). Race and jobs at risk of being automated in the age of COVID-19. Brookings. https://www.brookings.edu/research/race-and-jobs-at-risk-of-being-automated-in-the-age-of-covid-19/.


Bughin, J., Hazan, E., Lund, S., Dahlström, P., Wiesinger, A., & Subramaniam, A. (2018, May 23). Skill shift: Automation and the future of the workforce. McKinsey & Company. https://www.mckinsey.com/featured-insights/future-of-work/skill-shift-automation-and-the-future-of-the-workforce.


Dizikes, P. (2020, May 5). Study finds stronger links between automation and inequality. MIT News | Massachusetts Institute of Technology. https://news.mit.edu/2020/study-inks-automation-inequality-0506.


Galvin, J., LaBerge, L., & Williams, E. (2021, May 26). The new digital edge: Rethinking strategy for the postpandemic era. McKinsey & Company. https://www.mckinsey.com/business-functions/mckinsey-digital/our-insights/the-new-digital-edge-rethinking-strategy-for-the-postpandemic-era.


Herzberg, G., Panikkar, R., Whiteman, R., & Sahu, A. (2020, August 25). The imperatives for automation success. McKinsey & Company. https://www.mckinsey.com/business-functions/operations/our-insights/the-imperatives-for-automation-success.


Hetrick, C. (2021, October 19). Amazon’s Delaware warehouse has more robots than humans | Business Weekly Newsletter. Inquirer. https://www.inquirer.com/business/amazon-warehouse-robots-automation-business-weekly-20211019.html.


Jarrett, C. (2020, November 13). How Automation Can Create New Opportunities for High- or Lower-skilled Workers. Automation. https://www.automation.com/en-us/articles/november-2020/how-automation-create-new-opportunities-workers#authorInfo.


Manyika, J., Chui, M., Miremadi, M., Bughin, J., George, K., Willmott, P., & Dewhurst, M. (2017, January). A future that works: Automation, employment, and productivity. McKinsey & Company. https://www.semanticscholar.org/paper/A-future-that-works%3A-automation%2C-employment%2C-and-Manyika-Chui/e3ac9558f18234cdf92b730a7386ff16d446a1af.


Manyika, J., & Sneader, K. (2018, June 1). AI, automation, and the future of work: Ten things to solve for. McKinsey & Company. https://www.mckinsey.com/featured-insights/future-of-work/ai-automation-and-the-future-of-work-ten-things-to-solve-for.


Maurer, R. (2021, October 19). The Biggest Future Employment Crisis: A Lack of Workers. SHRM. https://www.shrm.org/resourcesandtools/hr-topics/talent-acquisition/pages/the-biggest-future-employment-crisis-a-lack-of-workers.aspx.


Popken, B. (2021, April 8). Manufacturers embrace robots, the perfect pandemic worker. NBC News. https://www.nbcnews.com/business/business-news/manufacturers-embrace-robots-perfect-pandemic-worker-n1263434.


PWC. (2018). Will robots really steal our jobs? An international analysis of the potential long term impact of automation. PricewaterhouseCoopers. https://www.pwc.com/hu/hu/kiadvanyok/assets/pdf/impact_of_automation_on_jobs.pdf.


Rogers, K. (2021, October 25). Restaurants prep for long-term labor crunch by turning to robots to work the fryer, shuttle food to tables. CNBC. https://www.cnbc.com/2021/10/22/restaurants-looking-for-labor-and-speed-turn-to-robots-.html.


SHRM. (2021). The COVID-19 Labor Shortage. Society of Human Resource Management. https://advocacy.shrm.org/wp-content/uploads/2021/07/SHRM-Research_The_Employment_Picture_Comes_Into_Focus.pdf.


SocialMediaToday. (2019). State of Marketing Automation 2019 | Social Media Today. Social Media Today. https://resources.industrydive.com/state-of-marketing-automation-2019-survey-report.


Strack, R. (2014, December 3). The workforce crisis of 2030 -- and how to start solving it now. TED Talks. https://www.ted.com/talks/rainer_strack_the_workforce_crisis_of_2030_and_how_to_start_solving_it_now?language=en.


Vega, M. (2022, February 6). 19 Statistics About Jobs Lost to Automation in 2022. Techjury. https://techjury.net/blog/jobs-lost-to-automation-statistics/#gref.


Wood, J. (2021, December 1). US companies order record numbers of robots in staff shortage. World Economic Forum. https://www.weforum.org/agenda/2021/12/robots-jobs-staff-shortage-automation/.


Copyright © 2022 by Arete Coach™ LLC. All rights reserved.