Reshaping the labour landscape

As the global economy changes at an ever-quickening pace, the labour market in many countries is not merely struggling to keep up, but seems to have broken down in important ways. High unemployment coexists with unfilled jobs. Rising productivity fails to translate into higher wages. And, for many, upward mobility is beyond reach, even though the economy has begun to recover.
Fortunately, change seems to be underway. Four global trends are reshaping the world of work, helping to resolve contradictions and overcome dysfunction in the labour market as companies, workers, and governments adapt to a new demographic, technological, and economic environment.
The first trend is demographic. In much of the world, aging societies and declining birth rates mean that the days of abundant labour are coming to an end. Some 60 per cent of the world’s population lives 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 (today, just 8 per cent are). In Germany, the labour force is projected to shrink by six million over the next 15 years.
As labour becomes increasingly scarce, employers and policymakers are being forced to think differently about sourcing talent. In Japan, where a quarter of the population is older than 65, Prime Minister Shinzo Abe has championed a major effort to bring more women and older workers into the labour market. As a result, even though Japan’s working-age population, traditionally defined, has shrunk 8 per cent over the past decade, the labour force decline totaled just 1 per cent.
Elsewhere, other strategies to fill the labour gap are emerging. Aerospace companies, faced with graying workforces, have pioneered flexible working hours, phased retirements, “encore careers,” and a slew of knowledge-transfer programmes to train the next generation of employees. Companies that cannot find the talent they need in one country are using remote workplaces to employ people elsewhere. And firms are making attempts to attract underrepresented groups, including women, young people, minorities, people with disabilities, and migrants.
At the same time, another trend, the rise of individual choice, is providing workers with unprecedented flexibility. With millions of job postings just a click away, it is easier to shop around for work; most millennials expect to change course several times during their careers. Rather than attempting to hang on to a job for life, the goal today is to remain employable – to develop the skills, experience, and expertise necessary to move on or up, regardless of the employer.
As a result, wages and opportunities are increasingly being dictated by skills, rather than tenure. Those with sought-after talents have more bargaining power, are better able to manage their careers, and command higher salaries. Those without in-demand skills are struggling and feel disposable.
So far, this abundance of choice has discouraged companies from spending resources on training employees, who might, after all, soon decide to join a competitor. However, as talent shortages loom, the need to retain employees could tip the balance back toward greater investment in professional development. Employers that provide learning opportunities will become a destination for talent.
The third trend reshaping labour markets is rapid technological change. Few industries are safe from disruption. Automation, facilitated by better artificial intelligence, is poised to have a major impact on jobs. Up to 47 per cent of the jobs that existed in the US in 2010 are highly likely to be computerized out of existence in the next two decades. If history is a guide, new industries and opportunities will replace those that are lost; nonetheless, the transition will be painful and could last decades.
And yet, there is reason for optimism. Even as technology sweeps away industries, it is facilitating the emergence of new models that could help solve some of the problems in the labour market. PricewaterhouseCoopers estimates that the five main sectors of the sharing economy – peer-to-peer finance, online staffing, peer-to-peer accommodation, car sharing, and music video streaming – could grow from around $15 billion in revenue today to $335 billion by 2025. To be sure, the industry is small. But it has nonetheless unleashed a torrent of creativity focused on the basic question of how better to align supply and demand for labor in a faster-paced world.
A fourth global trend evident in today’s labour market is the rapid embrace among technologically sophisticated employers of data-based approaches to human resources. Talent management has gone from being an art to a science, as organizations have applied big data and supply-chain techniques to recruiting and retention. With the proliferation of so-called people analytics – behavioral and intelligence tests, digital performance scorecards, and better information systems – companies know their workers like never before. It is easier to see where the best talent resides within a company, or where the gaps might be.
Companies are using these data to think more strategically about how to source talent. For example, given the difficulty of staying up to speed with changing technology, firms are increasingly outsourcing information-technology management to third-party experts. This, in turn, creates new efficiencies, allowing cyber-security providers to monitor attacks against a wide range of clients and share strategies and solutions. Recruitment is another area in which companies are turning to outsourcing in order to obtain expertise and increase efficiency.
In short, I am an optimist. The churning, difficult period in which we find ourselves will create new opportunities. The growing realisation that labour markets have fundamentally and permanently changed will spur policymakers, employers, and workers to address new challenges in ways that benefit everyone. Big shifts are never easy, but when they are managed properly, they can make us stronger and better off. - Project Syndicate