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Global Labor Market: Demand and Skill Gaps

Posted on 11/07/2012

National Science Foundation

The McKinsey Global Institute (MGI) recently released The world at work: Jobs, pay and skills for 3.5 billion people, a report analyzing dramatic shifts in global labor markets over the last several decades, which have caused increasingly stark skill and wage gaps across the world. In advanced economies, economic growth has largely shifted away from manufacturing, mining and agriculture to a variety of services. Millions of high-paying jobs have been created for workers with high education attainment, as new technologies and the drive for productivity gains have raised the demand for workers with advanced knowledge and skills. While this has resulted in rising incomes and falling unemployment rates for highly educated workers, workers with low education attainment in the advanced economies, i.e., with no postsecondary education, have experienced stagnating wages, job losses, and long periods of unemployment.

In the United States, average real incomes for workers with a four-year degree rose slightly more than 1 percent per year between 1960 and 2008, while they declined marginally for workers without a high school credential. Moreover, the unemployment rate for workers with only a secondary school education is now nearly twice that of college graduates. MGI warns that the growing gulf between the wealth of well-educated workers with promising job prospects and those with low levels of educational attainment and little hope of improving their living standards will almost certainly produce higher levels of social and political instability.

Labor market dynamics are predicted to continue in this direction over the next two decades. In advanced economies, the net increase of college-educated workers is likely to decline, given current rates of population growth, and college enrollment and completion. The likely loss through retirement of 12 million college-educated workers across the advanced economies through retirement over the next 20 years also will contribute to this decline. These dynamics will result in a greater need than ever to increase productivity to maintain GDP growth. MGI therefore predicts that the demand for workers with high education attainment will continue to grow faster than the available supply around the world.

By 2020, U.S. employers likely will require college-educated workers for 36 percent of all jobs, up sharply from 24 percent today. However, MGI predicts there will be 1.5 million too few workers with college or graduate degrees in the U.S., increasing the severity of skill shortages in advanced industries. Job prospects for workers without postsecondary education also would decline, resulting in further adverse outcomes. To address these issues proactively, MGI calls for an education revolution to dramatically increase in the next two decades the supply of workers with the skills that employers demand.

From the OVAE Connection (www), newsletter of the Office of Vocational and Adult Education, U. S. Department of Education, October 11, 2012