New global labor market surfaces

A new Report from the McKinsey Global Institute maintains that The dynamics of the global labor market may create new challenges for supply chain managers

By ·

A new Report from the McKinsey Global Institute maintains that The dynamics of the global labor market may create new challenges for supply chain managers.

The McKinsey Global Institute (MGI) analysts noted that 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,” said analysts. “To raise productivity, developed economies invested in labor-saving technologies and tapped global sources of low-cost labor.”


Today, added analysts, 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.

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

The dynamics of the global labor market will make these challenges even more difficult, said MGI. The population in China, as well as in many advanced economies, is aging, reducing the growth rate of the global labor supply; most of the additions to the global labor force will occur in India and the “young” developing economies of Africa and South Asia.

Aging will likely add 360 million older people to the world’s pool of those not participating in the labor force, including 38 million college-educated workers, whose skills will already be in short supply.

Alan Beaulieu, president of ITR, an economic forecasting firm, said an increase in private sector hiring in the U.S. will lower the chances of a “double-dip” recession.
“But that means U.S. companies will have to generate 200,000 jobs per anum for the next 10 years,” he added.


About the Author

Patrick Burnson, Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at [email protected]

Subscribe to Logistics Management Magazine!

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your entire logistics operation.
Start your FREE subscription today!

Article Topics

Global · Logistics · Supply Chain · All Topics
Latest Whitepaper
The View from the New “Single Window”
The single window, officially known as the "International Trade Data System," operates via the Customs and Border Protection (CBP) agency's Automated Commercial Environment (ACE) platform, and serves as a single point of contact for all trade filings.
Download Today!
From the March 2017 Issue
WMS vendors are stepping up to the plate and developing functionalities and solutions that meet the complex needs of today’s companies. Our top analysts take a peek into these developments and discuss the DC of the future and the software that will support it.
5 Supply Chain Trends Happening Now
2017 Warehouse/DC Equipment Survey: Investment up as service pressures rise
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly email newsletter!
Latest Webcast
2017 Trucking Regulations & Infrastructure Update
In this session our panel brings shippers up to date on the state of transportation regulations. Discussion will revolve around regulatory reform, aspects of the federal highway bill and what the transportation landscape looks like in the early days of the Trump administration.
Register Today!
EDITORS' PICKS
LM Exclusive: Major Modes Join E-commerce Mix
While last mile carriers receive much of the attention, the traditional modal heavyweights are in...
ASEAN Logistics: Building Collectively
While most of the world withdraws inward, Southeast Asia is practicing effective cooperation between...

2017 Rate Outlook: Will the pieces fall into place?
Trade and transport analysts see a turnaround in last year’s negative market outlook, but as...
Logistics Management’s Top Logistics News Stories 2016
From mergers and acquisitions to regulation changes, Logistics Management has compiled the most...