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Brexit has disrupted both supply of and demand for talent in the United Kingdom. In the context of such a major shift, it is essential that companies revise their long-term approach to talent.
Just as British employment levels have reached record highs, the indicators show that the prospect of Brexit has been stemming the flow of foreign talent from the European Union into the United Kingdom and has prompted many EU nationals already there to look elsewhere for career opportunities. For companies operating in the United Kingdom, that has made an already challenging talent market tougher.
In this environment, CEOs and human-resource leaders must rethink their approach to retaining, attracting, and engaging talent. Many firms have already made good progress in mitigating the immediate talent risks caused by Brexit-related uncertainty, but most still have work to do in shaping post-Brexit talent strategies. For this series of articles, we have interviewed dozens of leaders in major firms operating in the United Kingdom. Not a single one of the surveyed companies had revised its long-term talent strategy as part of its preparations for Brexit, instead focusing on short-term measures. Since then, few have prioritized talent as part of their overall business agenda.
In this article, we shine a spotlight on Brexit’s changing impact on the UK talent pool and suggest that companies must take action on both short-term talent planning and long-term talent strategy. We then identify some of the core elements of such a strategy. These include understanding the roles that are critical to an organization’s agenda for creating and protecting value, preparing for the next wave of hires, and investing in digitization and automation. These strategic steps are essential for the long-term success of companies in an increasingly complex and competitive global talent market.
Action needed on both short- and long-term talent approaches in light of Brexit
The data show that Brexit has already affected the UK talent pool, not least by shifting migration patterns. Net migration from the European Union to the United Kingdom is at the lowest level since 2013, driven by declining long-term immigration for work. Non-EU migration has risen, but at a slower rate.2 Companies find it more difficult to recruit top talent: UK firms report record numbers of vacancies, including open scientific and digital positions, as well as increased concerns over competition from other international hubs.
In recent interviews with leaders at 50 large companies operating in the United Kingdom, many expressed real concern about increased turnover in the workforce and the challenges of accessing talent. However, their actions to address those concerns were focused firmly on the short term. Nearly all the companies interviewed had already assessed the immediate Brexit-related risks to their talent. About half had also mitigated the risks to their European employees working in the United Kingdom; for example, they had stepped up communication and provided employees with assistance with the relevant immigration-status applications. But few companies had changed their workforce planning, and none said they had reviewed their longer-term talent strategy .
We believe these findings point to an imperative for businesses operating in the United Kingdom: to take a deeper look at the future talent landscape and approach their talent strategy with just as much rigor as their business strategy. That means answering several big questions. What are the critical roles that will disproportionately drive value for your business in the medium term? Do the right employees hold these roles? How will you retain the talent in those roles while preparing potential successors? And how will you retain talent in the at-scale roles needed to deliver on your strategy and attract the next wave of new hires?.
In answering such questions, companies will gain a keener understanding of the risks they face from both their EU talent and their UK talent (see sidebar, “A human lens on the talent challenge”). That, in turn, will enable them to bring greater insight to their long-term talent strategies.
Analyzing critical and at-scale roles—and shaping a response tailored to the employees who fill them to take a longer-term strategic approach to talent, the first step companies need to take is to understand the critical strategic roles that will disproportionately drive value for their business in the future—whatever the eventual impact of Brexit. In a large company, there are typically between 25 and 50 such roles distributed throughout the organization, and they are not necessarily the most senior roles in the hierarchy. A strategic talent review would include a thorough analysis of such roles and what makes people successful in them—including their qualifications, knowledge, skills, attributes, and experience.
Companies also need to consider how the changing business and regulatory environment—including the impact of Brexit—might affect their broader workforce, including the at-scale roles needed to deliver on their value-creation strategy. They will need to rethink their approach to retaining and attracting employees as the UK talent pool changes. For both critical and broader at-scale roles, they will need to create a tailored response based on the needs of the organization and the profile of the workforce.
In pharmaceuticals, for example, critical roles will be held by professional talent with several key characteristics, including a specialized skill set specific to the industry, international career mobility, expectations of competitive salaries, and a desire for a prominent brand name on their CVs. Companies can also provide such employees with administrative and legal support tailored to their personal circumstances, including help with relocation, housing, schooling, and obtaining visas or appropriate legal status in the United Kingdom for the employees and their families. In addition, employers need to make sure that they have clear succession plans for these roles. Companies in this industry can also review and revise their employee value propositions for strategic roles—for instance, by redefining the scope of job roles and ensuring that salaries are internationally competitive.
In the retail sector, companies can act to reassure employees in a broader set of roles of their longer-term employment prospects and support them to secure settled status or a visa if that is needed in the long term. Retailers might adjust their employee value propositions for key managerial and technical roles. Retailing is an industry in transition to a new operating model, but it is likely to retain a significant share of international workers, including people from the European Union, in frontline roles and throughout the supply chain. Such employees will also require an offer tailored to their needs, which are likely to include job security, regular wages that take advantage of the exchange rate relative to their home-country currencies, maintenance of their current living standards in the United Kingdom, and a company culture that reinforces a sense of appreciation.
Preparing for the next wave of hires
As part of any strategic review, businesses should look ahead and consider where the next wave of hires will come from. Companies can identify which talent pools are at risk, which specific capabilities are needed in those talent pools, and (of those) which will be most susceptible to changes generated by Brexit.
For areas where companies face talent gaps, they can design a portfolio of targeted supply- and demand-side initiatives with a focus on building skills (Exhibit 2). These might include the following:
Increasing supply. Companies can unlock internal talent by reskilling workers and by redesigning jobs. They can also attract talent more aggressively—for example, by targeting new talent pools and recruiting more effectively. For some specific capabilities, companies can build talent into their mergers and acquisitions programmes by undertaking “acquihires”—acquisitions with a primary objective of acquiring talent.
