The future of work is constantly evolving, and COVID-19 has accelerated this phenomenon. The pandemic has not only led to the rise of remote work and growth in the e-commerce market but also facilitated the adoption of artificial intelligence (AI) and automation. How do these trends affect occupational transitions? In this episode, we discuss what all this means for Asia’s workforce and how companies and policy makers can support employees through these seismic changes. An edited transcript of the podcast follows. For more conversations on the Future of Asia, subscribe to our podcast on McKinsey.com.
Oliver Tonby: You are listening to the Future of Asia Podcast by McKinsey & Company. I am Oliver Tonby, your host and chairman of McKinsey Asia. In this series, we feature leaders from across the region to discuss the forces, the opportunities, and the challenges that are shaping the future of Asia.
Today’s topic is the future of work after COVID-19. I am joined by two outstanding colleagues. Anu Madgavkar is a partner at McKinsey Global Institute and based out of Mumbai. She also happens to be the coauthor of the new report called The future of work after COVID-19. I’m also joined by Maya Horii. She is a partner in Tokyo, and she leads the Public Sector Practice there, and she is also a hub leader for our Organization Practice. Welcome Anu, welcome Maya. I would like to warm up. Before we get into the topic at hand, I would love to hear from you. 2020 was a tough year for all of us. As you look forward into 2021, what do you most look forward to? Maya?
Maya Horii: Sure. Thanks for having me, Oliver. The thing that I would love to do this year is to go back to the US. I lived there for 12 years and then came back to Japan three years ago. And now, I have not had the chance to travel back for about a year-plus. So I’d love to go back and see my friends and family there.
Anu Madgavkar: Oliver, I think 2020 has been a tough year. But in a strange kind of way, it’s also enabled us, through technology, like Zoom, to be a lot more connected with people around the world and have many more conversations. So while I’ve enjoyed that, I’m looking forward to a little more balance on the other side, which is that it would be nice to sit in the same room and talk to people that you know or don’t know about things that are interesting.
Oliver Tonby: Exactly—looking forward to that human connection. So thank you for being on, ladies. I suggest we dig straight in. Now, the topic at hand is how is work going to change after COVID-19. Or at least as we now look forward, it might not even be after but with COVID-19. Let me start with you, Anu. How is COVID-19 going to change the future of work in the longer term?
Anu Madgavkar: The future of work has been constantly evolving, but in the past this was mainly due to technological forces or economic forces. But I think with the COVID-19 pandemic, this has been like no previous episode that we’ve seen. What’s different about it is that it has brought very sharply into focus the notion of physical proximity and made that a factor that determines how work will be reshaped, and the new kinds of roles that will grow in demand or decline in demand— the physical dimensions of work and where we work. And given this, we think that there are three trends that have been accelerated and further fueled by COVID-19: remote work, digital channels, and automation. And as an impact of these, we’re actually going to see a lot more occupational transitions required in the future—about 100 million more across the countries we’ve looked at. So it’s pretty significant. And these challenges of reskilling people to meet these new and growing occupations are going to be more challenging than they were in the past. So it’s a tougher future. But if we manage to help workers make it through this, it could be a brighter future for businesses as well as workers.
Oliver Tonby: Thank you. Let’s double-click on some of this. You talked about three trends. You said remote work, you said digital channels, and you said automation. Let’s start with the first trend, which is remote work, or virtual meetings. So say a little bit more about that. Anu, why don’t we go first to you.
Anu Madgavkar: Remote work spiked during the pandemic pretty much across the board. While it was out of sheer necessity, what it has also revealed to workers, as well as businesses, is that there are longer-term benefits that include flexibility and greater ease of work in some ways. So our research actually suggests that if you look at work from a very granular perspective of what tasks and activities are people engaged in, we find that as much as 20 percent to 25 percent of the workforce could actually work remotely in the long term as well. And this is not the entire workforce, clearly, but nevertheless it’s four to five times the level of remote work that we saw prior to the pandemic. So while remote-work levels will fall, they could still be four to five times what they used to be in the past, and this has important implications for the workforce, for the way companies organize their workspaces, as well as for the future of cities, suburbs, and so on.
