By Marco Dondi, Solveigh Hieronimus, Julia Klier, Peter Puskas, Dirk Schmautzer, and Jörg Schubert

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Digital and artificial intelligence technologies will likely have a substantial economic and social impact. Governments can act now to create shared prosperity and better lives for all citizens.

In the coming years, automation will have a substantial economic and social impact on countries around the world—and governments will by no means be passive observers. This report seeks to provide government leaders and policy makers with the foundation to harness the potential of automation while mitigating its adverse effects.

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Automation can be a positive disruption that improves everyone’s lives

Automation has the potential to alter nearly every facet of work and daily life. Indeed, automation, digital, and artificial intelligence (AI) technologies are already essential to our professional and civic lives. The McKinsey Global Institute identified the adoption of digital technologies as the biggest factor in future economic growth1 : it will likely account for about 60 percent of potential productivity growth by 2030. AI alone is expected to yield an additional 1.2 percent in productivity growth per year from 2017 to 2030.

Promoting the adoption of automation is critical because many countries will need to more than double their productivity growth to simply sustain historic economic growth rates. In this context, the productivity boost from automation is necessary to avoid the negative consequences of stagnating economies, such as lower income growth, increasing inequality, and difficulty for corporations and households to repay loans.

Three challenges stand in the way of this opportunity

While automation has the potential to boost economic growth, it poses some key challenges to the nature of work. The public senses this shift. In a recent survey of 100,000 citizens in 29 countries, we found that job security was the number-one economic priority for the future. Our analysis has identified three challenges associated with automation.

Shifting skill requirements. The path toward sustained prosperity requires a growing number of talented individuals to enable a broad adoption of digital and AI technologies as well as a broad-based workforce capable of operating in a more automated and digital environment. Without addressing this skill demand, technology adoption could slow, and people with obsolete skills could exit the labor force.

The adoption of digital and AI technologies will also require most workers to upskill or reskill. Up to 14 percent of people globally may need to change occupations by 2030, a figure that could climb to more than 30 percent in more advanced economies with a faster pace of automation. However, reskilling is hard to do well at scale, and efforts to date have produced mixed outcomes.

Rising inequality. The trend of increasing inequality within countries has been visible for decades now. Most studies on the impact of further automation and AI on inequality expect increased polarization. And if income growth is concentrated among high earners with a very low marginal propensity to consume, aggregate demand could stagnate and drag down both business investments and job creation, resulting in a period of secular stagnation.

Backlash against technology. Concerns over shrinking job security and growing inequality have already led some governments to take measures to slow the pace of automation. Scaling back investment incentives and hindering the rise of platform-based business models exemplify this trend. But hostility toward automation would significantly impede productivity and prosperity growth.

Governments have an opportunity to enable the adoption of technology and automation while ensuring everyone benefits.

A blueprint for governments to manage the transition to automation

Since automation will have seismic impact on society and the economy, governments have an important role to play in four areas: developing a national technology-adoption strategy, reforming the human-capital development system, strengthening social protection systems to ensure universal benefits from automation, and convening and mobilizing all stakeholders to play their part in the future of work transition (exhibit).

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