Description

Summary

The development and adoption of advanced technologies including smart automation and artificial intelligence has the potential not only to raise productivity and GDP growth but also to improve well-being more broadly, including through healthier life and longevity and more leisure. To achieve these benefits—and reduce disruption and potentially destabilizing effects on society—will require an emphasis on innovation-led growth and careful management of the workforce and other transitions related to technology adoption and diffusion.

For the research, we compiled a library of about 600 use cases of technology applications that contribute to well-being, especially in relation to key societal challenges such as job security, health, and equal opportunities. More than 60 percent of these cases use some AI capabilities. We then developed a comprehensive welfare model of technology adoption that quantifies technology impacts beyond pure GDP. It incorporates critical dimensions of inequality, risk aversion to unemployment, leisure, and health and longevity, building on recent economic literature on welfare and well-being. Using this model, we conducted a simulation of welfare outcomes that enables us to compare the contribution of the new generation of technologies to previous generations and to identify key priorities for moving toward what we call a “Tech for better lives” outcome.

Our preliminary insights from this exercise include the following:

  • Technology is not intrinsically good or bad, but it can produce positive or negative outcomes—and often both—depending on how it is used. It affects different parts of the population unequally. In general, actions by business leaders and policy makers need to accompany technological innovations to ensure that the overall effects, and how they are distributed, create a positive balance. 2 McKinsey Global Institute
  • While technology adoption may be disruptive in the short term, especially to jobs and incomes, our library of applications (use cases) highlights a variety of ways in which technology itself can help smooth those disruptions and preempt risks. For example, online training programs and job-matching digital platforms can help workers improve skills and find employment, while mobile payments for financial access and online marketplaces that reduce prices of goods and services can positively affect material living standards. Other socially beneficial use cases include adaptive-learning applications to better prepare young people for the labor market, AI-powered drug discovery and personalized medicine for longer and healthier lives, and clean technologies for environmental sustainability.
  • While technology has been a significant contributor to welfare growth in Europe and the United States in the past 40 years, our modeling suggests that, for the next decade, welfare growth may continue on the same trajectory only to the extent that new frontier technology adoption is focused on innovation-led growth rather than purely on labor reduction and cost savings through automation, and that technology diffusion is actively accompanied by transition management that increases workers’ mobility and equips them with new skills. Other measures may also be needed to ensure a successful transition, potentially including support for wages. For all its potential, technology that enhances well-being is a tool kit that cannot address all the issues on its own.
  • A first attempt to estimate the approximate monetary value of a scenario in which proactive management smooths transitions related to technology adoption and innovation-driven growth suggests that the potential boost to welfare the sum of GDP and additional wellbeing components—can be between 0.5 and 1 percent per year in Europe and United States by 2030. This is as much as double the incremental growth from technology that we have modeled under an average scenario. Other scenarios that pay less heed to managing transitions or boosting innovation could slow income growth, increase unemployment risk, and lead to fewer improvements in leisure, health, and longevity.
  • Government and business have important roles to play in ensuring good outcomes. The public sector can help drive innovation and improve welfare by supporting research and development including in health, spurring technology adoption through procurement practices and progressive regulation, and ensuring retraining and transition support for workers coping with workplace disruption. Business can focus technology deployment on new products, services, and markets, augment the skills of the workforce including with technological solutions, and increase worker mobility by creating new career paths, among other steps. They can also prioritize technology solutions that simultaneously improve their bottom line and the outcomes for society.

This paper is aimed at stimulating discussion about the opportunities and challenges surrounding technology adoption and how technology itself could help mitigate negative outcomes. This is a debated area of economics and policy. We hope our efforts and preliminary findings will stimulate other research in this field that will spur improvements in methodology and refine our insights. We intend to return to the issues raised in more detail in due course.

Publication Details
Publication Year:
2019