The mature markets will move from high unemployment levels to labor shortages over the next fifteen years, according to a report published by The Conference Board today. The shift will create unprecedented challenges for policymakers and business leaders, the authors predict.
The report, titled “From Not Enough Jobs to Not Enough Workers,” predicts that labor shortages will become a rapidly-growing problem as baby boomers retire. Baby boomers are people who were born between 1945 and the mid-1960s.
It is the first study to examine possible shortages in such a wide range of individual labor markets, including 32 nations, 266 industries and 40 occupations in Europe and 464 in the US.
Co-author, Gad Levanon, Director of Macroeconomic Research at The Conference Board, said:
“Mature economies are facing a historical turning point: for the first time since World War II, working-age populations are declining. The global financial crisis and its aftermath – stubbornly high unemployment in many countries – have postponed the onset of this demographic transformation, but will not prevent it from taking hold.”
Businesses in the advanced economies need to start planning today for an environment in which controlling labor costs without losing labor quality will become considerably harder, because finding and holding on to workers will be much more challenging.
The authors of “From Not Enough Jobs to Not Enough Workers.”
Jobs hard to find today, but hard to fill tomorrow
The authors explain the widening difference between short- and long-term outlooks regarding the labor market. In the short-term, the effects of the Great Recession will still be present in several mature markets.
Over the longer-term, however, fundamental demographic shifts will lead to completely different labor market priorities both for workers and employers.
While labor markets today in the advanced economies are not yet particularly tight overall – wage growth and labor turnover are still well below pre-recession levels – this general picture masks enormous variations between nations, with rapid reversals from the oversupply of labor to shortages in many.
In order to have a better idea of labor-market tightness, look at the gap between current unemployment and the estimated natural rate of unemployment.
Some countries have already changed
In South Korea, Germany, Japan and Canada, any lingering effects of the recession are long gone – these countries have fallen below their natural unemployment rate.
The UK and US will probably follow in 2014 or 2015, and then Denmark, Belgium, Sweden and Australia in 2016 or 2017.
The European Union (EU) countries worse hit by the Great Recession – Portugal, Greece and Spain – plus France, will probably retain their oversupply of labor for longer, and will not reach their natural unemployment rates until after 2018.
Labor Shortage Index
The authors introduced a Labor Shortage Index to determine long-term trends. It combines current labor-market tightness with expected future demographic changes to forecast which countries will experience labor shortages in 2025, and to what extent:
- Germany: among the 32 nations compared, Germany is forecast to have the greatest labor shortage risk. Its unemployment rate is already well below the natural level, the country is also expected to have a shrinking labor force. Its Central European neighbors – including Austria, the Czech Republic, Slovakia, Poland and Hungary – face similar risks.
- The Mediterranean Countries: despite suffering the most from the Great Recession, these nations could well see labor shortages by 2025. With slow productivity growth and a large working-age population decline projected, Italy faces the highest risk.
- Asia-Pacific: here, there is a mixed picture. Japan, which is already experiencing demographic pressures, can expect the same challenges as Germany during the next ten years. South Korea, with its expected productivity growth, will have a more moderate risk.
- US, UK, Canada & France: the US is expected to have moderate labor shortage problems, compared to the rest of the world, as its working-age population grows slowly. However, immigration gives the US an advantage. Risks in Canada, France and the UK will be similar.