Facing an unseen challenge in global economy
The 21st century is a century of megatrends and global challenges. Usually, crises and megatrends are very visible, and dominate public discourse. But: There is one challenge, which is too often unseen or underestimated: The 21st century will be the century of „unemployEEment“. It is now urgently needed to shed light on possible solutions.
Over the last 200 years populational increase has been the major driver of economic growth and prosperity. This driving force of growth has been losing momentum for some time now. But things will get much more complicated in the future. And the turning point is ... now.
With their international study StepStone Group including Appcast and Totaljobs show: We do not see it coming. Numbers and population prospects are publicly available. Nevertheless: Only a minority of people in the United States, China, Germany and the United Kingdom see this economic threat coming.
Read here why the great unemployEEment will shape our future, which solution approaches there are – and why digitalization will not solve the problem.
Dramatic working population development in Germany, US, UK and China
Growth rates of the working age population from 1955 to 2050 according to UN forecasts – 30-year range, 5-year range and annual range.
Interactive graphs: Click on the arrows or countries or hover over the graphs in order to learn more.
For a long time, the working population grew in all major economies. But those times now belong to the past. Especially in Germany and China, the size of the working population is visibly shrinking. The outlook until 2050 paints a worrying picture: In the future, this dramatic development is set to be felt in all countries.
Although the classic immigration countries, the US and UK, are not yet directly impacted by the decline in the working population yet, the once strong populational increase which acted as a driver of growth and prosperity is declining significantly or even disappearing altogether. And at the same time, the proportion of the older population is also increasing massively. Meaning that as there are fewer people having to perform more, economic growth is made more difficult.
Sebastian Dettmers: A new era is beginning in the labor market. Alongside the climate crisis, the threat of labor shortage is the greatest economic and societal challenge of the 21st century. We all need to be much louder about this. And work together at full speed on solutions to safeguard our prosperity.
Shrinking working population: People do not see the danger
20% OF THE RESPONDENTS ASSESSED THE DEVELOPMENT CORRECTLY.
The UN figures highlight the problem of the shrinking working population. However, many people are not aware of the development or underestimate the consequences it will have.
For example, only one in five of those surveyed worldwide think that the size of the working population will decline as massively as forecasted. A good one in three even assumes that the size of the working population will continue to grow. People from Germany (29%) are still the most likely to be aware of the development. In the UK it is 25% and in China 17%. In the US, only one in ten predicts the right development. The low level of awareness in the US is not a surprise because the development there is far less dramatic than, for example, in Germany. The high profile in the UK is, however, rather surprising.
Interestingly, the misjudgement exists regardless of what job position people have. Even top decision makers are hardly aware of the challenge they will face in the future. Only just under a quarter of the respondents from upper management estimated the development correctly. This proves impressively: We are barely prepared for the upcoming developments.
On the other hand, the study also gives hope: Those who have been made aware of the problem understand how serious the situation is. In this case, more than two thirds of the respondents consider the population development problematic. Only one in ten still considers it unproblematic. Therefore, now is the time to wake up and act together.
Often misunderstood: Digitalization is not a solution to the problem
Digitalization will fix it: At least this is what more than 60% of all the respondents think when it comes to declining productivity as a result of a shrinking working population. In Germany, even 75% reckon that our productivity has increased more in recent years than ever before thanks to digitalization. After all, machines, smart robots and artificial intelligence could simply take over the work that needs to be done. In some industries, people are even afraid of losing their jobs as a result of digitalization.
Only the respondents from the UK are more realistic about digitalization: After all, 30% estimated that growth in productivity has waned despite digitalization.
In fact, digitalization is not a solution to declining productivity. Researchers argue about whether the impact of technological development has simply been overestimated or potentials have not been properly exploited. The reality is that in the past 20 years, there has been no increase in the growth of productivity due to the rapid development of computers and the internet.
60% OVERESTIMATE THE EFFECT OF DIGITALIZATION.