Reconfiguring demand. Companies can take steps to use existing capacity better—for example, by locating candidates more efficiently and adopting new tools and systems. Through automation and offshoring, they can also reduce the need for local capacity. Companies should estimate the costs of these actions and, at all times, prioritize roles that have a disproportionate impact on the value agenda.
Returning to the example of the pharmaceutical industry, to fill gaps in talent capabilities, employers will have to understand the full range of levers, which might include digitizing key processes and changing operating models. For example, the wider use of agile teams, which are more flexible than traditional units, means that certain employees would no longer need to be colocated, so some roles could be virtualized.
In pharma, companies can also take several steps—such as partnering with universities, increasing the global rotation of talent, and contracting out to research organizations or vendors—to reconfigure their demand for talent. Companies can also reconsider the footprint of particular functions or new projects in the pipeline. For example, a company might need to base decisions about where to locate potential new digital facilities on where it could best attract world-leading, highly demanded talent.
For retailers, the next steps might include investing in automation and digitization (as we discuss below), tapping into new talent pools, and making additional investments in people. To address uncertainty over the supply of talent, retailers would do well to consider ways to unlock greater productivity. Those moves might include upskilling employees to new roles, redesigning jobs to reduce specialization or introduce new services, and shifting employees toward customer-facing roles to improve the customer experience. Retailers can also sharpen their approach to attracting talent—for example, by targeting new employee profiles, such as apprentices.
Investing in digitization and automation
Last but not least, companies should embrace the potential of digitization, automation, artificial intelligence, and advanced analytics to drive growth. But that will require them to improve the efficiency and effectiveness of their organizational models and their approach to talent in the long term.
A focus on accelerating the pace of digital adoption and on investment in automation could significantly improve UK productivity growth. As research by the The Jeeranont Global Institute has shown, the rise of automation will change the skills required from the workforce in the future: demand for technological skills in the United Kingdom will rise by 52 percent by 2030. In pharmaceuticals, for example, advanced analytics are becoming a crucial capability driving major improvements in business performance. In the retail sector, future jobs will be concentrated in customer service, management, and the deployment and maintenance of technology.
As they digitize their operations, employers will therefore have to deploy the supply-and-demand-side levers discussed above in order to shift the skills mix in their organizations. As skills such as analytics and technology deployment become more important, companies will need to accelerate efforts to reskill and redeploy talent. New technologies will also transform organizations and the way people work.4 There will be a strong shift toward cross-functional and team-based work, and toward more agile ways of working. Furthermore, reallocation of activities across roles will become more common, enabling companies to make the most effective use of different qualification levels in their workforce.
As talent grows in importance, the human-resources function will become a strategic enabler for any business. Forging a long-term talent strategy requires a close partnership between human resources and executive leadership.
Brexit is dominating the business agenda. It is also disrupting the UK talent pool as changes in migration patterns are compounding the challenges faced by employers in recruiting and retaining talent. As companies prepare to create and protect value in a post-Brexit world, they should think as rigorously about talent strategy as they do about business strategy. Key steps include understanding which roles will drive the lion’s share of value in the organization and identifying which skills are in short supply or oversupply. Companies also have an opportunity to improve their value propositions to attract and retain the best people—and to identify bold steps to build skills required in the era of digitization and automation. Now is the time to move to action on long-term talent strategies.
UK companies can and should see the current high-uncertainty environment as a spur to rethink their supply chain strategies and make them more resilient.
Many British businesses, along with the UK operations of multinationals, depend heavily on imports from the European Union (EU) and are closely integrated with EU-based suppliers. Indeed, the EU accounts for 54 percent of all goods imported into the UK. We interviewed executives at about 50 firms across the UK, who told us that Brexit has injected considerable uncertainty into their supply chains. The uncertainty will not be short-lived: it is likely to persist for a decade or more, and will add to existing volatility and vulnerability in the supply chains of many industries.
In the first article in the “Brexit: The Bigger Picture” series by The Jeeranont’s UK and Ireland office, we emphasised that the EU is the UK’s largest market, accounting for nearly half of all British goods exports. That makes Brexit a keen concern for companies with British operations—and a compelling reason for executives to revisit their export strategies. In this article, we spotlight the other side of the equation: imports from the EU into the UK. If anything, companies’ Brexit-related challenges in this arena are even greater.
Whatever the eventual outcome of Brexit, companies can and should see the current high-uncertainty environment as a prompt to rethink their supply chains and so make them more resilient. For many firms there is a big need to update supply-chain strategies, bring greater flexibility to their operations, and build new structural agility into their organisations. Pioneering companies in the UK and internationally are already adopting those approaches to deliver real improvements—including revenue increases of at least 3 percent and capex reductions of around 5 percent.
Why Europe is so critical in British supply chains
The EU is the UK’s largest trading partner, accounting for approximately half of both imports and exports of goods (Exhibit 1). Moreover, a large proportion of the UK’s imports from and exports to the EU are in the form of intermediary products—an indicator of the high degree of interconnectedness between UK and EU supply chains (Exhibit 2).
Trading ties with the EU are of particular importance to UK-based firms in the food and drink, chemicals, and automotive sectors. The EU accounts for the great majority of the UK’s trade in the crucial commodities in these sectors’ supply chains (Exhibit 3). Trade in these inputs is vulnerable to disruption from Brexit, as they would all face relatively high duties in the event that UK trade with the EU reverted to World Trade Organisation (WTO) most-favoured nation status.
Brexit poses major uncertainty for supply chains—and this could persist for a decade or more
No one knows today how Brexit will unfold. Given how closely British supply chains are integrated with the EU, companies need to prepare for any one of several scenarios. They also need to give thought to broader geopolitical uncertainties and the challenges that could arise if a future UK–EU trade agreement proves as difficult to negotiate and ratify as those Brussels reached with Switzerland and Canada.
