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Global Workforce Crisis Puts $10 Trillion at Risk in World Economy, Study Says
By 2030, the Potential Value Squandered Because of Labor Shortages and Surpluses Could Exceed 10 Percent of World GDP, or Nearly 60 Percent of U.S. GDP, According to a New Report by The Boston Consulting Group
|By Marketwired .
|July 1, 2014 12:01 AM EDT
BOSTON, MA -- (Marketwired) -- 07/01/14 -- Workforce shortages and surpluses worldwide are becoming so acute that they threaten $10 trillion of world GDP over the next one to two decades, according to a new report being released today by The Boston Consulting Group (BCG).
This projected value loss stems from acute shortages and unrelenting surpluses that are being exacerbated by a range of factors, from anemic economic growth and aging populations to low birth rates and restrictive immigration policies.
BCG examined workforce supply-and-demand dynamics in 25 major economies -- including the G20 -- to forecast the extent of labor shortages and surpluses for 2020 and 2030. Overall, by 2020, many countries will still be experiencing a surplus. But by 2030, this surplus will for most have turned into a massive shortfall, according to the report, The Global Workforce Crisis: $10 Trillion at Risk.
"The consequences for many nations' growth and competitiveness are serious," says Rainer Strack, a BCG senior partner and a coauthor of the study. "Governments, companies, and other institutions must begin to take action now if they hope to avert the potentially long-lasting damage to national and regional economies, as well as to the global economy."
The impact of the labor imbalances worldwide will be neither simultaneous nor uniform. Here are some of the crippling shortages and chronic surpluses that the world will face:
- Germany will see a shortage of up to 2.4 million workers by 2020 and up to 10 million by 2030 -- 23 percent of the labor supply. The country will not reach its historical GDP growth rates unless it takes action soon.
- Brazil will have a shortage of up to 8.5 million workers in 2020; by 2030, that figure could increase nearly fivefold to 40.9 million people -- at 33 percent of the labor supply, more than 10 percent worse than Germany's and the highest projected 2030 shortage of the 25 nations studied.
- China is expected to have a surplus of 55.2 million to 75.3 million workers by 2020. By 2030, that surplus could reverse sharply, turning into a shortage of up to 24.5 million people.
- The U.S. is expected to have a surplus of between 17.1 million and 22 million people in 2020. By 2030, it will still face a surplus -- at a minimum, 7.4 million.
- France, Italy, and the UK, all projected to have single-digit surpluses in 2020, face labor shortages by the subsequent decade.
- South Africa faces the gloomiest prospects, with a projected surplus of 36 percent in 2020 that's expected to grow to 39 percent by 2030.
The problems associated with labor surpluses are well known. High unemployment cuts the tax base and raises the cost of social services while raising the risk of social instability. In the long term, surpluses can lead to the attrition of skills and ultimately reduce an economy's competitiveness and attractiveness to investors.
But the problems with shortages can be equally harmful to the economy because job openings cannot be filled. This fuels wage inflation and, above all, impedes business growth and competitiveness.
The authors used two scenarios for GDP -- and labor -- productivity-growth rates over two periods (the past 10 years and the past 20 years) to forecast two different future scenarios. They calculated the size of the labor force that each country would need to keep GDP and productivity growth for 2020 and 2030 at historical levels.
The report features a number of tables and charts, including graphs comparing labor supply-and-demand trends among countries within major geographic regions and a table benchmarking key labor-supply levers across the 25 countries. (See Exhibit 6 from the report, which highlights the projected imbalances.)
In addition, the authors outline the basic levers and interventions that governments can put in motion to mitigate the imbalances, such as modifying the official retirement age, liberalizing immigration policies, and encouraging greater labor force participation by specific demographic segments.
The Global Workforce Crisis: $10 Trillion at Risk is the first in a series of reports on this issue. Subsequent reports will break down the surplus and shortage numbers by education levels to reveal in greater detail the severity of global labor imbalances. They will also illustrate the consequences for companies.
"A country may appear to have a perfect balance of supply and demand," observes Strack, who is a coleader of BCG's human resources work within the firm's People & Organization practice. "But after breaking down the numbers, we might find that it actually has a surplus of 1 million people with a primary education but a shortfall of 1 million with a secondary education. This kind of de-averaging reveals the crucial challenge ahead for governments and businesses. Both will need far more sophisticated tools to analyze supply and demand and devise solutions."
To download a copy of the report, please visit www.bcgperspectives.com.
To arrange an interview with one of the authors, contact Eric Gregoire at +1 617 850 3783 or [email protected].
About The Boston Consulting Group
The Boston Consulting Group (BCG) is a global management consulting firm and the world's leading advisor on business strategy. We partner with clients from the private, public, and not-for-profit sectors in all regions to identify their highest-value opportunities, address their most critical challenges, and transform their enterprises. Our customized approach combines deep insight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable competitive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with 81 offices in 45 countries. For more information, please visit bcg.com.
Bcgperspectives.com features the latest thinking from BCG experts as well as from CEOs, academics, and other leaders. It covers issues at the top of senior management's agenda. It also provides unprecedented access to BCG's extensive archive of thought leadership stretching back 50 years to the days of Bruce Henderson, the firm's founder and one of the architects of modern management consulting. All of our content -- including videos, podcasts, commentaries, and reports -- can be accessed by PC, mobile, iPad, Facebook, Twitter and LinkedIn.
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