While remote-work levels will fall, they could still be four to five times what they used to be in the past, and this has important implications for the workforce.Anu Madgavkar
Maya Horii: Maybe I can jump in here and then share a bit about the case of Japan. So the government was trying to promote remote work for quite some time—for decades. And, frankly, it feels like this pandemic has really moved the needle, over the course of a few months, that we weren’t able to achieve in the previous decade. It’s actually interesting because we were supposed to have the Olympics in Japan, and that was going to be the main reason why we needed to move more toward remote work. But I actually see that there are two different kinds of companies. There’s a group of companies in Japan which have really embraced this as an opportunity to move more toward remote working, more flexible working, and embrace the change—and actually, even further, to say, “We want to optimize our real-estate footprints or we want to introduce more of the job-description-based workforce,” as opposed to employees just belonging to the organization. And that has been a significant progress that I see. But at the same time, and because the pandemic hasn’t been as significant or severe in Japan compared to maybe some other countries, I see some companies are reverting to the old ways. So in some situations, they are not taking advantage of potential changes that they could have introduced this way. And then, I think this division could be interesting in a potential future difference on the impact of COVID-19.
Oliver Tonby: Let’s stay on remote work for a second. What you’re describing—both of you, but also, Maya, what you just said—how are employees reacting to this? How do you think they will react to this? Some of this sounds a little bit scary, to be honest, the way you’re describing it.
Anu Madgavkar: Well, I think people are learning through experience, and one of the things that we are at least receiving as feedback, from both employees and employers, is that this is not something you can paint with a broad brush. It’s not that you can go permanently to 100 percent remote. There are very specific types of work that lend themselves to greater efficiency if we work remotely. But, equally, there are other types of work which are actually much more effectively done face to face—for example, onboarding new employees into an organization or providing a certain intensive level of coaching and feedback or negotiations and closing a sale when the customer or the client is unfamiliar to you. These kinds of things do benefit from face-to-face interactions. So for employees as well as employers, I think you have to take it with a scalpel. It’s not that you can take off large parts of your workforce and say, “Everybody works remotely.” That worked well during the pandemic. In the longer term, you have to be much more granular and thoughtful and go for a hybrid model.
Maya Horii: I would add just two additional points. I’ve heard a lot about working moms, myself included, really benefiting from the fact that they don’t need to commute and they may be able to spend more time with kids. I can see my boy coming home from school and then just have a three-minute chat, which has been a big difference. At the same time, I’ve also heard from many managers who are very worried that they don’t know how to manage their employees remotely because sometimes, in Japan, especially, you have all these workers sitting in front of you, and that’s the sign of working. And then now when you are far away from them, you don’t really know what each person is doing. And especially when your objectives are not clear or the outputs are not clear, then, as managers, it’s very difficult to say whether the person is actually doing the work.
Oliver Tonby: So what I hear you saying on this first trend, which is remote work—and, frankly, it’s not so much remote work as the opportunity to have hybrid models—I hear there’s a real opportunity for companies, for individuals. But I also hear that there’s going to be a little bit of experimentation and figuring this out as we go along, because some parts of this are uncomfortable, as with all changes, but some parts of this will be comfortable. Let’s move to the second trend I heard you mentioning, Anu, which was the increase in the use of digital channels. Why don’t you kick off on that topic?
Anu Madgavkar: Digital channels have proliferated and really surged worldwide during the pandemic. We looked at a set of countries—and certainly Asian economies are right up there—we saw that e-commerce growth in the year during the course of the pandemic was two to five times more than what you would expect if you’d looked at the average growth over the past few years prior to the pandemic. We have hordes of new users, first-time adopters, and then businesses figuring out how to manage the whole delivery economy as part of e-commerce. And it’s not just shopping, it’s also a lot of online food delivery, online grocery delivery, telemedicine, and, of course, remote learning—so across the board, digital channels and interaction. Now, what that means is when that happens, we’re coming back to the future-of-work implication of that. Customers have discovered the convenience. Now, they may actually go back to restaurants, and they may go back to buying their own groceries because they like to touch and feel the apples they buy before they buy them. Nevertheless, the level of e-commerce is going to be higher in the future, and we will see a shift of jobs, of demand for labor. We’ll see that shift from in-person customer interaction to more transportation, warehousing, and delivery-based jobs in the economy. So as any service-oriented business thinks about it, this is a shift in terms of its workforce that it can anticipate.
Oliver Tonby: Maya, do you see this happening?
Maya Horii: Yeah, I fully agree. And then in Japan, the delivery workers are already a huge shortage to begin with, but I think that this has accelerated that severity even more. And then at the same time, I also see things like a cashless economy or the availability of data and new businesses or new start-ups taking advantage of those data flows. I think those are also new emerging areas that we see from this trend.