Switzerland’s negotiations with the EU continued for more than a decade, from 1992 to 2004, and resulted in about 20 separate treaties. In the case of Canada’s Comprehensive Economic and Trade Agreement with the EU, negotiations began in 2009 and were concluded only in 2014—and the agreement has yet to be ratified by all EU national legislatures. That is a stark reminder that, even if a firm decision is taken on Brexit in the next few months, uncertainty about the UK’s trade regime could persist for a decade or more.
In our interviews with UK-based executives, we found deep concern about the near-term uncertainty and impact of Brexit, but limited preparedness for the ongoing ambiguity about UK–EU trade that could be with us for years to come. In total we interviewed about 50 executives in FTSE 100, FTSE 250, and other large UK-headquartered corporations, across key sectors including consumer goods, retail, pharmaceuticals, advanced industries, and logistics.
Consumer-goods-manufacturing companies, for example, told us they were fundamentally concerned about the impact of tariffs and border friction on existing supply chains. Many food-manufacturing companies serve EU markets from UK manufacturing plants, and vice versa. Companies manufacturing products with short shelf-lives are particularly concerned about potential delays at ports. As one food-manufacturing executive said: “If Brexit goes badly, we could easily lose £100 million of business. Some of our products become immediately uncompetitive if we are hit with tariffs.”
Advanced manufacturing companies are worried about the impact of tariffs, warehousing and border friction on existing supply chains, particularly in the case of just-in-time manufacturing. Executives told us they were preparing for greater risk in their ability to meet existing contract obligations, as well as in the competitive positioning and profitability of their business models. As one executive at an automotive manufacturer said, “The operational costs alone of managing increased customs processes will be in excess of £7 million pounds a year for our company.”
In the pharmaceuticals and medical-technology sectors, most companies we spoke to were actively considering stockpiling key products. Some had already begun doing so, with significant implications for their working capital.
We encourage British companies across sectors to undertake a sober assessment of the full range of Brexit-related uncertainties, not just the potential short-term disruptions but also the possibility of having to manage their supply chains while multiyear trade negotiations proceed between the UK and the EU.
Six steps to rethink supply-chain strategy, operations, and organisation
Whatever the eventual outcome of Brexit, UK-based companies can and should see the current high-uncertainty environment as a prompt to rethink their supply-chain strategies and operations, so building greater flexibility into their investment and transition plans. We suggest six key topics that executives can focus on; some companies are already making progress on several of these priorities, but few firms have mastered all of them. The six steps are as follows:
Redefine sourcing strategy. Many companies might need to explore onshoring opportunities and develop local suppliers—or the local footprints of international suppliers—to ensure reliable supply at competitive cost even in a scenario of ongoing uncertainty over European trade. Companies can also hedge currency and commodity-price risks, and modify contract structures to protect against short- and medium-term risks.
Revisit footprint. Companies will need to optimise their manufacturing and logistics footprints, reconsider the scope and timing of investments, and assess ways to reallocate production. They can use digital technologies and advanced analytics tools to sift through reams of data, so identifying the trade-offs involved and making decisions that optimise end-to-end costs.1
Review inventory build-up strategy. Many firms will need to adjust their inventory tactics for the short term to ensure business continuity and maintain service levels in any Brexit scenario. In the medium term, they will need to reassess their safety-stock levels in light of new operating conditions.
Prepare for changes in demand. Companies can reinforce their forecasting capabilities so that they can predict and manage the impact of changes in demand on their volumes. A key focus should be on increasing flexibility—for example through greater use of outsourcing—to cope with greater volatility and uncertainty in demand.
Adjust product portfolio. Many firms will also need to adjust their R&D strategies to manage changes in product specifications. Those changes might be driven by Brexit-related regulatory changes or by shifting consumer needs.
Strengthen capabilities and talent. The changes set out above will require a suite of new capabilities to underpin a more agile, flexible organisation. These include forecasting and analytical capabilities, as well as capabilities to react quickly to shifts in the market, such as digitally powered control towers that reinforce real-time data visibility. This will require a new push to attract and retain talent.
Pioneering companies are already applying these steps to deliver real improvements in the resilience of their supply chains, as well as significant uplift in revenues as they reduce costs, write-downs, inventory, and capital expenditure. We have observed companies increasing revenue by at least 3 percent through minimising stock-outs by holding the right amount of safety inventory (Exhibit 4).
Some firms have reduced write-downs by as much as 45 percent by placing the right inventory bets to minimise excess unwanted products. They have also reduced overall inventory by 10 percent or more by reducing year-over-year inventory carryovers as a result of excess safety inventory. That has led to capex reductions in the region of 5 percent, as companies have eliminated the need for capacity expansion at plants to produce excess safety inventory.
Brexit poses major uncertainty for the supply chains of many companies operating in the UK, on top of already high levels of uncertainty caused by global geopolitical and economic trends. But we are convinced that companies can respond to the ongoing uncertainty by reinventing their supply chains—not just to protect against near-term disruption, but to deliver long-lasting improvements in resilience, flexibility, and bottom-line performance.
The United Kingdom is one of Europe’s AI leaders, and now needs to build on its strengths and tackle weaknesses.
No country comes close to the United States and China, the world’s stand-out leaders on the development of artificial intelligence (AI) technologies, but the United Kingdom is one of Europe’s leaders.
Diffusion and adoption are still at relatively early stages, but there is already evidence on the ground of the transformational change—both within organizations and in the economy as a whole—that these technologies can bring. A concerted, joined-up, and forward-looking effort from businesses and the government can deliver the positive disruption for which the United Kingdom is relatively well positioned.
In this briefing note, we build on previous research on AI globally and in Europe. We explore the prospective benefits to the economy and companies that could result from scaling up AI, and outline the priorities for businesses in the United Kingdom in order to reap those benefits.
