By Mary Hallward-Driemeier, Lead Economist, Office of the Chief Economist,
The World Bank
July 11 was the UN’s World Population Day. It seems appropriate to mark it by highlighting new reports and commentary that focus on population trends and their impact on the skills gaps and who is likely to benefit from increased globalization.
The recent McKinsey Global Institute (MGI) report “The world At work: Jobs, pay and skills for 3.5 billion people”
provides numbers on the magnitude of the challenge. Based on current trends in population, education, and labor demand, it provides forward-looking scenarios of the likely shortages of highly skilled workers and shortages of low skill jobs. With the global labor force expected to expand from 2.9 billion to 3.5 billion in 2030, it projects a global shortage of 40 million college-educated workers. In developing countries, it projects a shortage of 45 medium-skilled workers but a global excess of 90 million low-skilled workers. Rising dependency ratios from the 360 million additional older people who will need to be supported will put pressure on raising productivity. The report calls on governments and businesses to raise educational attainment, offer job-specific training, and create more jobs for those who are not as highly educated.
The International Labor Organization (ILO) used World Population Day to highlight its study on population trends and the global shortage of skills ("As population grows, so will need for skills"
). Some claims are a bit alarmist, “[t]he global “war for talent” is expected to escalate once economies recover.” But it also raises the question of how to address the mismatch of the supply and demand for skills, and to what extent migration can be a solution. The ILO also highlights another study on the share of the population in forced labor (of which 30 percent is associated with sexual trafficking) in developed countries ("Forced labour: an EU problem"
). It reinforces the need to broaden protections of vulnerable workers and prosecution of those who exploit them.
Fittingly, the New York Times’ “Room for Debate”
this week was on whether a skills gap is contributing to unemployment. The viewpoints range from blame it on a lack of skills to blame it on employers – they want work experience specific to the job but do not want to train workers, plus they are being cheap. How can better job training come about? The views range from business should collaborate with unions, to businesses should focus more on building skills than quarterly earnings, to the government should improve its own job training programs.
Recent work on the benefits of migration ("A Global View of Cross-Border Migration"
) – for both sending and receiving countries, Duncan Green asks “Why is migration a Cinderella story in Development?"
The debate about who wins from outsourcing and offshoring continues with Gianmarco Ottaviano, Giovanni Peri, and Greg Wright on “Immigration, Offshoring and American Jobs”
; Paul Krugman’s critique (“Off And Out with Mitt Romney”
) of outsourcing in undermining the implicit social contract to help create a middle class – and the Economist’s rebuttal “Outsourcing: Take this job and ship it”
. Migration of jobs, rather than workers, features in a new National Bureau of Economic Research (NBER) working paper ("Selection, Reallocation, and Spillover: Identifying the Sources of Gains from Multinational Production"
). Maggie Chen and Laura Alfaro provide evidence that the traditional focus on productivity spillovers from foreign direct investment is only one source of gains – changes in market shares and the increased exit of lower performing domestic firms also serve to raise productivity. Work by Autor, Dorn, and Hanson ("The China Syndrome: Local Labor Market Effects of Import Competition in the United States"
) looking at the effects of the growth of Chinese imports on U.S. labor markets shows how such exposure explains a quarter of the decline in U.S. manufacturing employment.