Report on the Global Shortage of Skilled Workers
September 2013
Skills in Shortage
Global Impact of Skill Shortages
Drivers Propelling the Skill Shortages
Scenario in 2020, and Steps Ahead
Solu?ons Adopted
Key Ques?ons to Consider
Objective
Shortage of skilled workers is prevalent across most countries as of 2012. This shortage is also on the rise, having an impact on the opera=ons of companies. This is especially accurate for companies opera=ng in secondary industries such as manufacturing, construc=on, and mining.
In this report, The Smart Cube examines this shortage across several countries globally, its drivers, and its impacts across industries and economies
Contents
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Most recruiters consider the absence of technical skills as the main driver for skills shortage across a myriad of industries
SKILLS IN SHORTAGE
Job roles aected by labor shortage2012
Against the milieu of the slow-paced global economy, employers are experiencing diculLes in lling vacancies due to lack of qualied and employable workers; as the global economy is recovering, the labor market is increasingly Lghtening with acute shortage in the Asia Pacic and the Americas region
Procurement
Procurement has grown from being the purchasing
department at companies to an area of strategic importance
This has resulted in the growing demand for logisLcs, supply chain, and procurement professionals globally
Finance/Accounts
An increasing number of rms are facing a shortage of high-skilled professionals with
extensive nancial knowledge; there is a shortage of locally
available talent in several parts of the world
Engineering
There is a signicant shortage of engineers globally, which directly impacts the ability of companies to
invest and take up projects There is also a shortage of
engineering leaders who can take up management roles in dierent
engineering elds
IT
According to Hays, a leading recruitment rm, informaLon technology (IT) skills, such as JAVA, .NET, C++, are in scarce supply globally during 201213 The growing importance of IT has resulted in the shortage of workers across the bandfrom CIOs to
programmers, and IT support sta
There is a signicant shortage of vocaLonally trained individuals to occupy roles such as those of electricians, welders, plumbers, and, maintenance and repair
workers, globally
Skilled Trade Companies across industries face a severe shortage of research and development (R&D) sta;
R&D is intrinsic to the companys technological advancement and top line performance, impacLng
its compeLLveness
R&D
Major Technical Skills in Shortage
Source Hays Global Skill Shortage Index (2012)
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Apart from technical skills, employers believe that skilled labor with adequate soft skills is also in shortage
SKILLS IN SHORTAGE
Job roles aected by labor shortage2012
Work Ethics
Leadership
Language CommunicaCon
Team Work
Major SoD Skills in Shortage
The a_tude of employees and their lack of work ethics are major concerns across companies;
employees o`en lack in areas of Lmeliness, willingness to work, and
other hygiene factors While this does not directly impact the availability of skilled labor, it
certainly aects quality
Employers nd it most dicult to ll leadership
roles, such as CEOs, CIOs, and Directors; this is especially true for technical leadership jobs in developing countries
Companies are coming across candidates who lack the ability to work in teams and senior-level employees
who lack people management skills; these skills aect the eciency levels in organizaLons,
which are must haves for most employers
Many recruiters face a shortage of individuals with good
communicaLon skills; this goes beyond language barriers and can be observed in cases where candidates are not uent and coherent even in their naLve
languages
Workers procient and uent in English are scarce globallyespecially in countries where
English is not the naLve language Apart from English, companies look for individuals who can speak the naLve language of the country of operaLon; this has parLcularly
become important with the global movement of talent
Companies across industries are also facing challenges of shortage of labor with so` skills such as communicaLon, language, work ethics, and leadership
Source Hays Global Skill Shortage Index (2012
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Secondary industries face the brunt of this shortage; the key skills in shortage globally are skilled trade workers, engineers, technicians, and sales representatives
