As the pandemic’s impact on workers begins to fade, four structural forces are gathering momentum
The economic drag from aging across most countries will not be fully offset by growing working-age populations in sub-Saharan Africa and South Asia.
1.
Structural mismatches between labor demand and supply are already evident but accelerating.
2.
The rise of new technologies, especially AI, will lead to a new anxious phase in the complex, double-edged relationship between technology and labor.
3.
Slowing globalization is disrupting the pattern of global labor demand and potentially setting the stage for a resurgence of organized labor and growing worker bargaining power.
4.
Technology Shifts Demand
Globalization’s Downshift
Changing Demographics
Labor Mismatches
Technology Shifts Demand
Labor Mismatches
Globalization’s Downshift
Changing Demographics
learn more about the four structural forces
Demographic forces will impact regions very differently:
In North America and Europe, the “dual aging” of both workers and firms is leading to declining entrepreneurship and labor mobility.
In East Asia and South America, the transition from a demographic dividend to a demographic drag is risking economic growth.
In South Asia and sub-Saharan Africa, the rise of a massive new workforce is creating opportunities but challenges remain.
A shrinking workforce across OECD countries
Working age population
Source: World Bank. Data as of August 2023.
* International Labour Organization, “258 million workers in the world are over-educated for their jobs,” February 26, 2020. https://ilostat.ilo.org/258-million-workers-in-the-world-are-over-educated-for-their-jobs
675 m
258 m
undereducated
overeducated
Workers worldwide have jobs that don’t match their education levels
Structural labor mismatches are likely to increase
Demographic change, the emergence of new tech paradigms and the resurgence of onshoring are increasing both education and geographic mismatch.
Over the past few decades many countries have seen a decline in labor mobility, and higher mortgage rates and lower home affordability will only contribute to a further decline.
Percentage of overeducated vs. undereducated workers
Overeducation and undereducation coexist
Source: International Labor Organization. Data as of August 2023.
Investors should focus on three key aspects of the interplay between technology and jobs:
Despite the anxiety, technology tends to complement rather than replace labor.
The rise of “weightless” firms has led to a polarization of jobs and wages, leading to a decline of the middle-skilled job segment.
New technology around AI is going well beyond the physical realm of manufacturing and now disrupting service industries.
Number of bank tellers in the US (thousands)
It took decades for ATMs to displace bank tellers
Source: US Bureau of Labor Statistics. Data as of August 2023.
Slowing globalization has impacted trade but not migration
Despite political rhetoric, cross-country movement of workers has consistently grown over the past years.
Post-COVID supply chains will lead to new labor demand patterns, potentially exacerbating labor market mismatches.
These forces may bring about a potential resurgence of labor bargaining power, after an era of increasing returns to capital.
Number of issued temporary work visas in the US (thousands)
Source: U.K. Office of National Statistics , US Bureau of Labor Statistics and Germany’s Federal Statistical Office. Data as of August 2023.
Targeted migration has been key in closing labor market mismatches
Source: ILO*
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Overeducation
Undereducation