I see things like a cashless economy or the availability of data and new businesses or new start-ups taking advantage of those data flows. I think those are also new emerging areas that we see from this trend.Maya Horii
Oliver Tonby: Asia’s standing in the world has changed, and it’s clear that where the focus once was on how quickly the region would rise, the reality is now all about how Asia will lead. Keep listening to the Future of Asia Podcasts.
Oliver Tonby: Good. The third trend was automation and AI. So Anu, what does that mean?
Anu Madgavkar: We’re seeing, through the pandemic, that businesses were almost forced to embrace automation in select areas, and this is because many manufacturing plants have to think about “How do I keep the plant open, but manage with less workforce density?” So the meatpacking industry, for example—for a long time, perhaps—experienced a slow adoption of automation, just because of the nature of the work but suddenly saw a surge in that because workplace density was an issue. In other cases, there were spikes in demand for various kinds of things during COVID-19, and the only way companies could respond was through automation. But that said, we think that this is still an early stage. We’ve looked at the history of recessions over the past several decades. And what we find is that in the few years following the recession, you actually see automation levels and automation adoption rise very rapidly, because that’s the time when businesses are very keen to capture efficiencies, stabilize the cost base, and, in many ways, respond to the new economic realities post the recession.
So we expect something similar, in the case of this particular phase as well—to see automation levels rise, and we are seeing a sort of signal of that in things like robotic shipments around the world, which are starting to rise, and we’re seeing the stock prices of companies that produce automation-related products actually start rising. So there’s an anticipation that this will be a greater shift or a trend going forward than it even is now.
Oliver Tonby: So if we now pull these three trends together—remote work, digital channels, automation—when you pull them together, what is the impact of all of these trends post-COVID-19? Maya, do you want to go first on that one?
Maya Horii: Sure. To me, all of this together is, again, driving the changes that had been difficult to do before. And then, especially in the case of Japan, I think it shows up in the form of digital transformation, which we were already quite behind in to begin with. And then I think what’s important is that, finally, there’s a sense of urgency that things need to change. I think people had understood the benefit and importance of using the technology, adopting and becoming more efficient—all of that—but I feel like there was never as much of an imperative that that needed to happen right now, right away. But the COVID-19 situation has changed this.
For example, we have this culture of hanko, the stamps that we use for approvals in every company. Now people are showing up to the office just so that they can have a physical stamp on the contracts or decisions, et cetera. And the government said, “This is totally ridiculous, we’re going to get rid of that altogether,” and then that kind of leadership percolated throughout the organization.
So it’s not just about the government bureaucracies, but also companies are starting to abandon those old habits and adapting to more digital signatures and e-procurement, et cetera. So I feel that now is a moment where those kinds of big changes that maybe people resisted in the past or had been difficult in the past finally are starting to move.
Oliver Tonby: Anu, if you pull it together and look at the trends, what impact do they have? It feels like there will be a number of people whose occupations are going to be changing.
Anu Madgavkar: Absolutely, Oliver. We’ve actually quantified this in the MGI1 research. So we looked at eight countries, and across these eight there are more than 100 million workers that will need to transition and move to new occupations, not the occupations that they were in. And these numbers are particularly stacked for Asia—China, of course, with over 50 million, India with about 18 to 20 million, and Japan with six million. So these are occupational transitions. What it also means is that new skills will have to be acquired by these individuals. And the sort of gap between occupations that are growing in demand and occupations that are declining—that gap is getting wider. So individuals will need to be helped to acquire skills which are perhaps one or two rungs higher on the skills ladder than you might have thought in the past.
The sort of gap between occupations that are growing in demand and occupations that are declining—that gap is getting wider. So individuals will need to be helped to acquire skills which are perhaps one or two rungs higher on the skills ladder.Anu Madgavkar
So it is more challenging. But to pick up on Maya’s point, I think while companies realized they have an opportunity to reinvent work and reimagine it, they’ve also realized that you can be extraordinarily agile when you need to, and that’s something the pandemic has taught us. So we would hope that the same level of agility and creativity which we showed during the pandemic is also deployed when you think about how you equip the workforce for the future.
So one simple example is we need to think about redeploying or reskilling people for their whole jobs, but we should really think about slivers of skills, which are task specific. And if you just provide this skill, which might be something you can do in the space of a couple of weeks, the worker actually becomes fit for purpose in another kind of work. So adopting that very agile, very sharp type of focus to the rescaling challenge will help not just businesses respond quickly but will also help the workforce and the economy overall to move toward the higher-productivity future that’s possible.