Source: Talent Shortage Survey Results, Manpower Group (2012);
Notes: 1) Impact of skill shortage on the primary industry has not been assessed, due to the lack of a dened entry level skill set
SKILLS IN SHORTAGE
Intensity and Geographic Spread of Key Skills that are in Shortage2012
High-skilled Workers AYained ter?ary educa?on (college level)
Medium-skilled Workers AYained some level of post secondary educa?on (professional, voca?onal training)
Low-skilled Workers AYained only primary, and some level of secondary educa?on
Secondary Industries
Manufacturing
ConstrucCon
Oil & Gas, and Mining
AutomoCve
Energy and UCliCes
TerCary Industries
IT
Professional Services
Financial Services
Travel &TransportaCon
All Industries
Key Industries Impacted
Geographic Spread of Shortage
Intensity
of Sho
rtage
Skilled Trade Workers
Engineers
Technicians
AdministraLve & Support Sta
Managers & ExecuLves
Sales RepresentaLves
Laborers
Drivers
IT Sta
AccounLng & Finance
Low High
Low
High
Key Industries Impacted
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In Americas and Europe, skill shortages of engineers and skilled trade workers is impacting the manufacturing industry severely
IMPACT OF SKILL SHORTAGE IN AMERICAS AND EUROPE
Americas
Key Countries Aected
Region DescripCon Main Industries Impacted
Top 3 Job Roles in Shortage
Brazil 1. Technicians 2. Skilled Trade Workers 3. Engineers
Oil and Gas, Mining
There were only 1.95 engineers per 10,000 inhabitants in Brazil in 2012
In the oil and gas, and mining sector, employers also face shortage of geophysicists, rig managers, tool pushers, and experienced execu?ves
US According to a joint report by DeloiYe and
Manufacturing Ins?tute published in 2012, 5% of jobs (600,000 jobs) in the US manufacturing sector remain unlled due to lack of skilled labor
Manufacturing 1. Skilled Trade Workers 2. Engineers 3. IT Sta
Europe
Americas Outlook Skills shortage in the Americas is likely to become severe by 201516
Shortage in the US is expected to further worsen by 2015 due to increasing re?rements Countries such as Brazil will need to invest in technical training ins?tutes to cope with the expected increase in labor shortage
Romania
Bulgaria
Germany
Manufacturing
Manufacturing
Manufacturing 1. Skilled Trade Workers 2. Engineers 3. Sales Representa?ves
1. Engineers 2. Skilled Trade Workers 3. Sales Representa?ves
1. Engineers 2. Skilled Trade Workers 3. Management Execu?ves
Europe Outlook Talent shortage is expected to worsen in Europe by 201516
This is mainly due to an aging popula?on in many countries; another factor contribu?ng to increasing shortage is the s?gma associated with technical and voca?onal educa?on, which dissuades many students from studying skilled trades
Skill shortage is impac?ng Germanys manufacturing sector; according to the Federal Labor Agency of Germany, the country will face a shortage of six million workers by 2030
Eastern European countries, such as Bulgaria and Romania, face labor shortage There is a skill shortage in Romania due to the
absence of people with technical skills
Employers cite lack of individuals with industry-specic qualica?on as a major reason
Source: Talent Shortage Survey Results, Manpower Group (2012); Skills Gap in US Manufacturing, DeloiYe and Manufacturing Ins?tute (2011)
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Oil and gas, mining, construction, and IT industries are facing severe skill shortages in Asia-Pacific and Africa
IMPACT OF SKILL SHORTAGE IN ASIA-PACIFIC AND AFRICA
Asia-Pacic
Key Countries Aected
Region DescripCon Main Industries Impacted
Top 3 Job Roles in Shortage
Japan 1. Technicians 2. Skilled Trade Workers 3. Engineers
Oil and Gas, Mining
Japan faces a severe shortage of engineers due to declining enrolments in engineering, followed by a low birth rate in the country; this is impac?ng the manufacturing sector, par?cularly digital technology, automo?ve, and steel
Australia
Manufacturing
1. Skilled Trade Workers 2. Engineers 3. Sales Representa?ves
Asia-Pacic Outlook Asia will require a large pool of skilled workers and the skill shortage gap is expected to widen ?ll 2015-16
This will be driven by strong growth in developing economies, warran?ng the need for skilled workers; further, aging popula?on will also contribute to the talent shortage, along with low employability of graduates
The IT and professionals services industry is facing a shortage; according to NASSCOM and McKinsey, only 10% of IT graduates in India are employable in the industry
