What is the future of work in the current decade?
In today’s article we’re discussing some alarming global talent shortage trends and providing our input on the topic.
According to the Korn Ferrie institute’s report there’s an impending talent crunch worldwide for the period 2020-2030. Study is modeling the gap between future labor supply and demand, covering over 20 major economies worldwide. The model focuses on three knowledge-intensive sectors within each market as critical drivers of the global economic growth: Financial & Business services; Technology, Media, Telecommunications (TMT); Manufacturing, and also examines the remainder of each economy.
The study uses available data to forecast shortages for highly skilled, mid-skilled, and low-skilled workers to reveal an imminent talent crunch, using level of education as a commonly accepted proxy for skills, as well as taking into account forecast productivity gains.
Highlight 1: Global TALENT DEFICIT of 85.2 million skilled people by 2030
By 2030, economics will experience global deficit expected for skilled workers. This will result in a global talent shortage of more than 85.2 million people, where 21 % of this deficit is for high skilled workforce.
This talent shortage could reach $8.452 trillion in unrealized annual revenue by 2030. (Equivalent to the combined GDP of Germany and Japan; while only US will reach estimated loss comparable with 6% of their entire economy).
Highlight 2: New technology won’t be as productive as desired without the right lalent to work with it
Technologies will reshape the future of work. However, organizations will be unable to leverage it without the right talent. Most of CEOs believe technology will be their chief value generator, BUT Technology cannot deliver the promised productivity gains if there are not enough human workers with the right skills. Jobs won’t disappear but will evolve and available labor may not match sectors’ needs.
Highlight 3: Training, developing & upskilling the workforse must be a top priority for businesses and governments in order to navigate through the upcoming talent crunch
Governments and organizations need to seriously consider how to educate, train, and upskill their existing workforce. Smart organizations are building their own talent pipeline, hiring graduates, partnering with colleges and local workforce consultants, build in-house training centers and academies for career / professional development, driven by constant learning by both workers and organizations, beyond the traditional learning and development.
Companies must act now to mitigate the talent crunch. Employees’ development, recruitment, compensations and HR operations must become a top priority to support sustained growth.
Highlight 4: Expansion of talent pools by partnering with reliable outsourcing vendors in prospective locations
Proactive Organizations already expand the talent pools via multiple sourcing channels, engage the right outsourcing vendors and create local and regional sourcing partners via efficient engagement models. It is a crucial factor to leverage from several locations providing access to extended labor pools and methodologies of employees’ development.
Best way to mitigate the initial risk and labor market challenges is via trustworthy outsourcing partner who will support, consult and contribute to business and the dynamic needs ahead.
As we’ve already said the gap between talent supply and demand is forecasted in each of the 20 economies as a whole and within three major knowledge-intensive industries:
- Financial & Business services (including insurance and real estate)
US major sectors face a negative prognosis:
For example the US financial services sector will suffer due to lack of talents with $435.69 billion in projected unrealized economic output, equal to about 1.5% of the country’s entire economy.
Another major sector – Technology will reach labor-skills shortage of 4.3 million workers by 2030.
The only positive forecast (for now) – INDIA:
India is projected to have a skilled-labor surplus of around 245.3 million workers by 2030. The only economy estimated with surplus mainly thanks to the country’s vast supply of working-age citizens and government programs to boost workers’ skills.
The rest of the economies still have the chance to mitigate the risk by making their talent strategy a key priority and taking steps from now on to educate, train, and upskill their existing workforces – in-house or/and via reliable outsourcing partner.
Now, let’s have a look at the global trends sector by sector:
1. Financial & business services – global forecasts in short:
- Three economies among the major twenty (the United States, China, and Germany) will make up almost 40% of the total financial and business services worker deficit at Level A workers by 2030
- UK facing a talent shortage equivalent to a 1/5 of its sector workforce by 2030.
