A recent study from McKinsey has revealed how AI could reshape the U.S. job market and boost productivity growth, but not so much in Europe.

European economists are very much worried about productivity growth, especially after Christine Lagarde, the European Central Bank president, issued the stark statement last month that "It's just mind boggling that productivity [growth] in the United States between 2019 and now has been 6%. In Europe, 0.6%.".





The McKinsey paper, titled “A new future of work: The race to deploy AI and raise skills in Europe and beyond” points to structural factors that might make this productivity divide even more pronounced in the decades ahead, partially due to the inflexibility of the job market in Europe and the lack of talents.

According to the study, each side of the Atlantic will need as many as 12 million people to transition to different types of jobs over the next half-decade. The sectors that will need the most job transitions up til 2030 will be Health Aide Industry (3.3 million), STEM Professions (2.3 million), Health Professionals (1.5 million), while other areas will lead to significant decreases - Office Support (-5 million), Customer Services and Sales (-1.7 million).

By 2030, the study also predicts that up to 30 percent of working hours could be automated in the US and Europe, boosted by Gen AI and Agent technologies, forcing millions to make occupational transitions.

For Europe, requiring such an increase in the rate of people being able to move to different jobs will be much more difficult than for the US, partly because of the inflexibility of the job market. According to the study, the US job market is more prepared for higher job rate transitions as "1.2% of the U.S. workforce shifts jobs each year, whereas 0.4% of the European workforce changed occupations annually between 2016 and 2019".

The paper warns that the 3% projected productivity increase in the EU could be in jeopardy, and that "a slower adoption and fewer worker transitions would mean 0.3% productivity growth, closer to the current growth rate in Western Europe."

The paper concludes that while "Automation technology has the potential to revive productivity, allowing economies to solve most of today's labor market challenges”, …, “Europe and the United States are not on the same trajectory for capturing this productivity growth: most AI-related innovations are developed in the United States."

Historically, Europe has been slower to adapt its economy to new technological innovations, preferring to regulate them more heavily due to concerns about labor-displacing technology.

We know that Gen AI Technologies have a greater potential to disrupt the job market than other past technologies. Could the required rapid transition lead to a greater economic (and social) gap between Europe and the US in the decades ahead?