Construc?on
India IT
Civil and mining engineers, construc?on managers, brick and ?le layers are the toughest posi?ons to ll Universi?es are unable to produce qualied people
to match the high industry demand
1. IT Sta 2. Marke?ng Sta 3. Engineers
Africa Skill shortage in Africa is equally distributed across countries, with a majority of them facing a scarcity of quality workers As African economies expand, the demand for skilled labor is expected to increase and widen the skill gap The skill gap is mostly aYributed to the frail educa?on system and inadequate technical training in the region According to a survey conducted by the Na?onal Employers Federa?on in 2010, 96% employers in Namibia agreed that the country had a shortage of skilled labor The shortage of skilled workforce is aec?ng the oil & gas sector in East African countries, such as Uganda, Tanzania, and Kenya According to the 2011 IT Web-JCSE Skills Survey, an adverse impact of the shortage of informa?on and communica?ons technology (ICT) skills was reported by 66% of
companies across industries in Africa
Outlook for labor availability in Africa is bleak ?ll 201516, and companies will have to resort to in-house training and expat recruitment in order to ll vacancies
Source: Talent Shortage Survey Results, Manpower Group (2012); East Africa Skill Shortages, The Africa Report (October 2012)
Notes: 1) Skill shortage in Africa has not been assessed on the same parameters as other regions, due to lack of adequate informa?on
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Industry Speak
INDUSTRY SPEAK
The Hays Global Skills Index and report illustrates a major paradox in the worlds skilled labor markets. Many countries are suering chronically high levels of unemployment, yet employers are struggling to nd enough skilled individuals to ll the posts
available. Alistair Cox, Chief ExecuLve Ocer, Hays (2012)
As the global recovery gathers pace, cul=va=ng future talent and allevia=ng the shortage of skilled workers is becoming vital to ensure economic growth. With unemployment high around the world, migra=on is an emo=ve subject but strategic migra=on will be necessary to create a global workforce and alleviate the current shortage. Countries should be developing policies, which facilitate posi=ve migra=on to fuel economic growth
through providing skilled workers where they are needed, rather than crea=ng barriers to immigra=on. Jeery A. Joerres, Chief ExecuLve Ocer, Manpower Group (2010)
As we move further into recovery and business plan for growth, the demand for people with high-quality skills and qualica=ons will intensify. In the future, people with qualica=ons in science and math will be par=cularly sought aQer, and rms say it is
already hard to nd people with the right technical or engineering skills. Richard Lambert, Director General, ConfederaLon of BriLsh Industry (2010)
Increasing talent shortage in Asia Pacic could harm organiza=ons' innova=on eorts as CIOs struggle to adapt to ongoing technological change. Half of employers in the region have problems with skills shortages. IDC Report on Growth of IT in Asia Pacic (November 2012)
Concerns about nding sucient skilled employees in technical and engineering job func=ons is likely to grow in the future. EIU Survey on Skills Gap (2012)
The success of any na=onal or business model for compe==veness in the future will be placed less on capital and much more on talent. We could say that the world is moving from capitalism to talen=sm. Talent grows businesses and economies: understanding and harnessing talent mobility is now more cri=cal than ever. The talent crisis points out serious imbalances in human capital markets. On one side, there are talent shortages. On the other, high
unemployment rates and employability challenges slow down economies and threaten future growth across the globe. The new Millennial genera=on is calling for a change. At the same =me, talent is landing at the top of CEOs agendas. Klaus Schwab, Founder and ExecuLve Chairman, World Economic
Forum (2011)
"Foreign direct investment (FDI), and the projected increase in FDI into Africa, will mop up talent. The demand for talent in Africa is going to outstrip supply. As a result of the higher demand for talent, the price of talent is going to go up, and it is going to con=nue to go up, for as long as there is a skills
shortage.Ray Harraway, Tax Human Capital Director at Ernst & Young Africa (March 2012)
Source: Manpower Suggests Strategic Migra?on, Promo?ng Skilled Trades Key to Plugging Talent Gap, Manpower Group Press Release (August 2010)