- The UK, United States, Singapore, and Hong Kong – home to some of the world’s leading financial centers – will experience a combined deficit of 2.6 million Level A workers by 2030
- Top 5 financial centers (United States, China, the United Kingdom, Germany, and France) – could fail to generate $870.47 billion by 2030
- Japan, the world’s sixth biggest financial center, could fail to generate $113.62 billion in 2030 (18% of sectors value)
N.B. India is the only country expected to have a surplus of highly skilled financial and business services labor by 2030. The only place where a supply of Level A workers will grow faster than demand between 2020 and 2030 is there.
1.1 Financial hubs in Asia-Pacific are about to get hit hard
- The five economies with most significant talent shortage as a percentage (Hong Kong, Australia, Japan, Singapore, and Indonesia) are all found in the Asia-Pacific region
- For Hong Kong – the unrealized output is equivalent to 39% of its entire economy
- Australia could see $587.56 billion in unrealized output due to skills shortages, equivalent to more than a quarter of its entire economy
1. Technology, Media, Telecommunications (TMT)
- By 2030 the labor-skills shortage will reach 4.3 million workers and unrealized output of $449.70 billion
- USA is expected to lose $162.25 billion by 2030 due to sector skills shortages
- China (new world tech center) could fail to generate $44.45 billion of revenue by 2030 due to skills shortages
- UK will fail to realize almost 9% of TMT sector potential revenue due to skills shortages
- India is again the only country expected to have a skilled-labor surplus, projected to reach 1.3 million workers by 2030
Despite the short-term surpluses, the trend is negative in the upcoming years. Automation can get great gains, but not without the people who can innovate, create, and manage (the level A workers). Jobs won’t disappear but will evolve.
- Global labor skills shortage of 7.9 million workers and unrealized output of $607.14 billion by 2030
- China and Russia are driving a global surplus of highly skilled manufacturing workers until 2020. However, by 2030, all countries except India face deficits in highly skilled labor in the sector.
- US manufacturing economy already struggles reaching a 2030 shortfall of 383,000 workers (10% of highly skilled workforce)
- Japan could fail to realize $194.61 billion by 2030 due to severe labor shortages in this sector (or equal to 3% of entire country economy)
- India, yet again, is the only country where the supply of highly skilled labor is growing faster than demand, with a projected Level A labor surplus by 2030 of more than 2.4 million workers.
Europe, Middle East, EMEA and Africa
The overall labor skills shortage of this region is projected to reach 14.3 million people and unrealized output of $1.906 trillion by 2030.
Europe is about to suffer severe skills shortages, with unrealized output of the EU countries (in the study) totaling $1.323 trillion by 2030. Again a prerequisite for this is the talent deficits particularly in the sectors of financial and business services. The biggest challenge – level A workers.
- UK & Germany both expect the biggest shortage – almost 5 million workers by 2030. Germany may fail to generate $629.89 billion of revenue, equivalent to almost 15% of its economy
- London’s dominance of the financial markets may still be challenged by the talent crunch, resulting in nearly $90 billion of unrealized output
- France and the Netherlands, the other EU countries in the study, can also expect Level A (highly skilled) talent shortages – the sectors of financial and business services are again hit the hardest. France, due to talent deficits, may fail to generate $214.56 billion by 2030
The future of work doesn’t just require different skill sets, but entirely new ways of working. Successful organizations are moving to more natural, flexible relationships with their employees, based on mutual respect and empowerment.
To secure the future, companies must look to address the talent crunch now. Thesis of short-term issues with talent shortage (2020- 2023) are simply incorrect.
Over two thirds of firms globally have reported losing a preferred candidate thanks to an overly long hiring process, while number of people to occupy roles are significantly lower than the open vacancies.
In Bulgaria demand is twice bigger than available talent pool in 2021- 2022.
Talent demand is huge, continuously growing and it will outstrip the supply in the long term. This makes the recruitment process, sourcing channels, talent development strategies a critical factor. Without the right HR know-how, capability market knowledge, understanding of market changes, employment trends and other complex factors, organizations are going to face a challenging time in the coming years.
Key steps to minimize the negative impact are:
- dedicated attention to improve the recruitment process
- utilize multiple capability markets
- improve engagement models
Last but not least business organizations shall rely even more on the collaboration with outsourcing partners as they are a huge contributor in risk mitigation and talent pool development.