The pandemic accelerated existing trends in remote work, e-commerce, and automation, with up to 25 percent more workers than previously estimated potentially needing to switch occupations.
Susan Lund Anu Madgavkar James Manyika Sven Smit Kweilin Ellingrud Olivia RobinsonThe COVID-19 pandemic disrupted labor markets globally during 2020. The short-term consequences were sudden and often severe: Millions of people were furloughed or lost jobs, and others rapidly adjusted to working from home as offices closed. Many other workers were deemed essential and continued to work in hospitals and grocery stores, on garbage trucks and in warehouses, yet under new protocols to reduce the spread of the novel coronavirus.
This report on the future of work after COVID-19 is the first of three MGI reports that examine aspects of the postpandemic economy. The others look at the pandemic’s long-term influence on consumption and the potential for a broad recovery led by enhanced productivity and innovation. Here, we assess the lasting impact of the pandemic on labor demand, the mix of occupations, and the workforce skills required in eight countries with diverse economic and labor market models: China, France, Germany, India, Japan, Spain, the United Kingdom, and the United States. Together, these eight countries account for almost half the global population and 62 percent of GDP.
Before COVID-19, the largest disruptions to work involved new technologies and growing trade links. COVID-19 has, for the first time, elevated the importance of the physical dimension of work. In this research, we develop a novel way to quantify the proximity required in more than 800 occupations by grouping them into ten work arenas according to their proximity to coworkers and customers, the number of interpersonal interactions involved, and their on-site and indoor nature.
This offers a different view of work than traditional sector definitions. For instance, our medical care arena includes only caregiving roles requiring close interaction with patients, such as doctors and nurses. Hospital and medical office administrative staff fall into the computer-based office work arena, where more work can be done remotely. Lab technicians and pharmacists work in the indoor production work arena because those jobs require use of specialized equipment on-site but have little exposure to other people (Exhibit 1).
We find that jobs in work arenas with higher levels of physical proximity are likely to see greater transformation after the pandemic, triggering knock-on effects in other work arenas as business models shift in response.
The short- and potential long-term disruptions to these arenas from COVID-19 vary. During the pandemic, the virus most severely disturbed arenas with the highest overall physical proximity scores: medical care, personal care, on-site customer service, and leisure and travel. In the longer term, work arenas with higher physical proximity scores are also likely to be more unsettled, although proximity is not the only explanation. For example:
The pandemic pushed companies and consumers to rapidly adopt new behaviors that are likely to stick, changing the trajectory of three groups of trends. We consequently see sharp discontinuity between their impact on labor markets before and after the pandemic.
Perhaps the most obvious impact of COVID-19 on the labor force is the dramatic increase in employees working remotely. To determine how extensively remote work might persist after the pandemic, we analyzed its potential across more than 2,000 tasks used in some 800 occupations in the eight focus countries. Considering only remote work that can be done without a loss of productivity, we find that about 20 to 25 percent of the workforces in advanced economies could work from home between three and five days a week. This represents four to five times more remote work than before the pandemic and could prompt a large change in the geography of work, as individuals and companies shift out of large cities into suburbs and small cities. We found that some work that technically can be done remotely is best done in person. Negotiations, critical business decisions, brainstorming sessions, providing sensitive feedback, and onboarding new employees are examples of activities that may lose some effectiveness when done remotely.
Some companies are already planning to shift to flexible workspaces after positive experiences with remote work during the pandemic, a move that will reduce the overall space they need and bring fewer workers into offices each day. A survey of 278 executives by McKinsey in August 2020 found that on average, they planned to reduce office space by 30 percent. Demand for restaurants and retail in downtown areas and for public transportation may decline as a result.
Remote work may also put a dent in business travel as its extensive use of videoconferencing during the pandemic has ushered in a new acceptance of virtual meetings and other aspects of work. While leisure travel and tourism are likely to rebound after the crisis, McKinsey’s travel practice estimates that about 20 percent of business travel, the most lucrative segment for airlines, may not return. This would have significant knock-on effects on employment in commercial aerospace, airports, hospitality, and food service. E-commerce and other virtual transactions are booming.
Many consumers discovered the convenience of e-commerce and other online activities during the pandemic. In 2020, the share of e-commerce grew at two to five times the rate before COVID-19 (Exhibit 2). Roughly three-quarters of people using digital channels for the first time during the pandemic say they will continue using them when things return to “normal,” according to McKinsey Consumer Pulse surveys conducted around the world.
Other kinds of virtual transactions such as telemedicine, online banking, and streaming entertainment have also taken off. Online doctor consultations through Practo, a telehealth company in India, grew more than tenfold between April and November 2020. These virtual practices may decline somewhat as economies reopen but are likely to continue well above levels seen before the pandemic.
This shift to digital transactions has propelled growth in delivery, transportation, and warehouse jobs. In China, e-commerce, delivery, and social media jobs grew by more than 5.1 million during the first half of 2020.
Two ways businesses historically have controlled cost and mitigated uncertainty during recessions are by adopting automation and redesigning work processes, which reduce the share of jobs involving mainly routine tasks. In our global survey of 800 senior executives in July 2020, two-thirds said they were stepping up investment in automation and AI either somewhat or significantly. Production figures for robotics in China exceeded prepandemic levels by June 2020.
Many companies deployed automation and AI in warehouses, grocery stores, call centers, and manufacturing plants to reduce workplace density and cope with surges in demand. The common feature of these automation use cases is their correlation with high scores on physical proximity, and our research finds the work arenas with high levels of human interaction are likely to see the greatest acceleration in adoption of automation and AI.