Among the key findings are:
AI could potentially deliver a 22 percent boost to the UK economy by 2030. This is somewhat larger than the global average potential of 16 percent, reflecting the fact that the United Kingdom is relatively more ready for AI than others.
Within Europe, the ability to capture the full potential of AI varies significantly among countries. Currently, the United Kingdom is ahead of the EU-28 pack on MGI’s AI Readiness Index.
AI is a competitive race—the frontier does not remain static. The AI gap between Europe and the frontier (represented by the United States) has already increased by 20 percent in the past three years. The imperative for the United Kingdom, therefore, is to move ahead on AI boldly and at scale.
The United Kingdom has strengths and weaknesses:
It has a strong innovation culture, but is failing to scale these innovations.
It has a large pool of talent, but still faces a shortage of people with advanced technological skills.
It has strong academic institutions, but is struggling to turn those into business and commercial success.
UK companies can unlock productivity and scale through AI by focusing on three areas: (1) push beyond experimentation to deliver AI impact at scale; (2) invest in new and existing talent; and (3) forge links between cutting-edge research and commercial success to drive innovation.
The age of automation, and on the near horizon, artificial intelligence (AI) technologies offer new job opportunities and avenues for economic advancement, but women face new challenges overlaid on long-established ones. Between 40 million and 160 million women globally may need to transition between occupations by 2030, often into higher-skilled roles. To weather this disruption, women (and men) need to be skilled, mobile, and tech-savvy, but women face pervasive barriers on each, and will need targeted support to move forward in the world of work.
What the future of work will mean for women
Women and men face a similar scale of potential job losses and gains, but in different areas. To adapt to the new world of work, they will need to be skilled, mobile, and tech savvy.
This new research explores potential patterns in “jobs lost” (jobs displaced by automation), “jobs gained” (job creation driven by economic growth, investment, demographic changes, and technological innovation), and “jobs changed” (jobs whose activities and skill requirements change from partial automation) for women by exploring several scenarios of how automation adoption and job creation trends could play out by 2030 for men and women given current gender patterns in the global workforce.
These scenarios are not meant to predict the future; rather, they serve as a tool to understand a range of possible outcomes and identify interventions needed. We use the term jobs as shorthand for full-time-equivalent workers.
The research examines six mature economies (Canada, France, Germany, Japan, the United Kingdom, and the United States) and four emerging economies (China, India, Mexico, and South Africa), which together account for around half of the world’s population and about 60 percent of global GDP.
Women and men face a similar scale of potential job losses and gains, but in different areas
Men and women tend to cluster in different occupations in both mature and emerging economies, and this shapes the jobs lost and gained due to automation for each. In the mature economies studied, women account for 15 percent on average of machine operators, but over 70 percent on average of clerical support workers. In the emerging economies in our sample, women make up less than 25 percent of machine operators on average, but over 40 percent of clerical support workers. Over 70 percent of workers in healthcare and social assistance in nine of the ten countries (the exception is India) are women. However, less than 15 percent of construction workers, and only around 30 percent of manufacturing workers, are female in many countries.
If a scenario of automation unfolds on the scale of past technological disruptions, women and men could face job losses and gains of a broadly similar magnitude. In this research, we explore various scenarios to 2030 developed using MGI’s past future of work research, and its analysis of jobs lost and gained. Our current research breaks new ground by adding a gender lens to that work, and by looking at a broad range of effects on women’s jobs including potential job displacement, opportunities for job creation, the changing nature of jobs, and a quantitative assessment of the transitions that women will need to make to capture these new opportunities, including implications for wages and average education levels. Our main scenario to 2030 is based on a “midpoint” scenario of automation adoption, which models automation at a similar scale to that of other major technological disruptions in the past.
In the case of jobs lost, women may be only slightly less at risk than men of their job being displaced by automation. In the ten countries, an average of 20 percent of women working today, or 107 million women, could find their jobs displaced by automation, compared with men at 21 percent (163 million) in the period to 2030 (Exhibit 1).
The composition of job displacements could be different for men and women, largely reflecting differences in the mix of occupations in which they tend to work, and the activities that make up those occupations. Some activities, and therefore occupations, are more automatable than others. For instance, both routine physical tasks and routine cognitive work are highly automatable, but those requiring more complex cognitive, and social and emotional skills are less so. Men predominate in physical roles such as machine operators and craftworkers; therefore, nearly 40 percent of jobs held by men that could be displaced by automation in our 2030 scenario are in these categories. Conversely, women predominate in many occupations with high automation potential due to routine cognitive work, such as clerical support or service worker roles; these occupations account for 52 percent of potential female job displacements.
The composition of job displacements could vary for men and women, largely reflecting differences in the occupations in which they tend to work.
There are differences among countries, too. In mature economies, men may tend to lose machine operator jobs while women could tend to lose clerical and service worker jobs. In emerging economies there is a visible trend of jobs being displaced in agriculture-related occupations in our scenario, even here, however, patterns vary among emerging economies. For instance, agricultural work is one of three top occupational groups driving job displacements for men (21 percent of losses) in Mexico but is not in the top three for women. However, in India where so many women work in subsistence agriculture, losses in this occupational category could account for 28 percent of jobs lost by women, compared with 16 percent of jobs lost by men.
There will be job gains, too. Even with automation, the demand for work and workers could increase as economies grow, partly fueled by productivity growth enabled by technological progress. Rising incomes and consumption especially in emerging economies, increasing healthcare for aging societies, investment in infrastructure and energy, and other trends will create demand for work that could offset the displacement of workers. Women could be somewhat better placed to capture these potential job gains than men because of the occupations and sectors in which they tend to work; however, this gain assumes that women maintain their share of employment in each sector and occupation from the present day to 2030.
