The Covid-19 pandemic disrupted labour markets globally during 2020 resulting in a significant short-term and long-term impact. This will result in up to 25 per cent of workers may need to find jobs in new occupations, according to a study by McKinsey Global Institute.

A new report from the McKinsey Global Institute on the pandemic’s long-term impact on the future of work after Covid-19 is the first in a series MGI explores its long-term impact on the economy.

This report identifies the lasting impact of Covid-19 on labor demand, the mix of occupations, and workforce skills required in eight countries – China, France, Germany, India, Japan, Spain, the United Kingdom, and the United States.

The pandemic has accelerated three broad changes in consumer behaviour and business models that will persist to varying degrees: the rise of remote work, the increased embrace of e-commerce and virtual interactions, and the more rapid deployment of automation and AI technologies.

These trends will further exacerbate the reshuffling of jobs in the economy over the next decade. As a result, more than 100 million workers, or one in 16, may need to find jobs in new occupations by 2030 – and the shifts will require more advanced skills and intensify the retraining challenge.

“The long-term effects of the virus may reduce the number of low-wage jobs available, which previously served as a safety net for displaced workers,” said Susan Lund, a partner at the McKinsey Global Institute and co-author of the report. “Going forward, these workers will need to prepare themselves to find work in occupations with higher wages that require more complex skills, such as jobs in health care, technology, teaching and training, social work, and human resources.”

Jobs with higher proximity, such as cashiers in stores, servers and line cooks in restaurants, and receptionists in hotels, may experience the greatest disruption after the pandemic because of changes in customer and business behaviour that will stick.

Companies are already devising hybrid remote work models, and MGI estimates that roughly 20 to 25 per cent of workers in advanced economies could do their jobs most of the time from home. This could affect custodial jobs in offices, public transportation, and restaurants and retail in urban areas if fewer workers commute to office jobs.

In India, about 5 per cent of the workforce could potentially work remotely for more than three days a week, though this share is as high as 70 per cent for key sectors like financial services and IT.

Virtual meetings could replace 20 per cent of business travel, on the average across the 8 countries we studied and that will have knock-on effects for restaurants, hotels, and airlines.

Before the pandemic, highly skilled workers were drawn to the world’s biggest cities. Now remote work facilitated by digital tools opens opportunities for workers to live anywhere and companies to recruit more broadly.

Covid-19 forced consumers and businesses to rapidly migrate to the digitally enabled “delivery economy,” which is shifting low-wage jobs from retail shops and restaurants to warehouses and transportation. Share of e-commerce grew as much in 2020 as the previous three in India, and grocery and food delivery, online banking, tele-medicine, and streaming entertainment soared. McKinsey surveys find that about 70 to 80 per cent of consumers in India say they will continue using these channels because of the convenience they offer.

The delivery economy and remote work have already expanded work opportunities for independent workers. Roughly 70 per cent of 800 global executives surveyed by McKinsey in July 2020 said they expected to hire more independent workers for projects over the next two years.

Companies have started to adopting automation and AI to reduce workplace density and cope with demand surges, and this may accelerate as the economy recovers. Already, meat processors have installed robotics to reduce density in processing plants, and call centers have deployed chatbots. The greatest growth in automation may occur in indoor production and warehousing, as companies seek to increase space between workers and yet keep pace with surges in demand.

Some workers will need to find jobs in much higher wage brackets that demand specialised skills like technical skills and higher socio-emotional capacity. On the other hand, the requirement of physical and manual skills, as well as basic cognitive skills, will reduce.

“The pandemic will make the reskilling challenge more daunting. Its effects will fall heaviest on the most vulnerable workers. This creates a new urgency for companies and policy-makers to help these workers gain the skills most needed in the future,” said MGI partner and report co-author Anu Madgavkar.

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