McKinsey - the digital skills gap will get worse as cognitive automation intensifies

I've been making fun of the periodic "IT skills crisis" proclamations long before we launched diginomica five years ago.

After a couple of decades, shouldn't the sensationalism of a perpetual skills "crisis" give way to a more sober outlook? I'm cynical about the crisis language for two reasons:

• It fosters a misleading optimism for job seekers, who assume that investing in technical certifications will lead to immediate employment. Bottom-feeding pseudo-training companies exploit this hope.
• The so-called skills crisis is usually accompanied by proclamations from companies about talent shortages, when in fact the real problem is a lack of imagination in skills development, retraining, and sourcing from excluded populations who are deserving and capable.

At diginomica, we've tried to bring clarity to the talent crisis hyperbole via digital skills analysis, and an editorial focus on workplace diversity initiatives. But in the face of AI and automation, the digital skills debate won't go away.

In 8 ways to wake up from the digital nightmare and succeed, Den Howlett riffed on a 2017 McKinsey report, making the case that companies lack the cultural will to confront disruption at scale, until they wind up in the unwanted predicament of a near-death experience.

I'll add this: many workplace cultures lack the necessary infusion of fresh talent and provocative ideas that aren't coated in corporate politics. When you mix in a shifting skills landscape that companies struggle mightily to keep up with, that's a recipe for a stale and weak culture (though often such cultures are full of misplaced hubris as they lift-and-shift the desk chairs). No amount of gee-whiz tech solves that.

Which brings me to another McKinsey Global Institute report, an 80 page whopper entitled Skill Shift - Automation and the Future of the Workforce (PDF link - if you want a summary, check the WEF's The 3 key skill sets for the workers of 2030). This is the most significant report on digital skills gaps I've seen in a while. Why?

• It's a level-headed report loaded with regional and industry variations. It avoids a crisis mentality, offering up practical solutions.
• No one can say with certainty how the automation impact on jobs will play out. But this report strikes a good balance on the need for tech-savvy workers, along with higher-level cognitive/emotional intelligence skills.
• The focus is on business impact rather than tech needs. More than 3,000 business leaders in seven countries were surveyed.

The report's thesis:

• There is a digital skills mismatch between what companies need, and the talent pools they currently hire from.
• The pace of automation will exacerbate these skills shortages.
• Companies must get cracking on addressing these gaps - or they will be left behind.

Let's start with today's skills gap. Technical skills are one obvious area where McKinsey found a "mismatch":

Several countries report shortages of specialized information technology workers and data scientists. For example, France expects a shortage of 80,000 workers in IT and electronics jobs by 2020. Prior MGI research has estimated that there could be a shortfall of some 250,000 data scientists in the short term in the United States.

These gaps extend to less sophisticated digital skills:

The skill shortage also extends to more basic digital skills. A British parliamentary report in 2016 found that 23 percent of the UK population, or 12.6 million people, lacked basic digital skills, at a time when about 90 percent of new jobs require them. A survey of business leaders that we conducted for this report corroborates this finding. The top three areas identified by respondents as having the largest skill shortages today are data analytics, IT/mobile/web design, and R&D.

When you claim automation is accelerating skills shifts, you need to back it up. McKinsey tries to do that with data visualizations like this one:

McKinsey acceleration of skills from their Automation and the Future of the Workforce Report

Notice how the shifts in hours were modest from 2002-2016, except for technological skills. That changes bigtime in McKinsey's projections to 2030 (the end point in this report).

McKinsey sees growth in "higher cognitive" skills needs through 2030. But that's not the case across all so-called higher cognitive skills:

Other types of higher cognitive skills - such as advanced literacy and writing, and quantitative and statistical skills - will not see a similar increase in demand, and indeed our analysis suggests the need for them could remain stable or even decline to 2030.

Some examples:

In writing and editing, computer programs already produce basic news stories about sporting results and stock market movements for many newspaper chains. Of course, the decline in this skill does not imply that there will be no authors, writers, or editors in the future - but as in many other occupations, some of the more basic aspects of the work will shift to machines.

Usually, next-gen skills articles call for critical/creative thinking and social/emotional skills - without defining them. But McKinsey made an effort at better definitions:

McKinsey skills breakdown from their Automation and the Future of the Workforce Report

McKinsey gets into the variations from the seven countries surveyed, a limited sample that doesn't extend to the Asia Pacific region. Five industries get a skills deep dive, including banking and insurance, healthcare, manufacturing, energy and mining, and retail.

Industry focus is all-important for impacted companies, but McKinsey also found cognitive automation affecting skills across industries. Basic and higher level cognitive skills are defined as follows:

This research sparks three questions:

1. Individual - how do I make these skills transitions, given they will impact virtually every occupation?
2. Corporate - how do we execute a talent plan that will support - and not handcuff - our digital pursuits?
3. Societal - what are the workforce planning/schooling implications? How can we avoid leaving displaced and marginalized workers behind a cognitive skills divide?

For the individual, traditional schooling leaves us short. We must continuously identify our own gaps and address them. It's tempting to get into a the revenge-of-the-liberal-arts-degree fantasyland narrative, elevating creative and critical thinking skills in isolation.

But as McKinsey makes clear, the technological skills are the most potent area of need. Liberal arts schooling tends to fall short, because it doesn't fuse the creative/critical with the technical - setting up a bruising skills transition many have tasted firsthand. Technical trade schools fall short cultivating creative/critical abilities. In sum, our schooling system is out of whack. We need to fuse these skills into one education somehow. For now, we're on our own.

On the corporate side, the McKinsey report offers practical suggestions, many of which we've addressed in diginomica pieces, such as involving non-profits as a bridge between raw talent and corporate needs. From Girls who Code to programs serving marginalized youth, there is plenty of talent available now. Companies need to push beyond hiring from the same over-fished pool. And: a willingness to rethink limiting practices (example: greater use of online talent marketplaces).

A few great hires won't fix this. McKinsey:

Companies will need to make significant organizational changes at the same time as addressing these skill shifts to stay competitive. A survey of more than 3,000 business leaders in seven countries highlights a new emphasis on continuous learning for workers, and a shift to more cross-functional and team-based work. As tasks change, jobs will need to be redefined and companies say they will need to become more agile. Independent work will likely grow.

Leadership and human resources will also need to adapt: almost 20 percent of companies say their executive team lacks sufficient knowledge to lead adoption of automation and artificial intelligence. Almost one in three firms are concerned that lacking the skills they need for automation adoption will hurt their future financial performance.

They quote Michael Spence, a Nobel Laureate in economics, who has a pretty succinct reason for this latency:

The business side of this is really important. You can’t do this if business thinks labor is just another input where the goal is to minimize cost.

Of the three action areas I called out, the societal aspect is the most disconcerting/difficult. As McKinsey wrote:

Competition for high-skill workers will increase, while displacement will be concentrated mainly on low-skill workers, continuing a trend that has exacerbated income inequality and reduced middle-wage jobs.

There, I don't have any easy answers - but we better find them.