Notes: 1) Images have been sourced from secondary sources including scienceonline.com
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The shortage of skilled labor is resulting in supply-demand mismatch, primarily due to lack of responsiveness of the education system to the needs of labor market
DRIVERS SKILL SHORTAGE
Mismatch between skill demanded and
supplied
Paradox for policy makers
high unemployment despite shortage of skilled labor
Industrial sectors such as construcLon,
manufacturing, and mining have been parLcularly
aected
Global Shortage of
Skilled Workers
Aging PopulaCon
Demand Outpacing Supply
Low employability of Graduates Ke
y Factors Impa
cLng
Sho
rtag
e
Very High
High
Medium
Low
Very Low
Impact on Labor Shortage:
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Aging population worldwide is having a severe impact on the size of labor force across the globe
DRIVERS SKILL SHORTAGE
Aging popula?on is aec?ng the labor availability in many countries, and this is likely to con?nue over the next decades According to a UN Report published in 2012, by 2050, the popula?on aged 60 and above will outnumber the popula?on aged
15 and below
Aging popula?on and increasing re?rements are aec?ng many developed countries including the US, the UK, and Japan There are approximately about 810 million individuals aged above 60 as of 2012 and this is projected to increase over 2 billion
by 2050
As of 2012, one out of every nine individual is aged 60 years or above, while by 2050, one out of every ve is likely to be in that age group
In 2012, the propor?on of older individuals (aged above 60) who are economically ac?ve is higher in the less developed regions (50% among men and 22% among women) than in the more developed regions (26% among men and 15% among women)
Older individuals in the less developed regions work un?l more advanced ages (above 60) largely due to the limited coverage of social security schemes, as well as low pension values received by those who are covered
Key Factors Impac?ng Shortage
Aging PopulaCon
55.7%
67.9% 68.0% 66.2% 66.6% 65.7%
58.6%
67.8% 64.0%
67.4%
62.2% 64.3% 63.0% 63.4%
57.9%
63.6% 60.3%
62.9%
Africa Asia Europe La?n America and the Caribbean
North America Oceania
2012 2025 2050
Percentage of PopulaCon Aged Between 15 and 64 Years, 20122050
Source: UN
Source: Ageing in the Twenty-rst Century: A Celebra?on and a Challenge, UNFPA (October 2012); Department of Educa?on, Australia (2012)
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Low employability of graduates and demand outpacing supply are the key factors driving the global shortage of skilled workers
DRIVERS SKILL SHORTAGE
Source: Talent Shortage Survey Results, Manpower Group (2012)
Demand Outpacing Supply
One of the main drivers of skill shortage globally is the lack of a link between what is taught in schools and what is needed by at the job front, which leads to high levels of unemployment
In many countries the educa?on system only provides theore?cal knowledge and students are onen not equipped with requisite job skills
Further, the curricula is onen out-dated, and students have no present day relevant knowledge; this is par?cularly true for technical professions and low quality of teaching is also prevalent in many ins?tutes
The lack of employability skills also contributes to the diculty faced by employers to ll vacancies In many cases the labor shortage experienced in a eld is not due to the shortage of adequate personnel, but due to their low
quality and employability; employers nd candidates lacking generic skills such as communica?on, team work, and ?meliness
Employability of fresh graduates is a major concern in certain Asian and African countries; according to an annual employers survey conducted by Manpower Group in 2012, 28% of employers in Asia stated that low employability is a problem within the region
Key Factors Impac?ng Shortage
Low Employability of Graduates
In many parts of the world, the demand for skilled labor is growing at a rate, which is outpacing the labor supply growth Increasing demand is based on increased investments in projects and growth in various sectors IT, oil and gas, and mining industries in Australia are witnessing high levels of growth and in turn are demanding skilled labor;
the growth of the labor market however, is not able to match the total demand
According to the American Society of Engineering Educa?on, as of 2012, the US needs to graduate 10,000 addi?onal engineers every year to keep pace with the demand
