Gaps in the global labor pool are forcing company recalibrations.
By Carolyn White
The global economy has forever changed the way businesses operate and attract employees. Gone are the days when companies look to hire only employees who live in the area or countries in which they operate.
The workforce of this new era is far more connected, dispersed, and mobile than ever before. This reality presents human resources professionals with a number of challenges that must be overcome if they are to ensure their companies have the best people in place today—and can attract the talent they need tomorrow.
According to the McKinsey Global Institute, the world could face a substantial shortage of qualified workers by 2020. This shortfall shapes up in multiple ways. Developing nations might lack upward of 45 million workers with vocational training or secondary-school education. Advanced economies could end up needing as many as 95 million workers with the proper skills for employment. And the entire world will likely have 40 million too few college-educated workers.
These figures seem a bit unbelievable, considering that the number of unemployed workers worldwide sits at 197 million people. By the end of the year, this number is expected to grow to 202 million. According to the International Labour Organization, total worldwide unemployment will continue to grow to 210.6 million by 2017.
What has caused this large disparity? There are a number of factors at play. Economic growth has slowed worldwide, especially in China, India, Latin America, and the Middle East. Economic problems continue to plague the euro zone. Companies are still uncertain about government policies, consumer spending, and economic stability—all of which cause delays in hiring decisions. But the big problem is that companies throughout the world are struggling to find workers who have the skills that match their needs.
In the last decade, job growth in the United States has been attributed to positions that require complex problem-solving and contextual judgment. Jobs that are based on repetitive skills and one-to-one transactions are decreasing, and the educational system is not keeping pace with the change. This situation is not limited to the U.S. For example, again according to McKinsey, southern Europe could have as many as eight million workers without a post-secondary education who are unable to find work by 2020. And in countries with aging populations, such as Japan and Germany, the smaller numbers of young workers will cause an even larger divide between supply and demand.
Unfortunately, this gap won’t be easy to bridge. To keep pace, college completions must grow by 2.5 times the historical rate of increase, and workforce participation by women and older workers must double. One potential solution is to encourage employees to take advantage of massive open online courses (MOOCs).
By 2020, China alone will likely need 23 million more college-educated workers than it can supply. This shortfall stems from a combination of the country’s aging population, rapid growth in the service sector, and a new focus on skill-intensive manufacturing. Further complicating the situation is the number of women already in the workforce. At 82 percent, China’s female labor participation rate is the world’s highest, which means it cannot tap this population as much of a source of new workers. The country can increase its share of college graduates in the labor force, but to accomplish a six-percent increase by 2020 would require 85-percent of China’s secondary-school graduates to finish college.
India faces an entirely different situation. It might actually have a surplus of highly skilled workers—but not enough medium-skilled workers to fill jobs in the growing construction, manufacturing, retail, wholesale, and service sectors. Additionally, the country could have 27 million too many low-skilled workers by 2020. To position these low-skilled workers to take advantage of opportunities, India will need to focus on job creation and substantially invest in improving education, especially vocational training.
Unfortunately, these numbers will only get worse as the global economy picks up steam. An ever-widening divide could lead to significant social problems, including higher unemployment, lost generations, and social unrest.
In a recent survey by the McKinsey Global Institute and The Conference Board, 75 percent of human resources professionals reported the talent shortage has negatively impacted their businesses. To counteract these effects, companies will need to find more efficient uses for their skilled employees. One strategy is to pass less strategic or value-added tasks to others, so the most-skilled employees can focus on value-creation activities. Other companies are disaggregating jobs. In other words, they are breaking jobs into highly specialized tasks, allowing employees to focus on the areas in which they are most skilled to maximize scarce talent.
Leveraging technology and advances in communications allows employees to work virtually. Along with reducing overhead, this strategy can be highly attractive to a wide array of employees. According to Towers Watson, 47 percent of the 32,000 employees from large and midsize organizations surveyed in their 2012 Global Workforce Study work remotely or in flexible arrangements.
One example of a company that has successfully made the transition to a virtual workplace is security software company Symantec. Doing so required a shift in the company’s focus—from when and where employees’ work is done to employees’ overall contributions and results. Managers underwent training on remote management, which covered how to:
- Bring people from different cultures together into fluent teams;
- Communicate clearly and concisely; and
- Evaluate employees on measurable deliverables, not the hours they work.
Companies can also use a mixed employment strategy, creating a blended workforce of traditional full-time, part-time, remote, and contract workers. This mix enables a company to lower its overhead costs and better meet the ebbs and flows in demand. With more than 10 million workers or 7.4 percent of the U.S. population classified as independent contractors by the Bureau of Labor Statistics, companies have a large pool of temporary workers to help them flexibly meet demand and control costs. In the U.S. alone, contract work grew four times faster than total employment over the last decade.
Today, the world sits on the cusp of another revolution. Much like the Industrial Revolution did nearly 200 years ago, the robotics revolution will significantly change the way the world works.
First introduced in the 1960s, industrial robots were designed to perform rigid, predetermined repetitive movements—most commonly on assembly lines. Industrial robots typically cost more than $100,000 each, but where they become unattainable for smaller companies is in their upkeep. Maintenance, programming, and training expenses can be four times the original purchase price.
