By 2035, higher skilled jobs and healthcare roles set to offset the millions of jobs displaced by automation and artificial intelligence

A number of megatrends and events are expected to shape the world of work in the coming decades. These include factors such as Brexit and the COVID-19 pandemic, as well as longer-term trends such as the adoption of technology in the labour market, and major demographic and environmental change. Our literature review published earlier in the year, highlighted that these megatrends are expected to change the role workers play in the labour market, both in terms of the jobs they do and the skills they need, with a greater demand for skills that complement the new technology.

Understanding the types of skills needed most for work in the future, and how this demand will be met is essential. However, the nature of this transformation and its implications for the workforce are not currently well understood. These gaps in the evidence need to be addressed. This is because without evidence-based long-term planning to help affected workers re-skill/upskill, and help young people develop the right skills while in education, there is a real risk the current skills mismatch will be exacerbated.

Looking to the future

The National Foundation for Educational Research (NFER) is leading a strategic research programme called The Skills Imperative 2035: Essential skills for tomorrow’s workforce. The work, funded by the Nuffield Foundation, aims to identify the essential employment skills people will need for work by 2035. 

The NFER has just released its second suite of papers, which report the outcomes of a series of future labour market projections produced by The Institute for Employment Research (IER) at Warwick University, working in collaboration with Cambridge Econometrics (CE). They highlight the potential impact of these megatrends on the size and composition of the labour market in 2035.

The structure of the labour market is changing

The projections show the economy is changing slowly, but steadily and inexorably in favour of the service sectors. By 2035, the structure of the labour market will have changed substantially. This is true across the range of possible future labour market scenarios considered in this research programme and they imply significant changes in the skills required to succeed in the future labour market of 2035.

There will be more women in work. There are projected to be 2.6 million new jobs by 2035, the majority of which will be taken by women. The projections also show that jobs most vulnerable to automation are currently mainly held by men.

The projections indicate that two million jobs are likely to be displaced due to the adoption of new technologies in the labour market by 2035. Job losses are expected to be focussed among blue collar manual occupations, especially in areas where automation is possible, as well as among less skilled white-collar non manual occupations. This is a key group who are likely to need re-skilling so they can find jobs elsewhere.

However, far from being all doom and gloom, faster technological change and improvements to the provision of social services will also create many more new job opportunities. These will offset the jobs displaced due to the adoption of technology, which will offset these losses, in particular in higher skilled jobs and healthcare roles. 

There will still be many opportunities, even in declining occupations

The majority of new jobs created by 2035 – nearly 90 per cent – will be in professional and associate professional occupations. This is mainly due to a considerable rise in health and social care associate professionals. In particular, science, research, engineering, and technology professionals will experience the largest net increase in job openings (+0.90 million) between 2020-35, followed by health and social care associate professionals (+0.60 million). 

In contrast, there will be reductions in employment levels for administrative and secretarial jobs and skilled trades. In particular, elementary administration and service occupations are expected to see the largest employment decline by 2035 (-0.52 million), followed by secretarial and related occupations (-0.20 million). 

Despite some occupations contracting, the projections show that the level of replacement demand – that is, job openings created by workers leaving the workforce for reasons such as retirement, caring, etc., are generally much larger than net changes in occupations. The level of replacement demand, suggests the future labour market will continue to be very dynamic, creating new employment opportunities even in declining sectors and occupations

Employment will increase in all sectors except for manufacturing

Construction is the highest growing sector because of continued demand for housing to address UK-wide shortages for a population with growing incomes (who might be looking at leaving multigenerational family homes or equipping their homes with the latest energy saving solutions and technologies in the future) and anticipated demand for new decarbonisation infrastructure.

However, employment in manufacturing is projected to decrease by 286,000 jobs over the period 2020-35, which is nearly 11 per cent lower than in 2020. Manufacturing’s share of total employment in the economy is forecast to fall from 7.5 per cent in 2020 to 6.2 per cent in 2035, continuing the long-term downward trajectory. Although output in manufacturing is projected to continue to rise, continued increases in productivity are predicted to lead to a steady decline in employment in this sector.

A more qualified workforce

The workforce is also predicted to become increasingly well-qualified. More young people are anticipated to continue their education and acquire more and higher-level qualifications, replacing those who are leaving the labour market who are generally less qualified. As a result, by 2035, the number of economically active people with a postgraduate degree level and equivalent (QCF level 7-8) is projected to rise to about 8.3 million, compared to 4.7 million in 2020. At the same time, the share of people who are economically active in the UK who are unqualified (QCF 0) will continue to fall and is expected to represent only a small minority of the workforce by 2035 (<2½ per cent).

The need for co-ordinated action led by Government

Given the nature of the challenges presented by these projected labour market changes, there is an essential need for co-ordinated action led by Government. We recommend that a cross-cutting body is established, reporting directly to the Cabinet Office. This body would be responsible for working effectively across Government departments, with employers and other relevant stakeholders in order to ensure that appropriate strategies are developed to (i) understand the implications of these changes in more detail and (ii) set out how the Government, employers, training providers and the education system should respond, drawing on views and expertise from across and outside Government.

Moreover, industry leaders and representative bodies need to work with regional and local partners, including Mayoral Combined Authorities and local authorities, to assess what these projections mean for employment and output growth in their sectors or industries. These groups will also need to consider the business-critical occupations they will need in future and start planning what actions they need to take. 

As our findings indicate there will be an increase in employment opportunities for highly skilled professionals and associate professionals, unless action plans are developed and implemented before long, there will be a shortage of skilled professionals available to fill these new opportunities.

What happens next

On the basis this work and the outcomes of the previous literature review, we are now examining how the demand for skills needed by employers will change over the next decade and identify which employment skills will be most needed. We are also assessing what the potential supply of these essential employment skills will be in future, where skills gaps are likely to arise, which groups are most at risk of not having the essential employment skills needed and consider what actions are needed to support such groups to transition to other opportunities.