The Salary SurgeDetailed methodology

To discover the effect that the global talent crunch could have on organizations’ people costs, we mapped our global talent model against Korn Ferry’s proprietary global pay database.

The Salary SurgeDetailed methodology

To discover the effect that the global talent crunch could have on organizations’ people costs, we mapped our global talent model against Korn Ferry’s proprietary global pay database.

In part one of our study The Global Talent Crunch, we measured the global demand for labor at three key milestones—2020, 2025, and 2030—to understand whether economies and organizations would have the talent they need to deliver and execute on their strategies.

Our study modeled labor supply and demand at three distinct levels, with educational attainment used as a commonly accepted proxy for skills: highly skilled (Level A) workers are those who have completed post-secondary education or a high-level trade qualification; mid-skilled (Level B) workers have attained upper-secondary education such as high school or a low-level trade qualification; and low-skilled (Level C) workers have less than upper-secondary education.

Using economic modeling, we found that global growth, demographic trends, underskilled workforces, and tightening immigration mean that even significant productivity leaps enabled by technology cannot prevent a significant shortage of highly skilled workers, which will impact businesses and economies around the world.

To discover the effect that the global talent crunch could have on organizations’ people costs, we mapped our global talent model against Korn Ferry’s proprietary global pay database, which holds salary data on 24,000 organizations in more than 110 economies. This data shows the salaries being paid at specific job levels within those economies, allowing us to build a robust picture of the total salary cost for companies operating in them. If an economy is facing a talent shortage, the data reveals the consequent pay burden organizations are likely to face in that economy at the three future milestones.

The Global Talent Crunch study showed that shortages are predominantly found at Level A, so we have concentrated on the potential wage premium for this demographic. The makeup of the global workforce at Level A is further divided into three job levels with distinct salary ranges: professionals, managers, and executives. Using the companies in the pay database, we’ve calculated the average proportion of workers at each of these job levels (60%, 30%, and 10%, respectively) and used these proportions for our model.

The wage premium is the amount of base salary (gross) that a company may have to pay on top of existing salary bills. Figures do not include discretionary or variable payments such as bonuses. The model assumes that a 1% shortage of talent in the market translates to a 1% wage premium for the available workforce. The amount that wages change as a result of fluctuation in labor supply will obviously vary depending on factors such as job type, country, and industry, but a ratio of 1:1 is used as a global average, reflecting the fact that wages tend to rise closely in line with labor shortages. The study examines additional wage inflation, i.e., inflation that is over and above that which you’d expect to take place anyway over time.

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Understand the salary surge