A major commercial crisis is looming over organizations and economies throughout the world. By 2030, we can expect a talent deficit of 85.2 million workers across the economies analyzed — greater than the current population of Germany. This global skills shortage could result in $8.5 trillion in unrealized annual revenue by 2030 — equivalent to the combined GDP of Germany and Japan.
While global leaders have bet heavily on technology for future growth—a 2016 Korn Ferry survey found that 67% of CEOs believe technology will be their chief value generator in the future of work—they have discounted the value of human capital. Misalignment between automation, AI, machine learning, and other technological advances and the skills and experience talent needs to leverage the full potential of those advances is a main factor contributing to growing talent deficits. Technology cannot deliver the promised productivity gains if there are not enough human workers with the right skills. This has set the scene for a global talent crunch.
2030: Labor skills shortage of 47 million and unrealized output of $4.238 trillion
The talent crunch as a percentage of the economy is most pronounced in the Asia Pacific region. While some countries in this region are dealing with rapidly ageing populations, others have a rising number of working-age citizens. Hong Kong and Japan face particularly stark deficits, for instance; in contrast, India stands out as the only country in our study that can expect a talent surplus, expected to reach 245 million workers by 2030.
How we uncovered the talent crunch
To understand the global demand for skilled labor in the future of work we assessed the demand for talent versus supply in 20 developed and developing economies across the Americas (Brazil, Mexico, the United States), EMEA (France, Germany, the Netherlands, Russia, Saudi Arabia, South Africa, the United Arab Emirates, and the UK) and Asia Pacific (Australia, China, Hong Kong, India, Indonesia, Japan, Malaysia, Singapore, and Thailand).
More granularly, we examined talent supply and demand in each market as a whole and within three major knowledge-intensive sectors: financial and business services (including insurance and real estate), TMT (technology, media and telecommunications) and manufacturing.
Within these knowledge-intensive sectors, we measured the gap between talent supply and demand at three distinct skill levels, referenced throughout as:
- Highly skilled workers (Level A): These individuals have completed post-secondary education, such as college (or university), or a high level trade college qualification
- Mid-skilled workers (Level B): These individuals have attained upper secondary education, such as high school, or a low level trade college qualification
- Low-skilled workers (Level C): These individuals have less than upper secondary education
Level A talent is the most highly in demand and globally is in shortest supply. According to our model, by 2025 demand for Level A workers will outstrip supply by 13.6 million workers globally. This will rise to 35.1 million level A workers by 2030 across all sectors.
What does the talent crunch mean for Singapore?
The economic picture
- Singapore is already facing a talent crunch: its Level A deficit will stand at 248,000 by 2020 and deteriorate at a rate of 15.6% annually to 1.1 million by 2030. 1.1 million is equivalent to 61.3% of Singapore’s Level A workforce in 2030.
- Singapore is also expected to face a small Level B deficit in 2030. The gap is expected to deteriorate from a surplus of 207,000 in 2020 to a deficit of 8,000 in 2030, or the equivalent of 0.6% of Level B talent.
- Finance will account for 24.7% of Level A shortages in 2020, which will increase to 28.5% by 2030. Technology and manufacturing will account for 4.9% and 2.8% of total Level A shortages in 2030.
- By 2030, Singapore could lose out on $106.82bn USD that will not be realized due to talent shortages.
- In terms of the size of its economy, Singapore could fail to grow by 21% by 2030.
Singapore needs to accept and embrace the talent challenge. As a small economy that is heavily focused on highly skilled talent, the talent crunch in Singapore has already started and is being felt across several different sectors, particularly with skilled labor. We have significantly underestimated how quickly demand for skilled labor is being created in the economy through organic economic growth, new types of organizations, technological advancement and changing consumer demands. The velocity of job nature changing is far quicker than expected. Jobs 10 years ago are different today, jobs in 10 years time will demand very different skill sets compared to today. This is causing a significant labor deficit as the upgrading of skillsets are not happening fast enough.
While Singapore today attracts talent well, there's a question mark as to whether Singapore can continue attracting high calibre talent from abroad in large numbers. The places where Singapore currently attracts workers from will no longer have the talent to spare and will be fighting hard to retain those they do. This will inevitably make it increasingly challenging for Singapore to continue attracting and fostering talent in the same way they do now.
Importing talent is not sustainable and needs to be only a small part of our solution. We need to focus on our current workforce and look at how we can upgrade and reskill the population quickly and efficiently. This process will need an initial “retooling” of our Human Resource population at all levels to equip them with new processes, methodologies, products and services. Traditional HR will need to evolve and become Agile HR practitioners to act quicker and more effectively to the challenges.