In the aftermath of the global financial crisis many countries are still battling with high unemployment rates. According to the recent overview of European economies provided in The Economist, youth unemployment in Greece and Spain is still around 50%, while in Croatia and Portugal it is well above 40%. Although the unemployment trends since 2013 seem to be improving, progress is quite slow and the term “unemployment” remains sticky in many economic news headlines.
Given this context of high unemployment, it is much less common and quite surprising to note some economists talking about a lack of employees. For example, professionals from the Conference Board, a business research group, see that we are rapidly moving ‘From Not Enough Jobs to Not Enough Workers’. More specifically, forecasts of the Conference Board imply that due to an aging population and the approaching retirement of the baby boomers the mature economies will experience significant labor shortages already by the year 2025. According to their Labor Shortage Index, Germany with its neighboring countries of Hungary, Poland, Austria, Slovakia, and the Czech Republic are at the biggest risk of labor shortage. Due to its high immigration rates, the United States is projected to experience only a moderate shortage. But labor shortages are forecasted even in the Mediterranean countries, despite the severity of their current unemployment rates.
A similar forecast of labor shortages is pronounced by human resources expert Rainer Strack in his engaging TED talk. Drawing on the example of Germany, Strack highlights that the potential workforce in 2030 is already set in stone today, and the picture is not that positive at all. Taking into account the retiring baby boomers, while still forecasting an average GDP growth in the future, Strack’s calculations suggest that by 2030 Germany will have a labor gap of 20% in the workforce. Moreover, a similar workforce crisis is expected in the majority of our largest economies.
Rendering the projected picture even more complicated, Strack highlights that apart from lacking working population, the economies will also experience a big skill mismatch. Specifically, projections suggest a higher lack of skilled people for high level jobs, while at the same time there is a lack of ordinary jobs for low-skilled workers. Technology will replace a lot of regular jobs, but at the same time it will create a lot of new jobs that require new skills. As such, although improving efficiency and cost management, technological development may actually worsen the skill mismatch.
Finally, Rainer Strack believes that companies and governments will also face a big cultural challenge. Drawing from his own large-scale workforce survey, Strack argues that what will attract and retain the needed employees is not pay, but rather good relationships and appreciation for their job. Indeed, as his data shows, people are looking for recognition!
As such, the impending gaps in labor availability boil down to the right people strategy. Summarizing his talk, Rainer Strack recommends companies and governments to first improve their forecasting skills and start planning for their future workforce. Secondly, to battle the upcoming workforce crisis, we need to attract the right people. Apart from good recruitment strategies, businesses and governments might put more effort in tapping into the potential of women, retirees and immigrants. As noted in some of my previous blog posts, it is possible to see business opportunities in the aging workforce, benefit from gender diversity in the workplace, and use the strengths of immigrants for sustaining competitive economy. This will also require a more active management of global mobility to make use of surplus labor in other geographical regions. Thirdly, Strack suggests finding solutions on how to educate and upskill people. Finally, he calls on retaining the best people by fostering an appreciation and relationship culture. As Rainer Strack puts it, ‘one crucial underlying factor is to change our attitudes. Employees are resources, are assets, not costs, not head counts, not machines….’.