The time is ripe for new thinking in the labour market. The current system feels broken. It seems ill-suited to the structural changes that are occurring at an increasing pace. As a result, we see high unemployment with unfilled jobs, rising productivity with stagnant wages, and economic recovery with declining upward mobility for many.
Fortunately, the present dysfunction and apparent contradictions are spurring changes. Rather than returning to business as usual after the recession, the labour market is settling into a new normal. If we chart our course well we can navigate the changing world of work and unleash new employment opportunities and economic growth for the Fourth Industrial Revolution.
At ManpowerGroup, we call this new era the Human Age, where talent becomes the key differentiator for organizations and countries alike. This shift is evident in four global forces currently reshaping the world of work: demographic change, greater individual choice, the ongoing technological revolution and increasing client sophistication.
1. Shifting demographics, dynamic workforces
Trends like aging and declining birth rates mean the days of abundant labour are drawing to an end in much of the world. Sixty percent of people now live in countries with stagnant or shrinking workforces. China’s working age population peaked in 2010; by 2050 more than a quarter of its people will be over 65, up from eight percent today. In Germany, the labour force will shrink by six million workers over the next 15 years—this is one reason their politicians are more open to migrants.
Faced with labour shortages, employers and policymakers are being forced to think differently about talent sourcing. In Japan, where a quarter of the population is over age 65 (compared to 15 percent in the U.S.) there has been a major push, championed by Prime Minister Abe, to get more women and older workers into the labour market. As a result of these and other efforts, the labour force has declined by just one percent over the past decade even though Japan’s “working age” population (traditionally defined as ages 15-64) has dropped by eight percent. Policymakers elsewhere should take note - the UN estimates that by 2050, 33 countries will have an older population than Japan does today.
A more intense search for talent is beginning, and we are already seeing interesting people practices emerge. Aerospace companies, faced with graying workforces, have pioneered flexible working, phased retirements, “encore careers,” and a slew of knowledge transfer programs to train the next generation. Companies that can’t find the talent they need in one country use remote working to employ people elsewhere. Around the world, employers are experimenting with new policies to better appeal to underrepresented groups—women, young people, minorities, people with disabilities, migrants, etc.
2. The rise of individual choice
With millions of job postings just a click away, it is easier to shop around for work; most millennials expect to pursue multiple careers and change directions a few times over their working lives. Theirs is a new mindset. Rather than hanging on to a job for life, the goal today is to be employable: to develop the skills, experience and expertise necessary to move on or up, regardless of your employer. Ideally, this gives people greater choice and flexibility to ride career waves or slow down at different stages of their longer working lives.
As employers adapt to this workforce trend, wages and opportunities will increasingly be dictated by skills, not tenure. The “haves”, with sought after talent, find themselves in a better bargaining position today; they are able to manage their own careers and command higher salaries. The “have-nots”, those without in-demand skills, are struggling and feel increasingly disposable. Helping this group to upskill is the defining labour challenge of our time, and requires extraordinary efforts from educators, policymakers and most of all employers.
In the near term, individual choice is causing problems in the labour market. Companies understandably ask: why should I train you if you’ll leave and work for my competitor? However, with talent shortages looming, the need to retain employees may soon tip the balance back towards greater investment in development programs. By providing learning opportunities, employers become a talent destination.
Policy makers too will need to explore new ways of delivering social benefits that suit non-traditional work. Focusing on employment for life, rather than protecting specific jobs in companies, will increase workforce mobility, protect the individual and encourage lifelong learning and development.
3. The technological revolution
As a result of rapid technological change, companies today face shorter business cycles and truly global competition. Few industries are safe from disruption. Automation, facilitated by better artificial intelligence, is poised to have a major impact on jobs. Up to 47 percent of U.S. jobs in 2010 were rated as highly likely to become computerized in the next 10-20 years. If history is a guide, the new industries and opportunities created should ultimately surpass those that disappear, but the transition will be painful and may last decades.
Still, there is reason to be optimistic. Even as old roles are swept away, technology is facilitating the emergence of new work models that may help solve some of the current labour market issues. PwC estimates the five main sectors of the sharing economy—peer-to-peer finance, online staffing, peer-to-peer accommodation, car sharing and music video streaming—have the potential to grow from around $15 billion in revenue today to $335 billion by 2025. True, the industry is still small and may never be a panacea, but it has unleashed a torrent of creativity focused on the basic question of how to better align labour supply and demand in a faster-paced world. It is one of many solutions emerging and, as in times past, human ingenuity enabled by new technologies will make our world more prosperous for all.
4. Client sophistication and the dawn of data
Talent management has gone from an art to a science as organizations start applying big data and supply chain sophistication to recruiting and retention. The goal is greater efficiency and productivity, and it is transforming how companies think about talent. With the proliferation of so-called “people analytics”—behavioral and intelligence tests, digital performance scorecards and better human resource information systems—companies know their people like never before. It is easier to see where the best talent resides within a company, or where the gaps might be.
With all this data at their fingertips, companies are starting to think more strategically about where they source talent. For example, given the difficulty of staying up to speed with changing technology, firms are increasingly outsourcing IT management to third party experts. This in turn creates new efficiencies, allowing cyber security providers to monitor attacks against a wide range of clients around the world and share preventive solutions. In our industry, we see the rapid growth of recruitment process outsourcing as companies seek out expertise and efficiency.
So I’m an optimist. Yes, labour markets are struggling today and the business environment is harder to predict, but this churning, difficult period will lead to new solutions and opportunities for growth. The realization that this is the future of work should spur us to solve today’s challenges in ways that benefit and support everyone. This will require forward thinking workforce strategies that explore new talent sources, people practices and work models. An uncertain transition state is never easy, but we will ultimately emerge stronger for it.
For further reading on these subjects explore ManpowerGroup’s new report Human Age 2.0: Future Forces at Work.