Key questions for global companies
- When you make location and investment decisions, do you take into account the shift in demographic factors such as the percentage of working-age population, education level and skills base?
- Are you developing strategies to better tap the intellectual capital of older, more experienced workers?
- Are you satisfied with your efforts to promote diversity and inclusiveness, particularly in the emerging markets?
- Do you have a strategy for skills development that includes coaching and exposure to a variety of experiences?
Problems attracting critical-skill employees
Sixty-five percent of companies around the globe are having problems sourcing critical-skill talent. In the fast-growth markets, the problem is particularly acute.
Source: Towers Watson
An estimated 31% of employers worldwide find it difficult to fill positions because of talent shortages in their markets.
Summary: Never before has demographic change happened so quickly. Global employers face the challenge that, despite a growing global population, they will soon have to recruit from a shrinking workforce due to an aging population.
Despite a growing global population, the availability of skilled workers is actually shrinking, and no longer just in advanced, aging countries such as Japan and Italy. Now, some emerging markets, such as China and Russia, are also feeling a demographic pinch.
The data suggests that this is only the beginning. A “demographic divide” will soon arise between countries with younger skilled workers and those that face an aging, shrinking workforce. The war for talent will become increasingly acute in certain sectors, especially areas requiring high skill levels and more education.
More specifically, we expect:
Labor force demographics will shift profoundly
Despite projected growth in the global population from 6.9 billion in 2010 to 7.6 billion in 2020, the working-age population is expected to decline in many countries. Japan already has more people exiting the workforce than there are workers prepared to enter it.
In the European labor market, 2010 marked the first time more workers retired than joined the workforce. While this labor gap is a relatively manageable 200,000, it will surge to 8.3 million by 2030.
By the end of this decade, other large economies such as Russia, Canada, South Korea and China will also have more people at retirement age than are entering the workforce. Other, younger countries stand to profit from those trends.
One-third of India’s population is now under the age of 15.
Other emerging market economies with young labor forces such as Brazil, Mexico and Indonesia may benefit from a demographic dividend, a surge in productivity and growth as those workers join the labor pool.
But the dividend pays off only if the country provides its youth with adequate educational and economic opportunities to develop their skills.
There is a growing mismatch between the skills employers need and the talent available
An estimated 31% of employers worldwide find it difficult to fill positions because of talent shortages in their markets, reports the 2010 Talent Shortage Survey from Manpower, an international employment agency.
When it comes to attracting employees with critical skills, the task becomes even more challenging. Today, 65% of global companies and more than 80% of companies in fast-growth economies are having problems finding employees with the skills they need, according to Towers Watson, an HR consultancy.
Why can’t companies find the right talent despite the growing ranks of college-educated workers and the high unemployment in some of the best-educated markets?
Part of the answer has to do with the rising skill level needed in the evolving global economy.
Another element is the failure of educational systems to produce an adequate base of talent to meet these changing needs. Although educational access is growing worldwide, not enough students graduate with the skills desired by global employers.
“Generation U” and women to fill the skills gaps
Desperate for workers, many companies will become more accepting of diverse employees, particularly older workers and women.
The leading US advocacy group for retired people, the AARP, believes that 80% of baby boomers will keep working full- or part-time past their current retirement age.
The Pew Research Center predicts that Generation U (unretired) workers will fuel 93% of the growth in the US labor market through 2016.
Women, an increasingly well-educated source of talent, have entered the workforce in ever greater numbers in recent decades. However, their talents are still often underutilized.
This is particularly true in societies with traditional views of gender roles, including many fast-growing economies.
The talent market is increasingly global and mobile
Economic development and greater integration across markets in the past few decades have caused many talented people to explore career opportunities overseas.
Cross-border migration has grown 42% in the last decade, from 150 million to 214 million, with most of the traffic directed toward OECD countries.
Higher unemployment in developed markets has discouraged many migrants recently. Between a lack of opportunity and local hostility to migrant workers, more would-be migrants are staying home.
New legal restrictions also have created a disincentive.
As the economy recovers, however, demand for labor is expected to bounce back — and migration along with it. Some countries have taken initial steps to soften or reverse restrictive policy changes that they implemented at the height of the recession.
The dramatic growth of emerging market countries is also beginning to change migration patterns. Although developed markets are still a top choice for economic migrants, we are increasingly seeing reverse migration as well.
According to the World Economic Forum, “The return migration of highly skilled workers to their home countries is a growing trend for emerging countries.”
Employees gain more bargaining power
Over the past 20 or 30 years, the bond between company and employee has weakened, even in corporate cultures where loyalty was once prized.
Fast-changing company needs and a desire to cut costs led first to more frequent layoffs, and then to nontraditional relationships where the expectation was not decades of service, but only a few years.
In a period of high unemployment, this new social contract is an advantage for the employer. But as the market turns, skilled employees should benefit. They will want a better understanding of their employment options and a greater say in how work is assigned, assessed and rewarded.
The employer will no longer define the workplace; rather, employees’ priorities and preferences will dictate what the future workplace will look like, particularly now that technology makes it easier than ever to design a variety of flexible arrangements.
Companies operating in aging societies will have to craft methods to engage or re-engage the experienced base of talent. Companies that fail to respond to this change and do not succeed in redefining their employee value proposition will fail to attract, retain or develop talent effectively.