In January 2019, the World Economic Forum (WEF), in collaboration with the Boston Consulting Group (BCG), published the WEF Reskilling Report: first comprehensive review of the cost of training and redeploying workers at risk of losing their jobs to automation in the US.
WEF estimated that while automation could displace up to 75 million workers worldwide, up to 133 new roles will appear in response to technological advancements. The balance is positive, but the occupations destroyed and those created do not have the same job descriptions and will require different skills. This raises questions:
- How will these emerging jobs be filled, by reskilling workers or hiring already-skilled ones?
- Who will pay for
The WEF surveyed six US industries: aerospace, aviation, travel and tourism, consumer, financial services, oil and gas. It found that up to “95% of the 1.44 million individuals in jobs which will undergo a period of disruption until 2026 would be able to find a viable and desirable job transition.” The report defines as “viable and desirable” a transition into occupations similar in discipline, education and experience and to a field with higher wages where demand is not forecasted to decline. Nevertheless, transitioning might take on average two years and cost $34 billion.
New and disruptive technologies such as AI, robotics, ubiquitous internet connectivity, virtual reality lead what has been termed the fourth industrial revolution: a fundamental change in the way we live and work. In the US, the Workforce for the 21st Century section of the Cross-Agency Priority (CAP) Goals recognizes that “automation increases the overall efficiency of the workforce.” Yet, there is a need to “reskill and redeploy human capital from lower value work activities to higher value work activities” to mitigate the social and distributional drawbacks from automation.
The report recommends expansions in welfare and social support, funding for those not profitably reskilled, and incentives aimed at lowered costs of reskilling to address the at-risk-workers who are not profitably reskilled. Ultimately, a collaboration between government and private companies would have the most impact on reskilling workers.
The Role of Business
From the company perspective, two options exist as automation consumes the traditional workforce: “reskilling the employee within the company” or “letting the employee go and hiring external talent”. This report aims to identify the best option for businesses.
Retraining expenditures and missed productivity constitute companies’ cost of reskilling. Reskilling may include workshops or classes provided by the employer. In addition, employees are not fully productive while learning new skills, which could incur additional costs for corporations.
However, firing and hiring is also costly: severance and hiring costs can weigh on companies’ resources, and new employees do have reduced productivity as they learn procedures and protocols.
Based on this cost-benefit analysis, the WEF shows that “the private sector in the US could reskill 25% of workers expected to be displaced by technology into growing jobs with an overall positive cost-benefit balance.” This investment of $4.7 billion would be of financial interest while also providing societal benefits.
The Role of Government
From a government perspective, the two choices are “reskilling the employee into another company” or “paying direct and indirect welfare costs.” Reskilled workers would enter professions with higher wages. Increased tax revenues and reduced welfare payments would offset retraining costs. Based on this model, it would make financial sense for the government to invest $20 billion into reskilling 77% of at-risk workers.