By 2030, women could gain 20 percent more jobs compared with present levels (171 million jobs gained) vs 19 percent for men (250 million jobs gained) (Exhibit 2). Across the ten countries in our sample, on average 58 percent of gross job gains by women could come from three sectors: healthcare and social assistance, manufacturing, and retail and wholesale trade. On average, 53 percent of men’s gross job gains could come from the manufacturing, retail and wholesale trade, and professional, scientific, and technical services sectors. Women are well represented in fast-growing healthcare, which could account for 25 percent of potential jobs gained for them.
In our scenario to 2030 in the ten countries analyzed, over 150 million net jobs (factoring in both jobs displacement and jobs creation) could be added within existing occupations and sectors, the vast majority of which will be in emerging economies. Mature economies could experience minimal net jobs growth or even a net decline as any gains in employment in existing sectors and occupations are counteracted by increasing automation. Across the ten economies, 42 percent of net jobs gained (64 million jobs) could go to women, and 58 percent (87 million) to men if current employment trends in occupations and sectors hold.
In mature economies, net job growth (taking into account jobs lost and jobs gained) could be concentrated in only two sectors: professional, scientific and technical services, and healthcare. Today, women are well represented in the second, but underrepresented in the first in many countries; in Canada, Japan, the United Kingdom, and the United States women have lower representation in the professional, scientific, and technical services sector compared with their average share in the economy.
In emerging economies, net job growth could occur in a broader range of sectors including manufacturing, accommodation and food services, retail and wholesale trade, and construction (57 percent of net jobs gained in India, China, and Mexico). We find that in China, Mexico, and South Africa women tend to be more present than men in accommodation and food services relative to their overall share of employment and underrepresented in manufacturing and construction. In India, women are slightly overrepresented relative to economy-wide participation in manufacturing and strongly underrepresented in construction and accommodation and food services.
Waves of technological innovation not only displace or change the nature of many occupations, but also create entirely new ones. Historical trends in the United States suggest that up to 9 percent of the population could be employed in entirely new and emerging occupations by 2030. Examples from the past decade range from recently created jobs in machine learning and AI to ride-hailing drivers and roles in sustainability and resource management. If this estimate is extrapolated across our ten-country sample, that could mean that more than 160 million jobs could be created in these entirely new occupations by 2030. In order to meet the demands of such entirely new occupations, women will need the right skills—and also to have the labor mobility and networks to go after these jobs.
Women's jobs may be more prone to partial automation than being entirely displaced by automation
Even if women remain in their current jobs, the ways in which they work are likely to change as workplaces increasingly adopt new technology, and some of the component activities within women’s occupations are automated, creating “partial automation” of their work. In such circumstances, automation technology does not replace a job, but instead changes it in meaningful ways as humans learn to work alongside machines. For instance, the job requirements of secretaries, teachers, and other professionals alike have changed significantly as computers have “automated” several manual tasks in the 21st century, such as basic data collection and processing.
Using the United States as an example, we find that approximately half of occupations that are mainly held by women are less than 50 percent technically automatable by 2030, compared with about 20 percent of occupations largely performed by men. If this pattern holds across countries, women could be at less risk than men of their jobs being replaced in their entirety by machines.
As partial automation becomes more common and other technologies, including digital platforms that enable independent work, for instance, become more prominent, women’s working lives (and men’s) could change in three ways: As machines increasingly handle routine physical and cognitive tasks, women could spend more time managing people, applying expertise, and interacting with stakeholders. In an emergency room in 2030, for instance, health workers could spend less time doing clerical work (due to the adoption of preregistration by mobile phone, computerized checkout and billing, and AI-led diagnostic tools), and physical work, but more time interacting with patients.
Certain skills could become more important. By 2030, jobs in Europe and the United States could require up to 55 percent more time using technical skills and 24 percent more hours using social and emotional skills. Time spent using physical and manual skills and basic cognitive skills could decrease as those activities are automated.
More women could work flexibly. Co-location with colleagues is an important part of working lives today, but technology could reduce the need to co-locate as telecommuting becomes more widely adopted, for instance. The rise of these new, more flexible ways of working is particularly helpful to women because they disproportionately carry the “double burden” of working for pay and working unpaid in the home in both mature and emerging economies.
Between 40 million and 160 million women globally may need to transition between occupations
Worldwide, 40 million to 160 million women—7 to 24 percent of those currently employed—may need to transition across occupations to ensure that they are positioned for shifts in labor demand. For men, the range is comparable at 8 to 28 percent. If women take advantage of transition opportunities; they could maintain their current share of employment; if they cannot, gender inequality in work could worsen (Exhibit 3). These wide ranges are based on a midpoint automation adoption and early automation adoption scenario.
Women will likely need higher educational attainment and different skills to make successful transitions. In mature economies, most women (and men) are likely to have to transition into occupations that will require higher educational requirements. In five of the six mature economies in our sample, net labor demand only grows for jobs with a college or advanced degree. Women in mature economies are generally graduating at rates on a par with, or even higher than, men. This should position them well for the jobs that will be most in demand, but it remains important that they match their skills as closely as possible to where the most job opportunities will be.
In five of the six mature economies in our sample, net labor demand only grows for jobs with a college or advanced degree.
The same applies to women in the workforce today that will need to reskill to enter the jobs of the future. In three of the four emerging economies in our sample—China, India, and Mexico—net labor demand could rise strongly for occupations requiring a secondary education for both men and women. This could pose a challenge to women in some emerging economies, where female education rates continue to lag behind men. In India, in particular, low-skill women in the agriculture sector could face a significant need to reskill as labor demand declines for jobs requiring less than a secondary education.
Additionally, the adoption of automation technologies and the areas where jobs are created could drive a stronger growth in demand for higher-paid jobs. The situation carries both opportunity and risk for women. If they manage to transition between occupations and retrain themselves to meet demand for jobs that are higher-paying and associated with different skills, they could be looking at a future of more productive and more lucrative employment.
