McKinsey: By 2030, nearly 140,000 Croatian workers will need to change professions

Nearly 140,000 Croatian workers will need to change professions by 2030, one of the conclusions of the analysis  "The Future of Work in Croatia – Transforming the Croatian Workforce in the Age of Automation and Digitalization", published on Wednesday by the consulting firm McKinsey&Company.

In the analysis, conducted by McKinsey&Company Adriatic in collaboration with the research institute McKinsey Global Institute, it is stated that approximately 340,000 jobs will disappear due to automation and trends triggered by the COVID-19 pandemic, but they will be replaced by almost the same number of new jobs in new professions and growing industries, as well as due to a general increase in productivity. 

– However, while net demand for labor will remain virtually unchanged, there will be significant changes in the structure of professions. Therefore, by the end of the decade, nearly 140,000 workers in Croatia will need to change professions to remain employed –  emphasized McKinsey.

The analysis showed that by 2030, six percent of the total number of working hours in Croatia will shift from jobs requiring physical skills for task resolution to jobs requiring cognitive, social, emotional, and technological skills. Specific skills, such as those needed for operating devices and equipment and for simple data entry and processing, are likely to experience the largest decline in demand in the share of employed by 2030. 

This is expected, as activities requiring physical strength and skill, as well as skills for data collection and processing, are something that can be very easily automated, noted McKinsey.

They emphasized that achieving the full economic potential brought by automation and digitalization, as well as maintaining the existing level of employment, will require cooperation from all stakeholders to find ways to enable the workforce in Croatia to transform and acquire the skills that will be in demand in the future.

McKinsey noted that the analysis takes into account the composition of the workforce across the country, combined with the expected speed of automation adoption, based on available technologies and the economic feasibility of their implementation. 

– When the potential speed of automation is viewed from the perspective of trends triggered by the COVID-19 pandemic, Croatia will achieve an automation adoption rate of about 22 percent by 2030. In other words, activities currently consuming about 22 percent of the total number of working hours of employees in Croatia will be automated by the end of the decade. The adoption of automation will vary from sector to sector – manufacturing, wholesale, business functions that support administration, and public administration – will be areas with the highest rate of automation adoption –  wrote McKinsey.

Necessary Improvement in Productivity

Croatia must improve its productivity to achieve sustainable economic growth and income growth across all segments of the population. This is particularly important as the population of Croatia is aging, they emphasized. McKinsey also pointed out that automation is an opportunity to achieve Croatian national interests. 

– Companies, if supported by appropriate policies and investments in skill development, can develop new services and products, increase productivity, and create new and better-paid jobs. By embracing the changes that will occur in the world of work over the coming decade, Croatia can avoid structural unemployment and create new national wealth in a way that promotes social inclusion –  they stated.

Accelerated digitalization was noted as potentially the most important new driver of growth. 

"The Croatian digital economy, which encompasses all digital activities across all economic sectors, now accounts for approximately five percent of GDP, equivalent to a value of 2.4 billion euros. By 2025, the digital economy in Croatia could reach 11 percent of GDP, meaning it will contribute a value of 8.3 billion euros to the overall economy," is one of the conclusions of the analysis.

Automation and digitalization should not happen too quickly or too slowly

Although automation and digitalization present an opportunity to create a more productive and competitive Croatian workforce, McKinsey warned that they also bring several challenges, particularly in terms of job loss and the development of future skills. Thus, as in other EU countries, all stakeholders in Croatia must balance the pace of automation and the acquisition of new skills if they want the country to benefit from automation and the introduction of new technologies. 

– If automation and digitalization occur too quickly, it may happen that new jobs created will remain unfilled. This could potentially lead to worsening income inequality. On the other hand, if automation and digitalization occur too slowly, it could harm Croatia’s competitiveness and hinder economic growth – warned McKinsey.

The director of McKinsey & Company Adriatic Tomislav Brezinščak stated that Croatia can seize the opportunities arising from automation, manage risks, and ensure that the benefits are distributed as fairly as possible to as many residents as possible. 

– Efforts in this regard should include strong mechanisms for coordinated action. Companies and public institutions can begin strategic workforce planning to bridge the gap of people with necessary skills and create a workforce that can cope with future challenges. Companies can also take steps to assist workers who lose their jobs, thereby complementing the efforts of government institutions in protecting the most vulnerable and promoting inclusive economic growth. Educational institutions can collaborate with other stakeholders to set guidelines and frameworks for developing new skills among employees and upgrading existing training models to address the issue of skill shortages – said Brezinščak.