The Salary SurgeIntroduction

Putting a price on the global talent crunch.

The Salary SurgeIntroduction

Putting a price on the global talent crunch.

Organizations around the world could add more than $2.515 trillion to their annual cost of labor by 2030, the result of a global shortage of highly skilled workers that could dramatically drive up salaries for the most in-demand labor. Our new study, The Salary Surge, finds that world-leading economies, including the United States, China, and Germany, can expect rapidly escalating employee costs. World economies could also fail to generate $8.452 trillion in annual revenue by 2030 due to talent shortages. The combined effect of these twin pressures could jeopardize profitability and threaten business models.

As revealed in our previous study, The Global Talent Crunch, demographic trends, under-skilled workforces, and tightening immigration mean that even significant productivity leaps enabled by technology cannot prevent sizable future labor shortages. As automation advances, a widening gap between the top and bottom of the labor market is emerging. On one side is an abundance of low-skilled workers whose jobs are being threatened by digital advances. On the other, less populated side is a pool of highly skilled workers whose talents are increasingly scarce and valuable. The effect on organizations is that the salaries of the highest-earning workers will pull further and further away from the salaries of the rest of the workforce, effectively creating a two-tier talent system.

By way of background, The Global Talent Crunch study assessed the talent-supply gap in 20 developed and developing global economies across the Americas (Brazil, Mexico, the United States), Europe, the Middle East, and Africa (EMEA; France, Germany, the Netherlands, Russia, Saudi Arabia, South Africa, the United Arab Emirates, and the United Kingdom), and Asia Pacific (Australia, China, Hong Kong, India, Indonesia, Japan, Malaysia, Singapore, and Thailand). The study examined talent supply and demand, delineating between high-, mid-, and low-skilled workers and categorized by highest educational level achieved. While many economies can expect a surplus of mid- and low-skilled workers, the study found that all but one country—India—can expect a deficit of highly skilled workers. More precisely, by 2030 we can expect a talent deficit of 85.2 million workers across these economies—greater than the current population of Germany.

The future of work is one of scarcity in abundance: there are plenty of people, but there are not enough who currently have the skills organizations need. In this environment, companies that focus on upskilling, engagement, and retention have a competitive advantage.

Organizations cannot compete for talent on salary alone. This would incentivize workers to chase ever-bigger pay packets, creating a vicious cycle of rising costs. Organizations are already facing constrained growth due to talent shortages, so the imperative to increase wages puts yet another pressure on their margins. Some companies may be tempted to turn to contingent workers to fill gaps, but this is an unsustainable and expensive solution to a longterm problem.

Instead, leaders must focus on what really drives retention and engagement. We know that employees who have the opportunity for career development, who benefit from inspiring leadership, and who feel like their work has purpose are more likely to stay at an organization and—crucially—are also more likely to be engaged and productive.

It is a mistake to place a higher value on technology than human capital. Though seemingly counterintuitive, as technology continues its advance in the workplace, the ability to skillfully manage people and resources will become increasingly critical. It is only through the partnership of people and technology that the full potential of both can be realized.

We encourage organizations to move to a more flexible, bespoke talent approach for both the employer and employee. On an employee level, this may mean designing roles around individual interests and skill sets so that workers can make meaningful and specific contributions. On an employer level, leaders should focus on what makes their organization uniquely attractive to employees, both in terms of the company’s core purpose and the non-monetary rewards that it can offer.

The Salary Surge will help leaders understand how the shortage of highly skilled workers could cause wage rises, and how these increases are poised to affect their sectors and the regions where they operate. We also suggest some ways forward for organizations seeking growth in an increasingly talent constrained environment.

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Understand the salary surge