Over the past three decades, as developing economies industrialized and began to compete in world markets, a global labor market started taking shape. As more than one billion people entered the labor force, a massive movement from “farm to factory” sharply accelerated growth of productivity and per capita GDP in China and other traditionally rural nations, helping to bring hundreds of millions of people out of poverty. To raise productivity, developed economies invested in labor-saving technologies and tapped global sources of low-cost labor.
McKinsey director Richard Dobbs and MGI senior fellow Anu Madgavkar detail key findings from the report and policy implications for addressing labor market imbalances.
Today, the strains on this market are becoming increasingly apparent. In advanced economies, demand for high-skill labor is now growing faster than supply, while demand for low-skill labor remains weak. Labor’s overall share of income, or the share of national income that goes to worker compensation, has fallen, and income inequality is growing as lower-skill workers—including 75 million young people—experience unemployment, underemployment, and stagnating wages.
The McKinsey Global Institute (MGI) finds these trends gathering force and spreading to China and other developing economies, as the global labor force approaches 3.5 billion in 2030. Based on current trends in population, education, and labor demand, the report projects that by 2020 the global economy could face the following hurdles:
- 38 million to 40 million fewer workers with tertiary education (college or postgraduate degrees) than employers will need, or 13 percent of the demand for such workers
- 45 million too few workers with secondary education in developing economies, or 15 percent of the demand for such workers
- 90 million to 95 million more low-skill workers (those without college training in advanced economies or without even secondary education in developing economies) than employers will need, or 11 percent oversupply of such workers.
Source: The world at work: Jobs, pay, and skills for 3.5 billion people | McKinsey Global Institute | Labor Markets | McKinsey & Company.
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