Technology has been reshaping the labour force since the Industrial Revolution, but a more fundamental disruption is on the cards. In the past, machines took over tasks that were largely manual, forcing workers to adapt and learn new skills to carry out higher-value tasks. But now, the intelligence of computing machines is adequate to perform work that requires specialised knowledge or cognitive and judgement-based abilities — in short, things that “only human beings can do”.
Will India’s large, young population – its demographic dividend – turn into a demographic disaster as millions of workers are displaced by technology? New research from the McKinsey Global Institute examines the impact of 12 technologies (including the mobile internet, cloud computing, the automation of knowledge work, digital payments, verifiable digital identity and the Internet of Things) and concludes that, indeed, the application of these technologies will force millions of workers to acquire new skills, as the jobs they perform are rendered obsolete. Yet, rapid advancements in the same technologies will create new opportunities for millions of workers, including many less-skilled ones, and help them raise their incomes.
Globally, the automation of knowledge work, or machine learning and intelligent applications, can generate a 40 to 50 per cent productivity gain in work that involves processing data and information, interacting with customers or making decisions. In India, we estimate that automation and digitisation across sectors could drive productivity improvements equivalent to the output of some 19 million to 29 million workers in 2025 (five to eight per cent of India’s non-farm labour force). These workers cut across functions such as clerical and customer service, business process outsourcing and information technology, as well as those in manufacturing supply chains, the construction sector and workers engaged in retail trade and transportation.
The overall impact on net job creation could, however, be neutral to positive as technology opens new geographical markets and under-served segments of consumers. But the labour market will adjust to fill potential jobs only if workers are equipped to shift to the more value-added work. Education and skill-building systems need to be up to meeting this challenge.
Technology itself can provide solutions. Skill-building courses can be made available in small slivers — short online modules that workers can take at frequent intervals, focussed on what employers need and are willing to pay for. Adaptive learning systems that customise lessons according to how each student performs, simulated learning that uses technology to impart vocational skills such as welding and nursing in a virtual environment, and hybrid education models that combine MOOCs (massive open online courses) with classroom teaching, could help 18 million to 33 million more Indians acquire job-related skills by 2025.
Technology-enabled labour marketplaces help better matching of jobs and skills, creating millions of micro-entrepreneurs. As digital technologies achieve mass adoption, India’s legions of small-scale, unorganised and independent service providers can use the internet to reach new customers, establish their reputations, collaborate with others, and get more work. Project-based or piecemeal work assignments could be funnelled to technology-based aggregators representing large numbers of professionals such as designers, tax specialists or teachers who want part-time or temporary employment. Certified service providers (such as trained and licensed electricians, nurses or taxi drivers) could connect with customers and find decent paying work.
Rapid technology advancements will also help India’s less-educated workers leapfrog to productive work. Advancements in voice, language, and graphical interfaces will make complex knowledge and expertise available to workers on inexpensive hand-held devices that are easy to navigate. Even a semi-skilled person could become a knowledge-enabled worker in fields such as health care, financial services and logistics, or functions such as marketing and inventory planning, with just a few weeks of basic training in using these tools. Such workers can be deployed in local communities to deliver essential services. In Uganda, for example, the Grameen Foundation equips its community knowledge workers – well-regarded members of local farming communities – with smartphones that have weather, commodity prices, crop management and disease control-related apps. The workers share knowledge with other farmers and train them to use the apps themselves.
Several factors must fall in place to improve the odds so that technology becomes a positive force for the labour market on a large scale. Partnerships need to flourish, for instance, between technology companies, domain experts who can impart skills (such as agricultural universities or colleges of alternative medicine) and organisations with grass-roots experience. Standards and certification systems must evolve to help build mutual trust between customers and service providers in order to clear the market. And in addition to high-speed internet access, the widespread use of digital payments and verifiable digital identity will be essential to ensure that workers end up as winners in the race against technology.
Noshir Kaka is MD, McKinsey India, and director, McKinsey Inc. Anu Madgavkar is senior fellow at the McKinsey Global Institute