40% 41% 31% 30% 31% 34% 34%
2006 2007 2008 2009 2010 2011 2012
Companies Facing Diculty Filling Jobs Globally1, 20062012
Source: ManPowerGroup Survey (2012)
Notes: 1) This has been sourced from a survey conducted by ManpowerGroup in 2012 with 38,000 employers
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Globally, a shortage of high- and medium-skilled workers, and a surplus of low-skilled workers is expected by 2020; this represents a training and development opportunity
SCENARIO 2020
Source: The World at Work: Jobs, Pay and Skills for 3.5 billion people, Mc Kinsey Global Ins?tute (June 2012)
Mostly high- and medium-skilled workers are in short supply globally as of 2012 According to McKinsey Global Ins?tute, by 2020, there will be a 13% shortage of college-educated or high-skilled individuals globally Shortage of high-skilled workers will be most prevalent in developing economies, with about 50% of the shortage in China alone, in 2020 The expected shortage of medium-skilled workers (secondary educated) is about 15% by 2020 Most of this shortage is expected in developing and labor-intensive economies of South Asia and Africa However, by 2020, there is likely to be a surplus of low-skilled workers, largely in the developing countries Most of the excess supply of low-skilled workers is expected in India and other developing countries While the shortage of skilled manpower in developing countries can be overcome by improving the educa?on system, the problem in developed na?ons will be more
dicult to tackleas it is mostly not the educa?on, but the demographics that leads to the shortage
40 45
-94
High-skilled Workers
Medium-skilled Workers
Low-skilled Workers
Global Decit of Skilled Workers In millions, 2020
Source: The World at Work, McKinsey Global Ins?tute, June 2012
85 Million
Global Shortage of Skilled Workers in 2020
What will be the shortage of skilled workers in 2020?
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The availability of skilled labor in some of the prominent countries is unlikely to change drastically in the decade ending in 2020
STEPS AHEAD ?
Source: World Bank Educa?on Sta?s?cs
Availability of Skilled Labor2010 Availability of Skilled Labor2020
% Of Labor Force with College EducaCon
Size of Labor Force
5 10 15 20 25 30
800
0
500
150
100
50
China
India
Brazil
US
UK
Germany
Australia
Japan
Kenya
Romania
Size of Labor Force
5 10 15 20 25 30
800
0
500
150
100
50
% Of Labor Force with College EducaCon
China
India
Brazil
US
UK Germany
Australia
Japan
Kenya
Romania
Although the size of labor force and level of educa=on are set to improve, countries are not likely to undergo a major systemic change
This possible scenario in 2020, and its lack of progress from the present scenario, poses a serious ques=on for the decision makers today regarding the steps that need to be taken to tackle this
shortage over the next decade
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Governments are focusing on education, training and development, and policy related changes to tackle the talent shortage
SOLUTIONS ADOPTED
Source: Department of Educa?on, UK, Immigra?on rules aim to ease skill shortage in Germany, Business Day Live (February 2013)
The UK has a severe shortage of skilled labor, primarily engineers and technicians In May 2012, the UK government approved opening of 15 University Technical Colleges (UTCs) across the country during 201315
UTCs are designed to meet the shorqall of engineers and technicians by oering students a high-quality, technical educa?on, which can lead to appren?ceships and higher degrees
Once the 15 UTCs are set up, the UK will have a na?onal network of 34 UTCs In October 2012, the UK government announced a scholarship program to aYract top graduates to train as teachers for computer science
programs
The ini?a?ve is aimed at improving the standard of educa?on and thus, crea?ng a beYer pool of skilled labor The program is backed by companies such as Microson, Facebook, Bri?sh Telecom, and IBM to reduce the gap between the educa?on and
industry requirements
To eec?vely u?lize its oil resources, Ugandan government decided to develop resources with strong background in oil and gas within the country
The government sent people abroad for training courses who are now a part of the team leading their oil sector every year Till 2012, the government had sent 30 people to Trinidad & Tobago to study oil and petroleum related courses
