MGI research highlights technology’s role in improving societal well-being and smoothing disruption

Artificial intelligence, digital platforms, automation, and other technologies can bring significant benefits to our well-being beyond GDP, including in areas such as health and longevity, and equal opportunities. While the transition to a technology-led future in which we harness tech for good is disrupting the economy and the workplace, the deployment of these technologies could also soften some of those transitional challenges, according to a new discussion paper from the McKinsey Global Institute (MGI).

Technological innovation has improved lives in the past, including by raising living standards, reducing working hours, improving health, and making goods and services cheaper and more accessible. In its latest research on the impact of technology on business, society, and the economy, MGI draws on a library of around 600 tech applications to examine the potential of the new generation of technology to improve lives. 

The discussion paper, ‘Tech for Good: Smoothing disruption, improving well-being’, also makes a first attempt to estimate the value of such welfare gains to the economy and society beyond GDP. 

Boosting welfare through innovation led growth 

A key finding is that businesses, society, and the economy could all gain if adoption of these technologies is focused on innovation to drive growth and augment human skills and is accompanied by careful management of the workforce transitions related to technology diffusion. In such a case, the potential boost to welfare – the sum of GDP and additional well-being components, such as health, leisure, and equality – could be between 0.5 and 1% of additional welfare growth per year in Europe and United States by 2030. This is about double the growth from technology under an average scenario, MGI finds. 

However, other scenarios that pay less heed to innovating or to managing disruptive transitions from tech adoption could slow income growth, increase inequality and unemployment risk, and lead to fewer improvements in leisure, health, and longevity.

“Technology has been a significant contributor to welfare growth in Europe and the United States in the past 40 years,” said MGI director Jacques Bughin, who co-led the research. “A major insight from our work is that this positive trend will continue only if businesses adopt frontier technologies as a way to boost innovation-led growth rather than focusing purely on cost efficiency and labour savings through automation. Managing the transitions for workers resulting from tech adoption will also be essential.”

For all its potential, technology that enhances well-being is a tool kit that cannot address all the issues on its own, the paper finds. Its diffusion will need to be actively accompanied by transition management that increases workers’ ability to find jobs and equips them with new skills. Additional measures may be needed, potentially including support for wages.

Co-author Eric Hazan, a McKinsey senior partner in Paris, said: “Technology intrinsically is neither good nor bad – what counts is how it is used. We looked at a broad range of applications and found tremendous potential for the latest technologies to be used for doing good, in areas ranging from drug research and education to improving equal opportunities and matching people with jobs. Business has an especially important role to play here, including in retraining workers and helping improve labour fluidity, as well as focusing on innovation. If companies adopt an approach of enlightened self-interest in the face of AI and automation, it will bring benefits for society, the workforce – and be good for business.”

A library of use cases and novel welfare calculation

For the research, MGI compiled a library of around 600 use cases of technology applications that contribute to well-being across six areas: job security, material living standards, health, education, environmental sustainability, and equal opportunities. About 60% of these cases make use of AI to some extent. Cases include online training programs and job-matching digital platforms to help workers improve skills and find employment; mobile payments that improve financial access; online marketplaces that reduce prices of goods and services; adaptive-learning applications to better prepare young people for the labour market; clean technologies for environmental sustainability; and AI-powered drug discovery and personalised medicine for longer and healthier lives.

MGI also developed a comprehensive welfare model of technology adoption that quantifies technology impacts beyond GDP. The model incorporates critical dimensions of inequality, risk aversion to unemployment, leisure, and health and longevity, building on recent economic literature on welfare and well-being. 

“A growing body of academic research is looking at ways of measuring welfare and well-being beyond the usual yardstick of GDP,” said Tera Allas, a senior fellow at the McKinsey Center for Government and co-author. “With this paper, we hope to contribute to that debate, which we believe to be highly relevant in this time of technological disruption.”

While the paper aims to stimulate discussion about the opportunities and challenges surrounding technology adoption and how technology itself could help mitigate negative outcomes, the authors caution that this is a developing area of economics. More research will be needed to improve the methodology and refine the insights. 

Nonetheless, some clear priorities for government and business emerge from the research. The public sector can help drive innovation and improve welfare by supporting research and development including in health, spurring technology adoption through procurement practices and progressive regulation, and ensuring retraining and transition support for workers coping with workplace disruption. 

Business can focus technology deployment on new products, services, and markets, augment the skills of the workforce including with technological solutions, and increase workers’ opportunities by creating new career paths, among other steps. They can also prioritise the large number of technology solutions we found to simultaneously improve companies’ profitability and the outcomes for society.

The McKinsey Global Institute (MGI), the business and economics research arm of McKinsey & Company, was established in 1990 to develop a deeper understanding of the evolving global economy. Our goal is to provide leaders in the commercial, public, and social sectors with the facts and insights on which to base management and policy decisions. 

The partners of McKinsey & Company fund MGI’s research; it is never commissioned by any business, government, or other institution. The Lauder Institute at the University of Pennsylvania ranked MGI the Number 1 private sector think tank in the world in its 2017 Global GoTo Think Tank Index.