Global economic growth may be expected to maintain its momentum over the next twelve months, but it is not generating a corresponding improvement in labour productivity or wage growth. The is one finding to emerge from the seventh edition of the Hays Global Skills Index (‘the Index’), a report published by the recruitment company in collaboration with Oxford Economics.
This year’s report – titled ‘Investing in the Skills of Tomorrow; Avoiding a Spiralling Skills Crisis’ – examines professional employment markets across 33 markets and measures the ability of companies to access skilled workers, providing a unique insight into the health of the global labour market.
The year’s Overall Index score increased slightly from 5.3 to 5.4, suggesting that the global labour market has come under greater strain in the last year. The Overall Index score is an aggregate of the seven key indicators across all 33 markets surveyed. However, a subtle movement in the Overall Index score often masks a wealth of insight and information at an individual country/region level.
The Index revealed the main factor behind this tightening is the growing mismatch between the skills workers possess and those required by employers. This trend was seen across almost half of the markets assessed (16 out of 33) and is highlighted by a growing number of open job vacancies coupled with a higher rate of long-term unemployment, with the largest rises coming from within Europe (most notably Austria, France and Belgium).
The Index also highlights the economic damage being caused by the ‘global productivity puzzle’, which has seen labour productivity levels across the world flatline since the financial crisis a decade ago. The research indicated that many countries across Europe, the Middle East and the Americas are stuck in a low growth trap, whereby weak productivity growth has led to reduced investment in labour and capital, further weakening overall productivity levels. Most worryingly, this stagnation may be part of a longer-term trend; the result of macroeconomic forces such as an ageing population; a downturn in global trade; and reduced investment in education and training.
Finally, the data also presented a pattern of narrowing wage gaps between lower-skilled jobs and higher-skilled occupations, which may serve to reduce wage inequality levels globally. The research also showed across all markets covered in the report that the gender pay gap persists. It also revealed women are less likely to participate in the labour market than men and when they do, are less likely to find skilled employment.
The fast-changing work environment has led to the global labour force failing to develop the skills required to fill today’s roles. To bridge this gap, education programmes and on-the-job training need to be prioritised; low interest rates and stable global economics need to be utilised to increase investment in technology and infrastructure to help boost productivity; and diversity of all forms must be promoted. This may enable businesses to boost productivity and empower workers across the world to retain good quality jobs and boost wage growth.
“This year’s Index has highlighted a growing mismatch between the skills workers possess and the skills that are required by businesses,” said Alistair Cox, chief executive, Hays plc. “It’s already a problem if employers can’t find workers with the necessary skills and experience for today’s roles, and going forward the issue will only become more challenging with further advances in technology, particularly in AI and machine learning”.
“The Index has also exposed the alarming signs behind the global lack of growth in productivity and wages. Labour productivity across the globe has flatlined as firms fall behind with investing in new technology and crucial infrastructure development post the financial crisis, both aspects that can drive productivity forward.
“There are important long-term trends to consider here and the reasons behind them are important for business, policymakers and workers themselves. It is crucial that going forward more investment is made in education and on-the-job training so that workers can fill the roles their employers are creating and boost productivity. We are at a critical junction, where if we don’t seek to address these issues in the very near future, then the skills crisis risks spiralling out of control and the global labour market will struggle to keep up and provide the skills the world needs.”