Now, significant advances in technology have made robots smaller, nimbler, and more responsive. As a result, during the next 10 to 15 years, manufacturing and service industries will greatly increase their use of robotics.
Already, manufacturing companies are seeing the benefits of robotics. In the past two years, U.S. manufacturers have hired nearly half a million employees thanks in part to robots. This might seem counterintuitive, but automation enables companies to reshore their operations. Rising wages in the developing world, specifically China, Mexico, and India, plus shipping and other costs have made offshoring more expensive. By employing more affordable, nimble robots—and the staff who can program and run these tools—manufacturers are able to keep factories stateside and remain competitive.
Advances like Baxter, a new generation of robot from Rethink Robotics, aim to make robotics affordable for any size organization. Baxter costs just $22,000 and is considered so safe and simple that workers unskilled in technology can train and operate the machine, according to the company. Low interest rates, which allow companies to borrow money to upgrade facilities, make purchases of these robots even more affordable today.
The adoption of robotics will spread throughout the world. In 2011, sales of robots increased by 38-percent globally, the highest level ever. At present, Japan is the number one employer of robots in the world, but other countries are gaining quickly. China quadrupled its robot supply between 2006 and 2011, making it the country with the largest growth of robot installations. Korea has the highest robot density in the world, with a ratio of 247 robots to every 10,000 employees.
By the end of the 21st century, 70 percent of today’s occupations might cease to exist, according to Wired magazine. Automation will have replaced the human worker in many of the roles we currently play. Robots will replace assembly line workers, workers in warehouses, fruit and vegetable pickers, pharmacists, cleaning crews, long-distance freight drivers, and likely many other jobs. In the relocation industry, robots might eventually replace other skilled workers, too.
Already, significant strides have been made in automating elements of our jobs. Narrative Science is a company that develops algorithms to use artificial intelligence to train computers to write newspaper stories on sports and companies’ stock performance. Military forces rely on robots to disarm explosives and unmanned drones to explore dangerous areas, keeping troops out of harm’s way.
Now, robots are branching into healthcare. Robot-assisted surgeries are quickly becoming standard for many procedures. Unlike humans who can experience hand tremors, robots can keep a steady hand and provide an unsurpassed view of small, tight surgical fields like the prostate. With advances in artificial intelligence, robots will be able to learn surgical techniques and apply them in common operations. Doctors might even be able to control robots through wireless technology, opening up opportunities to perform operations on patients in underdeveloped countries.
In Japan, concerns over caring for its aging population are driving researchers to develop robots that can assist with eldercare. Nursebots lift elderly patients and bring them meals. And Panasonic has developed robots that wash hair, deliver drugs, and help patients communicate.
While robots will replace humans in a number of jobs, they might also create millions of jobs—just as computers and the Internet did back in the 1990s. In some cases, robots are better suited to do certain jobs than any human. For example, jobs that require precision, control, and unwavering attention—such as producing computer chips or inspecting every point on a CAT scan for cancer—are best left to machines.
New jobs will be born from the machines themselves. These opportunities are ones that we cannot even imagine will exist because they are jobs the machines will make up. Consider the jobs and activities that exist today but weren’t even a blip on the radar 100, 50, or even 10 years ago. Likely, the highest earning professions in 2050 will directly result from automation and machines that have yet to be invented.
Automation and robots will—and already have—made lives easier and businesses more efficient. And just like the buggy whips of the past, jobs will come and go as a result. Technology is expected to take a large bite out of certain jobs, specifically for lower-skilled workers, which is why companies and countries will need to invest in developing the skills and knowledge of their people. By developing and investing in their talent, companies can realize a great return—in the form of lower turnover, greater brand value, and better bottom lines.
According to The Conference Board, companies conducting business in different countries should take the following steps to make sure they can attract and retain the right talent:
- Remain abreast of trends in education, employment, incomes,and skills.
- Identify what types of skills and capabilities are required—and look for sources and talent pools to tap.
- Assess current workforces and evaluate what is needed to meet future business needs.
- Grow skilled employees into the leaders who will guide the company in the future.
- Effectively use expatriates. Instead of short-term assignments, companies should consider using longer-term placements so the expats can build expertise, adapt to local cultures and environments, and remain productive for a longer length of time. Of course, companies must make sure these expats have a proper reintegration when they return to their home countries.
While some problems, such as stagnant population growth, cannot be solved by businesses, other causes of the talent crunch can be stymied by businesses. In a recent quarterly report, the McKinsey Institute recommended that global companies strive to increase the number of women they employ in managerial and executive roles. Another simple solution is to focus on breaking down cultural and language barriers through training.
Businesses also have the opportunity to focus on developing the skills of the broader population with the hopes that their efforts will empower and prepare the workforce of tomorrow. For example, businesses can:
- Develop partnerships with education facilities, not just colleges but also primary and secondary schools, to help develop curriculum and interest in science, technology, engineering, and mathematics (STEM) jobs.
- Invest in internal training programs.
- Create strategies to hire, train, and retain employees from underused labor pools.
Carolyn White is senior VP of marketing and public relations for The Graebel Companies, Inc. Responsible for companywide marketing and communications for the global company, White has been with the company since 1991.