The Future of Work in the U.S. Tells a Tale of Multiple Americas
Geographic polarization and local economic disparities are common and increasing
By Irving Wladawsky-Berger
The U.S. economy looks good by almost any measure. Unemployment is at historical low levels, forcing employers to raise wages and become more aggressive about hiring and training workers. There are more job openings than unemployed people to fill them. Inflation remains low. A number of recent studies have concluded that over the next decade, our technology-based economy will create a significant number of new occupations which will more than offset declines in occupations displaced by automation. Not only is the U.S. economy doing well in the present, but despite our increasingly smart machines, automation fears appear to be unfounded.
Why then are so many Americans so anxious about the future? Why do they feel left behind despite our growing economy? Why is the country so polarized?
A recent McKinsey report, The Future of Work in America: People and Place, Today and Tomorrow, sheds light on these very important questions. For the past several years, McKinsey has been conducting research on the impact of automation technologies on the future of work at a national level. This new report is radically different, based on a detail analysis of more that 3,000 U.S. counties and over 300 cities.
Overall, the study found that while in aggregate the country is doing well, there are actually multiple Americas, each with widely different economic patterns and on sharply different trajectories, some of which are doing quite well and face an exciting future, while others are not in good shape and risk falling further behind.
The report is organized into five main sections, and includes a number of tables, graphs and maps. Let me summarize the key findings of each of the sections.
Local economies have been on diverging trajectories for years
McKinsey used a mathematical clustering method to categorize all U.S. cities and counties based on several economic factors. The analysis revealed five distinct segments:
- Urban core. 12 megacities, (e.g., New York, San Francisco, Boston, Atlanta, Miami) and 13 high-growth hubs, (e.g., San Jose, Seattle, Austin, Orlando, Raleigh, N.C.) account for roughly 30% (96 million people) of the U.S. population. These are the nation’s most dynamic places, with higher incomes, faster employment growth, high net migration and a younger and more educated workforce. But they also have high levels of income inequality and affordable housing shortages.
- Urban periphery. Home to 16% of the U.S. population, these are the extended suburbs of large metropolitan areas, (such as Arlington, VA; Riverside, CA; Bergen, N.J.) They’ve been attracting people moving out of cities in search of lower housing prices and more space. A large share of their population works in nearby urban areas.
- Niche cities. With 6% of the population, these smaller cities have found success with a variety of unique features. They include college-centric towns with major research universities, (e.g., Ann Arbor, MI; Boulder, CO; South Bend, IN; Ithaca, NY); fast growing retirement communities, (e.g., Naples, FL; Hilton Head, SC; Prescott, AZ); and small technology and industrial clusters which offer a high quality of life at lower costs, (e.g., Boise, ID; Provo, UT; Reno, NV; Des Moines, IA; Charleston, S.C.)
- Mixed middle. With almost one-quarter of the U.S. population, these include mid-size stable cities (such as Cleveland, St. Louis, Jacksonville, FL., San Diego, Pittsburgh); smaller independent economies, (such as Chattanooga, TN; Burlington, VT; Little Rock, AR; Fargo, ND); and manufacturing hubs, (e.g., Green Bay, WI; Logan, UT; Greenville, S.C.; Tuscaloosa, AL). These mid-size cities are not in distress, but have slower economic and job growth, higher unemployment, and somewhat lower educational attainment than urban and niche cities. Some are on an upward trajectory, while others are in decline.
- Low-growth and rural areas. With 25% of the population (78 million people), this group includes 54 trailing cities and more than 2,000 rural counties. Some are former industrial cities, (e.g., Flint, MI; Bridgeport, CT; Mobile, AL; Binghamton, N.Y.). These counties and cities have higher unemployment, lower educational attainment and older populations than the national average, and include some truly distressed areas.
Automation will not be felt evenly across places or occupational categories
McKinsey’s previous research found that while less that 5% of occupations will be entirely automated by 2030, 60% of jobs will be transformed through the automation of a significant fraction of their component tasks. Under most scenarios, there will be enough work to maintain full employment over the next decade. But, the vast majority of “workers will need to adapt as machines take over routine and some physical tasks and as demand grows for work involving socio-emotional, creative, technological, and higher cognitive.”
These transitions will be very challenging, especially for workers in communities whose local economy may not have the momentum to offset automation-related displacements.
In the past, economic divergence prompted people to move from distressed areas to those with stronger job markets. But, U.S. geographic mobility is now at historic lows. While 6.1% of Americans moved between counties or states in 1990, only 3.6% did so in 2017. “Differentials in the cost of living, ties with family and friends, and a growing cultural divide all partially explain these patterns, but more research is needed to understand these patterns.”
In the decade ahead, local economies could continue to diverge
Net job growth through 2030 will likely be concentrated in urban areas, while much of the country may see little employment growth or even lose jobs. “The 25 megacities and high-growth hubs, plus their peripheries, may account for about 60% of net job growth by 2030, although they have just 44% of the population.” Niche cities could enjoy 15% job growth, and the mixed middle cities could see modest job gains. But, rural counties, which account for 20% of jobs today, could see a decade of very low or even negative net job growth, with the roughly 970 most distresses such counties seeing their employment bases shrink by 3%.
Less educated workers are most likely to be displaced, while the youngest and oldest workers face unique challenges
“Individuals with a high school degree or less are four times more likely to hold highly automatable roles than those with bachelor’s degrees.
Given educational disparities, Hispanic and African-American workers may be hit hardest, with 12 million displaced. Nearly 15 million jobs held by young people could be lost, raising questions about career pathways.
Workers over age 50 hold an additional 11.5 million at-risk jobs. The share of middle-wage jobs may shrink as growth concentrates at the high and low ends of the wage scale.”
Local business leaders, policy makers, and educators will need to work together to chart a new course
While each community must set its own agenda based on local economic conditions, the report concludes with a few key suggestions:
Connect workers with new opportunities. This will help workers, especially those who need to switch jobs, pursue a different occupation or move to a new location.
Retrain workers and providing lifelong learning. “The old model of front-loading education early in life needs to give way to lifelong learning. Training and education can no longer end when workers are in their twenties and carry them through the decades. Employers will be the natural providers of training and continuous learning opportunities for many workers.”
Strengthen the social safety net. Governments need to help support workers as they transition between jobs. Support can take many forms, including more flexible income support programs during periods of unemployment, relocation assistance, training grants, and earned income tax credits. Portable benefits tied to the worker rather than the employer can help workers who need to switch jobs as well as the growing number who are self-employed.
“Policy choices, along with increased public and private investment in people and in the places that need it, can create more inclusive growth. Companies can make a difference, too, in recognizing that talent, space, and untapped potential are available all over the country,” according to the report.
“It is possible to turn this period of technological change into an occasion to create more rewarding jobs and build better learning systems and career pathways that serve more Americans. The challenge is not fighting against technology but preparing U.S. workers to succeed alongside it,” McKinsey concludes.
This blog first appeared Sept. 15 here.