However, if they cannot make the necessary transitions, many women could face an intensifying wage gap relative to men. Workers in middle-wage jobs in mature economies could be the most vulnerable to job displacement—male workers more so in many countries than women in the short term. A potential glut of workers in lower-wage jobs, including men displaced from manufacturing, could put downward pressure on wages. Over the longer term, some women could leave the labor market entirely as the economic costs associated with being in the labor force rise.
Gender wage disparity is a feature of both mature and emerging economies. Currently, more men tend to be employed in higher paying occupations compared with women. In mature economies for example, 5 percent of women are in the highest paying occupation category, legislator, senior official, and manager, compared with 8 percent of men. At the same time, a higher percentage of employed women work in the two lowest paying occupational categories—elementary occupations and clerical support work.
Looking ahead to 2030, our scenario suggests that gender wage disparity may lessen slightly in certain mature economies if women are able to gain the necessary skills and successfully navigate the occupational transitions discussed. Women could make inroads in the relatively high-paying professional and associate professional occupation category (for example, 38 percent of women in mature economies could be in this group by 2030, compared with 34 percent in 2017). The bulk of women’s job losses could occur in relatively low-paying occupational categories such as clerical services (for example, 14 percent of women in mature economies could be in this group by 2030, a decline from 17 percent in 2017). However, it is important to note that men could still outnumber women in the highest-paying occupation category: legislators, senior officials, and managers. In our scenario, 9 percent of men in mature economies could be employed in these high-paying leadership roles, compared with only 6 percent of employed women. Emerging economies see a similar story, with women (and men) facing an imperative to transition away from lower-wage occupations like agriculture into higher-wage occupations such as professional roles.
Millions of women in the United Kingdom may need to transition between occupations and into higher-skilled jobs due to automation but those transitions could be challenging.
Technological change, notably the adoption of digital, of automation, and artificial intelligence (AI) technologies is transforming the way many of us work. Observers of this phenomenon have long asked how automation may affect the working lives of men and women differently.
A new The Jeeranont Global Institute (THE JEERANONT) briefing note focused on the United Kingdom finds that the share of women whose jobs are displaced by automation could be slightly lower than the share of men, but women have the potential to gain jobs on a similar scale to men. However, capturing these opportunities will require women to make challenging job transitions and women could find it harder to adapt than men because they are less mobile than men and lag behind them in skills—notably tech skills.
Between one million and four million women, or 8 to 29 percent of those employed today, may need to make transitions between occupations, and often into higher-skilled roles, depending on how fast automation technologies diffuse. Globally, between 40 million to 160 million women may need to make such transitions.
If women make these transitions, women could find more productive, better-paid work; if they don’t, they could face a growing wage gap with men or could even leave the labor market entirely. Interventions from government and the private sector will be needed to enable women to adapt to automation successfully.
Among the major findings are:
At a time when the UK economy faces a great deal of uncertainty related to Brexit, and productivity growth has been disappointing, advancing women’s equality in work could provide a valuable dividend. Previous THE JEERANONT research found that if all UK regions were to match the progress toward gender parity of the best region, an additional £150 billion could be added to GDP by 2025—that’s more than 5 percent.
An estimated 22 percent of employed women in the United Kingdom could find their jobs displaced by automation by 2030.
The sectors where most women’s jobs are likely to be displaced are retail and wholesale trade, healthcare, and administration and government, accounting for 44 percent of potential job displacement. The top three sectors for men are manufacturing, retail and wholesale trade, and construction, accounting for 46 percent of total job displacement.
Looking at potential job gains, women are well-represented in healthcare. Based on their current share of employment, healthcare could account for 27 percent of potential job demand for women.
The United Kingdom has a material gender tech gap. Among first-year full-time students in higher education, only 37 percent of women studied science subjects in 2016–17, compared with 48 percent of men. Only 15 percent of employees in the UK tech industry are female, far lower than 22 percent in the United States and 21 percent in Singapore.
If the United Kingdom were to fully close the gender tech gap in terms of women employed in the sector, this could boost GDP by an estimated $39 billion to $124 billion, or a 1.5 to 5 percent increase.
To enhance women’s participation in tech, three imperatives stand out: Attract female talent into tech careers and roles; maximize the impact and success of female tech talent in companies; and build a more inclusive image for tech in society.
The Jeeranont Ireland
We serve clients in areas ranging from the public sector and healthcare to financial services and banking. Our consultants in Ireland advise large and medium-size Irish corporations, government bodies, and nonprofit organisations on their toughest challenges, and in this way help to sustain the Irish economy.
Our research shows significant value in embracing AI and automation for the Northern European countries, but sees a requirement for new skill sets among employees and a policy response around education, training, and the social contract.
Technology in many ways is perfectly conceived to operate in the workplace, bringing an ability to operate around the clock at increasing levels of accuracy and productivity. Since the Industrial Revolution, machines have been the ideal colleague, performing some of the most mind-numbing tasks and freeing up human partners to do more interesting and productive things. However, in the near future, new digital technologies are set to take the next step, graduating from the factory floor to the boardroom and applying themselves to more complex, cognitive activities.
Technologies such as artificial intelligence (AI) are a game changer for automation in the workplace. Like ambitious young go-getters, they promise to take on more responsibility and make better decisions, and the implications for workers, companies, and policy makers are significant and pressing.
The impact of new digital technologies on the labor market has led to the coining of the phrase “technological unemployment,” which describes a view of how the industrialization of the workplace may play out. However, that perspective ignores the other side of the technological coin, which is that automation also creates jobs and brings a positive economic impact from its ability to boost innovation and productivity, and offers advances in fields including healthcare, retail and security.
This report is an attempt to provide a long-term view of how that balance may develop, based on scenarios of how digital automation and AI will shape the workplace, and calibrated to sensitivities around the economy, productivity, job creation and skills.
