The future of work in America: People and places, today and tomorrow

Here is a brief excerpt from a special report from the McKinsey Global Institute, written by Susan Lund, James Manyika, Liz Hilton Segel, André Dua, Bryan Hancock, Scott Rutherford, and Brent Macon, and featured in the McKinsey Quarterly, published by McKinsey & Company. To read the complete report, check out other resources, learn more about the firm, obtain subscription information, and register to receive email alerts, please click here.

To learn more about the McKinsey Quarterly, please click here.

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The US labor market looks markedly different today than it did two decades ago. It has been reshaped by dramatic events like the Great Recession but also by a quieter ongoing evolution in the mix and location of jobs. In the decade ahead, the next wave of automation technologies may accelerate the pace of change. Millions of jobs could be phased out even as new ones are created. More broadly, the day-to-day nature of work could change for nearly everyone as intelligent machines become fixtures in the American workplace.Until recently, most research on the potential effects of automation, including our own, has focused on the national-level effects. Our previous work ran multiple scenarios regarding the pace and extent of adoption. In the midpoint case, our modeling shows some jobs being phased out but sufficient numbers being added at the same time to produce net positive job growth for the United States as a whole through 2030.

The day-to-day nature of work could change for nearly everyone as intelligent machines become fixtures in the American workplace.

But the national results contain a wide spectrum of outcomes. A new report from the McKinsey Global Institute, The future of work in America: People and places, today and tomorrow (PDF–4.41MB), analyzes more than 3,000 US counties and 315 cities and finds they are on sharply different paths. Automation is not happening in a vacuum, and the health of local economies today will affect their ability to adapt and thrive in the face of the changes that lie ahead.

The trends outlined in this report could widen existing disparities between high-growth cities and struggling rural areas, and between high-wage workers and everyone else. But this is not a foregone conclusion. The United States can improve outcomes nationwide by connecting displaced workers with new opportunities, equipping people with the skills they need to succeed, revitalizing distressed areas, and supporting workers in transition. Returning to more inclusive growth will require the combined energy and ingenuity of business leaders, policy makers, educators, and nonprofits across the country.

Section 1: Local economies have been on diverging trajectories for years

Cities and counties across the United States are entering this period of technological and labor market change from different starting points. We used a mathematical clustering method to categorize all US cities and counties into 13 archetypes based on their economic health, business dynamism, industry mix, labor force demographics, and other characteristics (download the full list of locations in each segment). This approach reveals that the differences between local economies across the country are more nuanced than a simple rural-urban divide or regional variations. Our 13 archetype can be grouped into five segments with common patterns:

o Urban core. Twenty-five megacities and high-growth hubs account for roughly 30 percent of the US population and are the nation’s most dynamic places. The high-growth industries of high tech, media, healthcare, real estate, and finance make up a large share of these local economies. These cities have higher incomes, faster employment growth since the Great Recession, high net migration, and younger and more educated workforces than the rest of the country—but also high levels of income inequality. Many are experiencing congestion and affordable housing shortage.

o Urban periphery. These 271 counties are the extended suburbs of US cities. Home to 16 percent of the US population, they also have seen strong net migration, attracting people moving out of cities in search of more space. In most of these counties, a large share of the population works in nearby urban areas. Healthcare, retail, logistics, and local services are large parts of these local economies.

o Niche cities. These 56 much smaller towns and cities, home to 6 percent of the US population, have found success by building on unique features. In college-centric towns, a major research university dominates the local economy. Silver cities, many of which are in Florida, are fast-growing retirement destinations. Small powerhouses, such as Bend, OR, and Provo, UT, have built economic clusters around technology and other industries; they have the fastest economic growth rates and second-highest rate of net migration across our archetypes. All niche cities are attracting both workers and companies with a low cost of living and a high quality of life.

o Mixed middle. Almost one-quarter of the nation’s population is found in these 180 stable cities (such as Cincinnati and St. Louis), smaller independent economies (such as Lancaster, PA, and Winston-Salem, NC), and the manufacturing hubs that we call “America’s makers” (such as Rockford, IL, and Oshkosh, WI). Neither thriving nor in distress, these places have slower economic and job growth, higher unemployment, and workforces with slightly lower educational attainment than those in urban core cities. Some of America’s makers are on an upward trajectory, while others are in decline.

o Low-growth and rural areas. This group, which includes 54 trailing cities and more than 2,000 rural counties, is home to one-quarter of the US population. Many trailing cities, such as Flint, MI, and Bridgeport, CT, are former industrial towns with declining economies. Rural counties encompass somewhat better-performing places (Americana) and struggling areas (distressed Americana). In these segments, populations are older, unemployment is higher, and educational attainment is lower than the national average. Things are somewhat brighter in the 192 rural outlier counties that have found some success with tourism or mining and energy.

A new report maps local labor markets today and weighs the impact of automation on people and places.
The economic performance of these segments has been diverging for decades, and that trend accelerated after the Great Recession. While all areas of the country lost employment during the downturn, job growth since then has been a tale of Americas. Just 25 cities (megacities and high-growth hubs, plus their urban peripheries) have accounted for more than two-thirds of job growth in the last decade (Exhibit 1). By contrast, trailing cities have had virtually no job growth for a decade—and the counties of Americana and distressed Americana have 360,000 fewer jobs in 2017 than they did in 2007.
Population growth has also tilted toward urban America. High-growth hubs, small powerhouses, and silver cities have grown by more than 10 percent since 2007, and most urban peripheries are also growing. Residents have been moving out of megacities, stable cities, America’s makers, and trailing cities. Immigration has more than offset domestic population losses in megacities and stable cities, but populations in rural Americana counties grew by less than 1 percent—and distressed Americana is shrinking.Growing economic divergence might have been expected to prompt more people to move from distressed areas to thriving job markets. Yet geographic mobility in the United States has eroded to historically low levels. While 6.1 percent of Americans moved between counties or states in 1990, only 3.6 percent did so in 2017.
Furthermore, when people in rural segments and less vibrant cities do move, it is usually to places with a similar profile rather than to megacities or high-growth hubs (Exhibit 2). 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.

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Here is a direct link to the complete article.

Susan Lund is a partner of the McKinsey Global Institute, where James Manyika is chairman and a director. Liz Hilton Segel and André Dua are senior partners in McKinsey’s New York office. Scott Rutherford is a senior partner in the Washington, DC, office, where Bryan Hancock is a partner. Brent Macon is a consultant in the Atlanta office.

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