You may not be sharing your office with a robot yet, but the next wave of automation has begun. Humanoid service robots, machine learning algorithms and autonomous logistics will replace millions of service workers in the coming decade. Experts are rushing to forecast the likely impact on jobs. But most projections overlook two powerful forces that will combine with automation to reshape the global economy by 2030: rapidly aging populations and rising inequality.Here is the February 7, 2017 issue of Bain's 'Insights":
The collision of these three forces sets the stage for a 10- to 15-year economic boom followed by a bust. An aging workforce, advances in automation, and growing income inequality point to an era of rapid and volatile change—and greater economic disruption than we have seen over the past 60 years. In the coming decade extremes are likely to become more extreme.
How would this boom-bust cycle likely play out? As populations age, labor force growth will slow, triggering labor scarcity in a growing number of industries. Faced with labor shortages, companies will accelerate their investment in automation technologies. Our research shows incremental capital investment in automation could reach $8 trillion in the US by 2030. That translates to about $5 trillion in net accumulation to the US capital stock, increasing capital per worker to a net figure nearly 1.5 times higher than today.
The magnitude of the investment in automation in the coming decade is likely to be greater in scale than in previous periods because it will primarily affect the service sector, and it will spread through advanced economies as well as parts of the developing world. An $8 trillion investment boom would result in average annual US growth of about 3% and roughly 60% more economic output in 2030 than in 2015.
Typically, in an investment boom of this kind, supply growth creates the demand for more supply—a virtuous cycle of growth. In the early 2020s, rapid investment in automation would likely offset a little more than half the negative impact of automation on employment, easing the demand constraint on growth and potentially mitigating the immediate displacement of millions of workers. But by the end of the 2020s, automation could eliminate 20% to 25% of current US jobs—40 million workers—hitting middle- to low-income workers the hardest. At the same time, many of the companies that invested heavily in automation will be saddled with assets that are out of step with demand.
That’s the crucial pivot between boom and bust. As the investment wave recedes, it risks leaving in its wake deeply unbalanced economies in which income is concentrated among those most likely to save and invest, not consume. Growth at that point would become deeply demand-constrained, exposing the full magnitude of labor market disruption temporarily hidden from view by the investment boom.
Consumers who have lost their jobs to automation will spend less, putting further downward pressure on demand. By the late 2020s, unemployment and wage pressures may exceed levels following the Great Recession in 2009. Income inequality, having grown steadily for a decade, could approach or exceed historical peaks, choking off economic growth....MORE
Labor 2030: The Collision of Demographics, Automation and Inequality
Executive summaryAnd the January report (68 page PDF):
Demographics, automation and inequality have the potential to dramatically reshape our world in the 2020s and beyond. Our analysis shows that the collision of these forces could trigger economic disruption far greater than we have experienced over the past 60 years (see Figure 1). The aim of this report by Bain's Macro Trends Group is to detail how the impact of aging populations, the adoption of new automation technologies and rising inequality will likely combine to give rise to new business risks and opportunities. These gathering forces already pose challenges for businesses and investors. In the next decade, they will combine to create an economic climate of increasing extremes but may also trigger a decade-plus investment boom.The analysis and business insights in this report can help leaders put these changes in context and consider the effects they will have on their companies, their industries and the global economy....MORE
In the US, a new wave of investment in automation could stimulate as much as $8 trillion in incremental investments and abruptly lift interest rates. By the end of the 2020s, automation may eliminate 20% to 25% of current jobs, hitting middle- to low-income workers the hardest. As investments peak and then decline—probably around the end of the 2020s to the start of the 2030s—anemic demand growth is likely to constrain economic expansion, and global interest rates may again test zero percent. Faced with market imbalances and growth-stifling levels of inequality, many societies may reset the government's role in the marketplace.
LABOR 2030: THE COLLISION OF DEMOGRAPHICS, AUTOMATION AND INEQUALITY