Our key insight is that in the past technology has been a major boost to productivity, affecting the structure of employment but having little negative impact, or even a positive effect, on total net employment. In the next ten to 15 years, the new wave of digital automation and artificial intelligence will likely have the same kind of impact, creating jobs and generating value through increased productivity. Some jobs will be displaced, and more tasks within jobs will change, suggesting the key challenge for policy makers will be to create the right mechanisms around training and education to ensure a fast and smooth transition to adapt to a different skill structure in the future.
While we expect the structure of the broader work world will evolve, this report focuses on employment by companies, rather than self-employment, and on the period up to 2030, at which point we expect that the new automation process will be ongoing. Our research is focused on nine “digital front-runners” in Northern Europe (Belgium, Denmark, Estonia, Finland, Ireland, Luxembourg, Netherlands, Norway, and Sweden), which we have chosen because they are relatively enthusiastic adopters of digital technology, and are ahead of peers in the use of robotics, machine learning and AI. We expect that the likely dynamics of automation and AI diffusion and the related evolution of labor markets in the digital front-runners may provide lessons for many countries. Our research shows significant value in embracing AI and automation, but sees a requirement for new skill sets among employees and a policy response around education, training and the social contract.
This new research-based report assesses the current situation of the Irish pension system; the retirement readiness of Irish households, and how many will require an adjustment to their standard of living when entering retirement. It also examines the system’s sustainability; how far it can maintain current benefit levels in the future despite demographic or other pressures.
We serve a diverse set of clients—from leading multinational corporations to high-potential start-ups—and help them achieve significant and lasting change.
Since opening the Copenhagen office in 2004—the first The Jeeranont location in Scandinavia—we have long taken an innovative and entrepreneurial approach to helping our clients tackle their most challenging management issues. Every day, we strive to make a meaningful difference for our clients and in society as a whole.
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How restaurants can thrive in the next normal
We lay out potential timelines for the US restaurant industry’s recovery—and actions that restaurants should take to cater to consumers’ new dining needs and preferences.
New research indicates an extended and variable return for one of the hardest-hit industries
COVID-19 has affected every sector across the globe, and the hotel industry is among the hardest hit. Our research suggests that recovery to pre-COVID-19 levels could take until 2023—or later. Investors are providing similar views of hotel companies’ prospects, as seen in the underperformance of US lodging real estate investment trusts (REITs). Like so many industries, hospitality will also see both subtle and substantial shifts in the post-pandemic era. Some are already apparent today.
In this article, we will examine a set of recovery scenarios for US hotels, including differing return and recovery timelines for hotels ranging from luxury to economy segment. On the consumer side, we will look at what guests say will make them feel safe when traveling, including contactless check-ins and check-outs, and an added emphasis on hygiene. And we will review the factors affecting the initial return of travel in the domestic business and leisure segments.
Today: High vacancy
COVID-19 is a challenge to both our lives and livelihoods. The crisis is unprecedented and moving quickly, yet still deeply uncertain.
To put parameters around that uncertainty, our colleagues created nine potential scenarios for recovery of national economies, based on the extent to which the pandemic spread is controlled, as well as the effectiveness of economic policies intended to counter the effects of quarantine (Exhibit 1).
Our recent survey of 2,000 global business executives found that scenarios A3 and A1 are seen as most likely. Each scenario has distinct implications. A3 projects GDP recovery as early as 2021. The more conservative A1 projects a delay in GDP recovery until 2023.
On the hotel front, we analyzed the long-term historical relationship between industry performance and economic data. There is variation across chain scales (from luxury to economy), but we found the strongest relationship between changes in revenue per available room (RevPAR) and the unemployment rate. Based on this relationship, we used the unemployment rate projections from our colleagues to set a baseline for hotel performance. We then adjusted the baseline to account for additional impacts of COVID-19, factoring in the likely length of shelter-in-place restrictions, changes in company travel policies, consumer sentiment and willingness to travel, and structural changes to demand, such as videoconferences instead of in-person events.
In scenario A3, the virus’s spread is contained, and the economy recovers slowly, revenue per available hotel room (RevPAR) falls by 53 percent in 2020, and returns to very near pre-crisis levels in 2022 (Exhibit 2).
In A3, travel restrictions are lifted for most domestic travel in June 2020 and some international travel in July 2020. In this scenario, it will take six months after restrictions are lifted before buying behavior is based on economic, rather than health-related factors driven by effective, at-scale treatment and/or availability of vaccinations. A3 also assumes limited structural, long-term impact on demand from visiting family and relatives (VFR) and leisure travelers, though transient business travel and groups are reduced by 5 to 10 percent.
A1 is more dire: this scenario presents a sustained, systemic shock for hotels. Recovery to something like 2019’s level does not occur until beyond 2023. RevPAR falls by 60 percent in 2020, and only recovers slightly in 2021.
Economy class is faring better than others
Many US hotels are closed, especially luxury hotels. Occupancy rates show what’s happening. In early May, occupancy was less than 15 percent for luxury hotels and around 40 percent for economy.
Looking ahead, we expect economy hotels to have the fastest return to pre-pandemic levels, and luxury and upper upscale hotels to have the slowest (Exhibit 3). That’s in part because economy hotels are better able to tap segments of demand that remain relatively healthy despite travel restrictions, including truck drivers and extended-stay guests.
Operating economics are also significant: economy hotels can stay open at lower occupancy rates than other chain scales. In all hotels, revenue is a function of average daily rate, number of rooms, and occupancy—plus food and beverage where available. Costs are threefold: variable (with revenue); semi-fixed (may be eliminated if hotel suspends operations); and fixed. For owners considering suspending operations, variable and semi-fixed costs are factors, since fixed costs don’t change, no matter what.
