Automation Could Absorb Half of U.S. Work Hours by 2035

A new report from the McKinsey Global Institute predicts that automation could absorb more than half of U.S. work hours by 2035, but this doesn't necessarily mean a significant number of jobs will disappear. The study estimates that technological and economic changes may lead to a reduction in labor demand equivalent to 36 million jobs over the next decade.

However, the same report also suggests that growth in AI-related industries and services could create new job opportunities, potentially leading to an increase in total employment by 2035. This paradox highlights the complexities of the changing workforce landscape. The McKinsey Global Institute's research indicates a possible net gain in employment despite widespread automation.

The challenge lies not in the number of jobs that exist, but rather in the skills and qualifications required for these positions. As AI assumes more routine tasks, workers may need to acquire new competencies to remain employable. In fields like management and law, where human judgment is essential, technology will likely augment rather than replace existing roles.

In these sectors, professionals will be tasked with overseeing AI-generated work, ensuring its responsible use, and redesigning workflows to accommodate emerging technologies. The report emphasizes the need for continuous learning and professional development as workers adapt to a changing job market.

According to McKinsey's research, office and administrative support roles are among those most vulnerable to automation, with approximately 80% of current tasks potentially being automated by 2035. This shift may not necessarily result in widespread job losses but will undoubtedly transform the nature of these occupations.

As automation takes hold, workers may need to transition into new occupations to remain relevant in their fields. Estimates suggest that around 11 million Americans could be displaced from declining industries and forced to seek new employment opportunities by 2035.

The shift towards automation will likely require workers to adapt quickly, with many needing to acquire new skills or credentials to remain competitive. In fact, nearly 85% of growing job openings require some form of certification or qualification.

However, companies are not just looking for employees with the right qualifications, they also want individuals who possess proven skills and experience. This could mean that employers begin to place greater emphasis on these qualities when hiring, potentially widening their talent pools in the process.

To better understand the impact of automation, it is essential to track key metrics such as employee mobility, internal promotions, and job satisfaction. By doing so, businesses can gain valuable insights into how AI is affecting their workforce and make informed decisions about how to allocate the time saved by automation.

Finance leaders will also need to consider how employees use the time freed up by AI, asking whether it is being used to drive business growth, improve customer service, or tackle more complex work.

Carine Damois has taken on a new challenge as CFO of Renault Group, overseeing the finances of the French automaker behind popular brands like Renault, Dacia, and Alpine. She brings over 20 years of experience in finance leadership to her new role, having previously held senior positions at Michelin and AREVA Group.

In related news, James J. Burke has been appointed interim CFO of Standard Motor Products, a leading automotive parts manufacturer and distributor. With a long history at the company, Burke returns to the CFO position he held from 1999 to 2019, before being promoted to chief operating officer. He will remain on the board of directors as the company searches for a permanent replacement.

As companies continue to reap the benefits of increased productivity thanks to AI, CEOs are facing a new challenge: turning those gains into actual business growth. According to the latest EY-Parthenon CEO Outlook Survey, half of the 1,200 CEOs polled cited AI as their biggest source of productivity improvements.

The survey highlights the paradoxical situation many companies find themselves in: having more time and resources available due to automation, yet struggling to translate those advantages into tangible results. As a result, finance leaders must now grapple with how employees are using the extra time freed up by AI, ensuring it is being used effectively to drive business growth or improve customer service.

The use of artificial intelligence (AI) in businesses has led to significant productivity gains, freeing up employee hours that could be used for more strategic tasks. However, a substantial 23% of companies surveyed report that these benefits are often absorbed before they reach the bottom line, leaving little room for investment in growth initiatives.

Moreover, only about one-sixth (16%) of companies have a clear understanding of the return on investment (ROI) generated by their AI implementations. This lack of transparency creates challenges in allocating capital effectively and making informed decisions about future investments. The situation is further complicated by skills shortages, with 72% of respondents anticipating that talent constraints will become a major obstacle to growth.

To address these issues, chief financial officers (CFOs) can play a crucial role as strategic partners to CEOs, helping to convert efficiency gains into lasting value through targeted workforce development and capital allocation. As the energy landscape continues to evolve with bipartisan legislation aimed at speeding up permits for projects like solar farms and power lines, businesses must navigate these complexities while adapting to shifting market conditions.