Oliver Tonby: Yeah. And can I ask you, you said more than 100 million workers need to find a different occupation, an awesome occupational transition. By the way, that is something that’s very easy to say but sounds like something that is quite worrying and difficult for the individuals involved. I’m very happy saying that what we’re talking about here is slivers or chunks, so, hopefully, you can reskill over time. But the trends you laid out, at least two of them were present before COVID-19—automation, we’ve been talking about for a while and digital channels as well. What difference has COVID-19 made to the number of people who will see some significant change in their occupations?
Anu Madgavkar: So there is a quantitative increase, about 12 percent higher than we might have thought. But in some of the advanced economies where these trends are affecting and disrupting workforces even more, this could be as high as 20 percent more. So it’s both a greater set of transitions in terms of the number of transitions, but it’s also a greater challenge because of this widening gulf in terms of the kinds of skills. So if a retail cashier or somebody in food service is displaced, you’d have to think quite carefully about how to reskill such a person for a higher-skill occupation, which is a couple of wage levels higher than currently. So how can we train that person to be, let’s say, a health specialist of some kind or a health technician of some kind? That’s a growing occupation. But the gulf between the skills is a little bit more than it was in the past. So we’re going to have to be quite sharp about it.
Oliver Tonby: I understand. Listen, we have a few minutes left. I want to zoom in and focus on how companies and policy makers can support some of these changes. Maya, why don’t you take the first stab at that. How can companies and policy makers support these changes?
Maya Horii: I think, as Anu mentioned, that reskilling and building the capabilities to fit the new types of jobs is the most critical. And then I think many companies are trying to have that kind of rescaling program, but I don’t think it’s enough. Especially, I worry about those of older ages. Especially when we think about the Asian economy, in Japan and in many of the Asian countries it’s not the 20s and the new graduates who would need to adapt to new technical skills. I think that’s important, but that’s going to happen. But what’s going to be more challenging is people who are in their 50s and 60s who still have some more productive years to go, but their skills are no longer relevant in many of the jobs that they can fit in. I think about how to reskill that population—I think it’s very important.
And when we think about the policy makers, I would also add thinking about the SMEs.2 I think this is going to be critical because I think larger corporations will be able to find their own resources to have different types of training programs, et cetera. But then, when it comes to SMEs, they don’t necessarily have the resources, capabilities, or even understanding of how these new skills need to be developed or adoption needs to happen. So that’s where the policy makers could also play a role in figuring out the materials, the technology players, or trying to create platforms and services that could be helpful for these things.
Anu Madgavkar: I would also say that it’s time for companies to double down on diversity and inclusion measures, particularly with reference to women, because women are, like Maya talked about, there are groups which are more affected, and women are one of those groups. But also, we know that the classic time-poverty issue exists, so women find it harder actually to invest the time and resources needed to reskill themselves. So if we don’t want to regress and go backward on the journey toward greater parity in the workforce, we’ve got to pay more attention, at this point in time, to diversity and inclusion.
Oliver Tonby: That’s right. I remember on one of our previous podcasts, Anu, I think you said that women, during the pandemic, have been 1.8 times as likely to lose their jobs. So I think you’re spot on in terms of keeping an eye on diversity and inclusion. Listen, we’re going to round out. I’m going to ask each of you one last question. If you put yourselves in the shoes of many executives that are listening to this podcast, what is the one piece of advice you have for them with regard to the future of work post-COVID-19? Maya?
Maya Horii: I’d say, take this as an opportunity to make big, bold changes. I think now is the time, more than ever, to break through all these constraints and resistance.
Oliver Tonby: Anu?
Anu Madgavkar: Embrace technology—put technology first—and think about what competitive advantage technology gives you, and reimagine your business model and workforce on that basis.
Oliver Tonby: Perfect. Anu, Maya, a huge thank you to both of you. You guys are absolutely great. This was a great conversation. Thank you so much for spending the time. And to all of our listeners, thank you for joining and have a great day. Take care.
Maya Horii: Thank you.
Anu Madgavkar: Thanks.
Oliver Tonby: You have been listening to the Future of Asia Podcast by McKinsey & Company. To learn more about McKinsey, our people, and our latest thinking, visit us at mckinsey.com/futureofasia or find us on LinkedIn, Twitter, and Facebook.