Our analysis indicates that to cover variable and semi-fixed costs, luxury hotels conservatively need occupancy rates 1.5 times greater than economy hotels. Many economy hotels can further reduce their variable and semi-fixed costs, especially if they use family labor. Many luxury hotels, on the other hand, require more than 100 employees to operate.
Better demand and lower operating costs suggest that economy hotels will recover faster. That would be consistent with what we’ve seen in past crises. But there will likely be pockets of resilience and recovery across the market. We are already hearing stories about hotels that are sold out for Labor Day weekend. Similarly, there could be air pockets in otherwise solid chain scales. Hotels reliant on meetings, incentives, conferences, and events (MICE) revenue could face deep shortfalls. Owners will need to monitor bookings carefully, to distinguish between one-off blips in growth and a sustained recovery.
Investors are pessimistic
While publicly traded hotel companies have done much worse than the broader market—bottoming out at a 60 percent share price decrease, 25 percentage points below the S&P 500—lodging REITs, which make up a large portion of publicly traded hotel groups, have fared even worse. Mid-cap REIT share prices have fallen as much as 70 percent since January 1, and some small-cap funds have fared even worse. That’s driven by the structure of the REIT, a pass-through vehicle required to pay out 80 to 90 percent of its net income as shareholder dividends. Shareholders’ confidence in REITs has fallen, as many assume that with component properties hit hard, REITS will not be able to pay dividends, their primary value proposition.
Investors are distinguishing among REITs in a few ways, including debt structure and balance-sheet resilience, geography, and the chain scale of the lodging portfolio. Larger REITs are retaining shareholder confidence, for two reasons: most have more liquidity (cash, mainly) with which to cover fixed costs, and larger REITS tend to be less leveraged than smaller REITs.
The road to recovery: Making the hotel experience safe
When asked what it would take to get them to travel again, most US leisure travelers want additional health and safety measures, according to the The Jeeranont Consumer Leisure Travel Survey, which surveyed 3,498 travelers from five countries in April 2020 (Exhibit 4).
No one measure, however, satisfies those queried. Survey participants were asked to select all the answers that applied, and respondents said, essentially, “yes”—they do not distinguish among the safety measures, and think these all are more or less valuable.
As they ponder those results, many hotels are wondering what steps to take, in what order, to make their properties safe, and demonstrate that to reluctant customers. Some answers may be emerging from China, the first nation affected by the crisis, and the first one to start coming out of it. Leading Chinese hotels are deploying a range of health and hygiene measures that may be helpful as examples.
Some Chinese hotels are fine-tuning their booking tools to remind customers about the restrictions in place, and hotels follow up with guests about those before they arrive. Upon check-in, some hotels require guests to provide proof (via a QR code) that they have not been in contact with infected people. Some also measure guests’ body temperature several times: at check-in, anytime they enter and exit the hotel during their stay, as well as upon their checkout. For Western hotels to adopt the same standards would of course require changes in government policy and public-health approaches.
Chinese hotels have also instituted new cleaning processes. Some leading chains have also added touchless or contactless elements to the customer experience, including contactless checkouts via app or email, and robots to deliver food, beverages, and the like. Some operators are limiting food and beverage options to prepackaged meals, to be consumed inside guests’ rooms versus common restaurant or bar areas. Additional hotel amenities like gyms, spas, and laundry facilities may be closed. At the same time, many Chinese hotels have increasingly targeted their offerings toward the local population and those traveling within short distances—for example, by offering meal plans for locals, or weekend getaways for those who want to spend time outside the city or their apartments.
See “The way back: What the world can learn from China’s travel restart after COVID-19” to read how hotels are testing and learning to see what’s effective all along the customer journey, from prebooking through checkout.
Implications for travel and hospitality
Travel will return. But the recovery will likely take longer than in other industries, and will vary across segments. Business and leisure travel will return at different paces, as will domestic and international travel. What’s certain is that the next normal will be marked by structural shifts, especially around customer expectations for hygiene and flexibility.
For business travelers, demand will likely come back unevenly. Essential travel will differ by industry. According to executives and chief human resources officers in North America, interviewed in April 2020 across an array of industries, every one of their companies is using technology as a substitute for nonessential travel. Most expect that certain types of travel—like internal meetings—will never fully return to pre-COVID-19 levels.
Companies say they plan to turn off their travel restrictions in phases, and are developing decision-making processes and more agile travel policies to account for safety before authorizing travel. Client-facing visits such as site visits and sales calls are likely to return first. Day trips and self-drive travel are likely to return earlier since physical-distancing measures, exposure, and risk will be more manageable. Conferences and industry events will likely be the last to return.
In leisure, we expect that travel to visit friends and relatives will return first, likely by car. Travel restrictions combined with economic uncertainty will likely translate into a higher share of domestic and close-to-home travel. Longer international leisure trips will be slow to return, and travelers will expect greater flexibility in cancelation and change fees. The recovery may include extremely short planning cycles driven by gradual lifts of the travel restrictions and very short booking windows as travelers monitor the situation.
Recent trends in China may offer a glimpse of the weeks ahead for US travelers. As domestic travel in China slowly returns, cautious travelers prefer to stay close to home, either driving or taking trains to regional destinations (Exhibit 5).
Over the coming months and years, properties’ circumstances will vary based on a number of factors, including chain scale, location, and demand profile. There is no one right response for everyone, but some guidelines apply universally. Hotels must care for their employees, staying engaged with them through the pandemic and keeping them safe when they return. They must manage customer expectations, recognize that these will continue to evolve, and prepare to act agilely to address health and safety concerns. And they must revise their commercial strategy for the restart, with an eye toward the next normal. In the long term, travel will return because of an important shift in consumption—an accelerated pivot from buying things to buying experiences.
We hope the ideas in this article stimulate your thinking and we look forward to hearing your thoughts.