New Economic Reality: Changing Labour Markets

July 2024

The global labour markets are rapidly evolving, influenced by demographic shifts, technological advancements, changing workforce preferences, and unexpected events. While this transformation impacts costs, productivity and economic growth, it also offers opportunities for innovation and investment in technology and human capital. Understanding these shifts is crucial for companies to adapt strategies, embrace technology, and focus on talent attraction and skill development.

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Key findings

Population ageing is a key force altering global labour dynamics and composition

Population ageing and declining birth rates are transforming global labour markets, particularly in advanced economies. By 2040, the share of the population aged 65+ is forecast to surge by 33% in developed countries, accompanied by a 4% drop in working-age population. The ageing trend is set to exacerbate the existing labour shortages and create significant skill gaps, driving competition for skilled talent and leading to higher labour costs.

Technological advancement is reshaping jobs landscape and skill demands

Rapid tech advancements are reshaping the global labour markets by driving demand for skills such as data science, programming, AI, cybersecurity and engineering, while displacing jobs that are routine and repetitive. While this trend exacerbates the existing skill mismatch, it also offers potential for productivity growth and enhanced efficiency, especially for businesses that adapt quickly, effectively employ new technology and invest in skill development.

Flexibility and a work-life balance increasingly valued by employees, defining the future of work

The rise of hybrid work and the gig economy, driven by rapid digitalisation and accelerated by the pandemic, have heightened workforce expectations for flexibility, work-life balance and compelling employer value propositions. This shift has challenged traditional labour market structures, but has also enabled talent globalisation, benefiting both advanced economies facing labour shortages and emerging markets with growing youth populations.

Skill development, tech investment and global talent focus are key to win in changing labour markets

To thrive in the new labour market landscape and effectively address shortages and skill gaps, businesses should prioritise strategic talent acquisition and retention, invest in internal talent development and upskilling, and leverage global talent pools and educational partnerships. Additionally, investments in innovative technology such as automation and AI can help cut labour costs, enhance efficiency and productivity, and bolster competitive advantage.

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Key findings
Labour market evolution challenges business costs, operations and productivity
Key drivers shaping the future labour markets
Population ageing exacerbates existing labour and skills shortages, driving up labour costs
Diverging trends in India’s and China’s working-age population to alter their labour dynamics
Africa’s burgeoning workforce holds promise, but local talent and skill support is key
Migration shapes labour dynamics, with lower-tier Asian cities rising as potential hubs
Growing Gen Z workforce drives focus on flexibility, wellbeing and continuous learning
Case study: Seino Transportation expands modal shifts to mitigate labour shortages in Japan
Case study: Yettel Hungary introduces grandparental leave to support ageing employees
Case study: IBM India expands to smaller cities for lower labour costs and large talent pools
AI and automation reshape the future of work, freeing up workforce for more critical tasks…
…while shifting skills demand and exacerbating skills mismatch
Tech adaptation to determine future productivity gains and competitiveness
Supported by digital solutions, hybrid work and gig economy drive globalisation of talent
Case study: In an AI pivot, IKEA is upskilling call centre staff for interior design roles
Case study: Ericsson uses Degreed to boost critical skill development and streamline training
Businesses face mounting pressures, as labour costs continue to climb globally
AI-driven solutions help to streamline administrative and repetitive tasks in services
Manufacturing firms turn to automation to enhance efficiency and reduce labour tasks
Case study: Knuspr invests in automation to reduce manual labour and boost productivity
Case study: Foxconn expands in Mexico looking for lower costs and easier access to the US
Navigating labour market shifts
Strategies to win in changing global labour markets
Evolution of changing labour markets
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