The German government is taking steps to liberalize immigra?on laws to make it easier for non-EU workers to nd employment in the country This is being done to overcome severe skill shortages in engineering, train-driving, electronics, and plumbing jobs; according to OECD, the
country will face a shortage of 5.4 million workers with voca?onal and ter?ary educa?on by 2025
The German Chancellors cabinet has passed new immigra?on rules in February 2013, to reduce red-tapism, in order to help workers get their qualica?ons recognized easily
Measures taken by the UK
Government
Measures taken by the Uganda Government
Measures taken by the German Government
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Industry players are adopting innovative strategies to tackle the talent shortage across a myriad of industries
SOLUTIONS ADOPTED
Source: Namibia Ins?tute of Mining Technology; Queensland LNG projects will need imported labour, Reuters (October 2011); Department of Educa?on, UK
Manufacturing
Case exampleMazak (US) Like most manufacturing rms in the US, Mazak was facing a
talent shortage during the last decade; however, instead of wai?ng for government to take steps, Mazaks leadership decided to take proac?ve measures
In 2008, the company started a training campaign for entry level posi?ons, which the company calls Tooling University The training program involves computer-based, classroom, and
on-the-job training with Mazak machines
Apart from its own training ini?a?ves, the company has also collaborated with local community colleges to oer a two-year program for appren?ce engineers and machinists
The companys president sees this as a remarkable improvement, which has enabled them to hire 300 individuals since 2008
Case exampleBechtel (Australia) Bechtel Australia was facing a talent challenge in the country
in 2011
The company reported that shortage of skilled labor nega?vely impacted its revenues in 2011, and that the company will combat this by hiring foreign labor
Riley Bechtel, CEO Bechtel, stated that the company will import workers such as electricians and welders into Australia to ensure that manpower shortage did not aect top line performance
ConstrucCon Case exampleRossing and De Beers (Namibia) Namibia has a popula?on of 2.3 million as of 2011, and the
country faces a severe labor shortage; mining is a cri?cal industry in the country and accounted for 9.5% of the countrys GDP in 2011
In order to tackle the shortage of skilled voca?onal workers in the country, Rossing Uranium (Rio Tinto) set up the Namibia Ins?tute of Mining Technology (NIMT) in 1991
NIMT func?ons as a technical and voca?onal ins?tute, oering courses in mining, manufacturing, and engineering
Further, in 2007 De Beers Namibia donated $308,000 to NIMT for its expansion plans
The ins?tute produces about 300-500 graduates annually, all of whom get absorbed in the mining industry
Oil and Gas, and Mining
IT
Case exampleIBM (Global) IBMs Academic Ini?a?ve program, provides educators free
resources to strengthen their curricula in elds such as cloud compu?ng, informa?on management, big data, and NoSQL databases
The program provides training material, curriculum guides, sonware, and hardware needed to teach analy?cs and informa?on management skills
These courses train students to occupy roles such as analy?cs specialists, data scien?sts, big data specialists, data and visualiza?on specialists
This was done to bridge the skill demand and supply gap in the IT industry globally, especially in the eld of big data and analy?cs
Measures Taken by Companies
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Your Checklist
SOLUTIONS ADOPTED
Below is a list of queries that senior execuLves, decision makers, and managers globally should reect on regarding the risk of shortage of skilled labor
Are your future talent needs impacted by the shortages experienced in the world? Do you operate in geographies where there is a skill shortage? Do the regulaCons in the geographies allow you to hire foreign workers? What impact will skill shortage have on your top line? What are the various steps your compeCtors
and the industry are taking in this regard?
Are you taking the necessary steps to insulate your company from this risk in the long term?
Contact our strategy team to take this forward and know about our various oerings in this space! [email protected]
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The Smart Cube has conducted more than 17,000 studies to date across virtually every major industry, function, and region through its global team of over
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