If unaddressed, the global talent shortage could see 85 million jobs go unfilled over the next 12 years, according to a study.
And the shortage could amount to $11 trillion in unrealized revenue across the world, concluded Global Talent Crunch by consulting firm Korn Ferry.
“Right now, companies are feeling the pain, but they don’t feel it with the level of intensity that they should,” said Alan Guarino, vice-chairman of Korn Ferry’s CEO and board services in New York.
“Many CEOs are sleepwalking their way into a crisis. Unfortunately, until they feel the pain and the burning building, they may not give it the level of intensity it needs. And even if HR is predicting and calling for it, it may fall on deaf ears.”
Developed markets will be hardest hit by talent shortages, with Australia, France, Germany, Japan and the United States facing the largest threat, he said.
The U.S. alone could leave $2.2 trillion of annual revenue unrealized by 2030, and Canada isn’t immune, said Guarino.
“Companies must work to mitigate this potential talent crisis now to protect their future,” he said. “If nothing is done, this shortage will debilitate the growth of key global markets and sectors.”
The study looked at the potential gap between talent supply and demand in 20 global economies in the years 2020, 2025 and 2030, across three sectors: financial and business services; technology, media and telecommunications; and manufacturing.
Labour shortages in financial and business services are the most severe, with a potential deficit of 10.7 million workers globally by 2030 — and a subsequent loss of $1.7 trillion in revenue.
As such, the issue is one that should be on the front burner for both business and government, in terms of immigration and higher education strategies, said Guarino.
“The talent shortage is not a shortage of headcount,” he said. “It’s a shortage of skills.”
The college- and university-fuelled labour force cannot keep pace with demand, even with assumptions that some organizational roles will be replaced by technology, said Guarino.
And for employers, that equals “tremendous” wage pressure, he said.
“Supply and demand will continue to drive price, and if salary is indeed the price you pay for talent — and there’s not enough talent to go around — then they will raise the price,” said Guarino.
“That affects earnings per share, which then affects the stock price, which affects the stock market, and then the global economy.”
Canadian vacancies growing
In Canada, job vacancies are currently at 3.1 per cent — the highest rate recorded since the Canadian Federation of Independent Business (CFIB) began observing the trend in 2004.
Nearly 400,000 jobs across the country have been vacant for four months, said Ted Mallett, chief economist at CFIB in Toronto.
“In every part of the country, you will find businesses struggling to find the right worker,” he said. “We have to find ways to move the labour up to the position or the skill set for the jobs that are available.”
Strategy could also include turning to new equipment or automation, said Mallett.
“They’re not going to carry on with that kind of issue indefinitely,” he said. “They can’t just keep banging their heads against the wall. They will make some adjustments.”
Pressure continues to mount on wages as a result of labour shortages, though the issue is more complex than that, said Mallett.
“It’s not just a wage issue,” he said. “You can’t just magically say, ‘OK, we’re going to offer wages X per cent higher and that will solve our problem.’ That probably won’t solve the problem, because their causality is much more complex than that.”
Small firms are more prone to struggle with prolonged vacancies, according to Mallett.
“They’re the ones with perhaps the least flexibility in the kind of people they need. They need generalists — people who can fill a wide variety of roles — whereas a large enterprise can afford to get specialists in certain areas.”
Quebec is facing an especially high rate at 3.9 per cent, with 109,600 jobs going unfilled, said a recent CFIB report for the second quarter of 2018.
British Columbia’s vacancy rate is 3.4 per cent, while Ontario’s rests at three per cent.
The issue is relatively new to Quebec, and employers aren’t used to dealing with these types of issues, said Mallett. “It’s a big shift in the kinds of things they have to pay attention to.”
The loss of 230,000 workers age 45 and younger over the last 30 years has had “significant long-term effects on the availability of labour,” said Marcel Boyer, distinguished senior fellow at the Montreal Economic Institute.
More people leave Quebec for other provinces, rather than vice versa, with the majority relocating to Ontario, he said.
“It’s totally a major challenge today for Quebec society, government, firms to understand why we’re losing our population, our youth, to the rest of Canada,” said Boyer.
For Quebec employers, the path to a more dynamic labour market is via greater openness to competition, increased wages, and shifting organizational culture towards more flexible career development, he said.
While wages have yet to increase, the scarce labour market should change that in the next six months, said Boyer.
Automation is also a major part of the way forward, he said.
“When you begin to have problems with labour — with the labour shortage or recruiting labour — you will invest more in robotization or advanced technologies that will make whatever workers you have more productive. And, therefore, you will replace the number of workers with an increased productivity due to increased investments in advanced technology,” said Boyer.
“Quebec should be the leader in Canada for automation and robotization within firms because of its particularly strong labour shortage.”
Advice for HR
Human resources can brace for this by conducting a talent assessment of what labour will be needed based on business strategy up to 2030, according to Guarino.
“They need to execute workforce planning at a level of sophistication that they probably have not done before,” he said.
“Once they’ve done that… they (will) have a fairly good idea of the critical skills that are going to make or break the ability to execute their business strategy.”
Recruitment tactics will also require a review, said Guarino.
“Your employer brand needs to be just as important as your corporate brand,” he said.
As HR departments become more strategic in nature, employers and senior leadership may be required to increase the group’s budget, said Guarino.
“The days of underfunding human resources and thinking that you’ll pay salaries and you’ll have people are over,” he said. “In some cases, it means doubling or even tripling the discretionary portion of the HR budget.”
This approach will drive better talent acquisition, increase retention and enlighten workforce planning, allowing proactive businesses to “suffer less of the pain than others,” said Guarino.
Looking to industry peers to isolate issues specific to your business is also beneficial in terms of boosting retention and reducing turnover, said Mallett.
“There’s an awful lot of time and effort that goes into bringing people on and training them up, getting them to the most productive level possible,” he said.