Co-Author of “The Great Demographic Reversal“
Professor Charles Goodhart: A combination of declining fertility rates and longer life expectancy is going to make massive changes to our labour markets in future years. It is, indeed, necessary to plan ahead for a structurally tighter labour force and, as a result, rising unit labour costs. To offset such higher labour costs, employers will need to invest more in labour-saving technologies, and also to spend more time and effort on labour management.
What ways are there out of the unemployeement?
There are two obvious strategies to address the unemployeement: Increase the number of workers in other ways and/or make each worker more productive. The following measures can increase the overall number of employees again: integrate all people equally in their diversity into working life, promote labor immigration and extend the working life. More efficient automation as well as greater flexibility in the labor market ensure that people take on tasks for which they are most needed and where they can make the greatest difference. This would increase individual productivity. But how are these approaches evaluated?
The respondents have identified the possible solutions as follows:
All suitable tasks should be automated more consistently. This takes the burden off the people. This way, less productive, repetitive tasks would disappear. In return, higher-value jobs would be created that require human strengths such as creativity or problem-solving skills. Better and higher quality occupations would in turn lead to improved conditions and pay for human labor. In all major economies, people consider this approach a good solution to soften the effects of the unemployeement. China in particular stands out in this respect: 76% think that better automation promotes increased productivity.
Diversity in the workforce
No two people are the same. They vary in gender, culture, social and psychological characteristics, but also in their views and perspectives. In the future, promoting diversity in the workforce will no longer be a question of attitude alone. Because from an economic point of view, we will quite simply no longer be able to afford to rule out workers. Around three quarters of respondents have a positive attitude toward a diverse workforce. People from the US are more reserved in this respect: Only slightly more than half agree that diversity should be promoted more.
Flexible labor market
The flexibility of the labor market has many facets. This includes the option of being able to change jobs quickly and easily, as well as companies hiring new staff in an uncomplicated and unbureaucratic way. This can increase the productivity of those changing jobs. Remote-working options and other tailored forms of working relationships can also make a difference. New working models beyond permanent employment, such as gig workers or freelancers, also increase flexibility for employers and employees. Almost three quarters of all the respondents think that making the labor market more flexible is a good solution to increase productivity. However, what is surprising is that in the US and UK, of all places, the euphoria is much less pronounced. One explanation is that the labor market there is already very flexible meaning that it is assumed that there is less leeway in this respect. In traditionally security-loving Germany, the openness for more flexibility is surprisingly high.
Those who continue to work beyond the statutory retirement age increase productivity. The retirement age is being raised worldwide to keep up with longer life expectancy. What continues to be a meaningful occupation for some is out of the question for most when they think of their well-deserved retirement: People obviously do not want to work longer than they have to. According to the survey, only 44% have any confidence in productivity in old age, and around a third even see this very negatively. People in the US are a little more positive in this respect: more than half (57%) are in favour of it. In general, the willingness to work longer increases with the age the respondents. This can even have its advantages: According to a study by Oregon State University, working longer has a positive effect on life expectancy.
Labor migration is a classic economic measure to increase the number of people in employment. The US and UK in particular have traditionally benefited from labor migration, and yet the respondents were surprisingly critical of this option. In the UK, only 55% view labor migration positively, and in the US the figure is even as low as 42%. Noticeable here was that people with a university degree see labor migration significantly more positively (60%) than people without (50%).
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About the survey
The global labor market is experiencing a turning point. The age of “unempolyeement” is beginning. This is shown, among other things, by the UN forecasts on population development. With this international study, the StepStone Group wants to create awareness for the coming developments and possible options for action. For this purpose, StepStone conducted a survey among around 20,000 workers in the US, the UK, Germany and China in the period from December 2021 to January 2022. The aim was to decode whether the demographic challenge has reached people's consciousness, how possible solutions are assessed, and what differences there are in four of the world's five most important economies.
StepStone has been helping companies make great hires and candidates find the right job for over 25 years. Through constant development, innovation, and deep understanding of the market we have grown StepStone into what it is today: One of the world's leading online recruiting marketplaces.
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