The Global Workforce Crisis: $10 Trillion at Risk

The outlook for the 25 economies we studied is mixed, which is not surprising. These regions have diverse economic prospects and varied labor and family policies. The countries currently enjoying strong growth could see that growth halt abruptly if labor supply cannot keep pace with demand. Of the four BRIC countries (Brazil, India, Russia, and China), for instance, only India is safe from an impending shortfall. And countries with labor surpluses and persistently weak or no economic growth face a gloomy outlook as those surpluses threaten to spiral out of control.

Highlights by Region

In many developed economies, demographic decline—falling birth rates and an aging population—translates into negative labor growth. In the developing world, rapid growth has created an ever-increasing demand for labor. But many emerging economies are also reaching the final phase of their demographic peak. All economies with favorable demographics—developed and developing—risk high unemployment if they fail to push their growth targets.

China and India. These long-term stars of the emerging world are among the nations with the world’s highest sustained GDP growth for the past 20 years (10.1 percent for China and 6.7 percent for India). Both countries have robust exports, a vast population, a rapidly rising middle class, and infrastructure needs. Both have instituted significant market reforms in recent years to open their economies to foreign trade and competition. But their labor-force trends reveal important differences.

apac-labor

China will be hard hit as a consequence of its one-child-per-family policy, which has been in effect since 1979. This policy has helped make the world’s most populous country also its most rapidly aging. Recent proposals to ease this policy, if implemented, will have only limited impact over the next decade.

By contrast, India’s demand for labor will not exceed supply until 2030, giving the country enormous headroom for further growth—assuming its existing workforce is utilized more effectively. India’s supply-demand balance will also depend on how much of the workforce transitions from the nation’s huge “shadow” economy into its formal economy.

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* Ref. report by bcg group on global labor.

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