The Global Skills Convergence

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The Global Skills Convergence

  1. 1. The Global Skills ConvergenceIssues and ideas for the management of an international workforceADVISORY by Bernard Salt September 2008
  2. 2. Report steering committee The steering committee would also like The steering committee would alsoThis report represents the culmination to acknowledge the contribution of the like to recognize the contribution toof 7 months work for a global following people who provided feedback this study made by Sally Mikkelsen,steering committee including the and direction on the study. Senior Adviser at KPMG in Australia andfollowing people. Ashima Bist, Graduate Trainee at KPMG in Mr Ben Garfunkel Australia. The steering committee wouldMs Rosheen Garnon Partner like to thank the partners and staff of KPMG(Steering Committee Chair) International Executive Services member firms who contacted and set upPartner KPMG in the United States the interviews with industry executives.International Executive Services Mr Nicholas Bacon If you have any queries regardingKPMG in Australia Partner access to further copies of this reportMs Mary Kay Woods International Executive Services please contact the nominated KPMGPartner KPMG in the United Kingdom member firm representative in theInternational Executive Services relevant country as indicated on the Ms Jill StoreyKPMG in the United States inside back cover. PartnerMs Stephanie Bolakowski International Executive Services KPMG in Australia partner and reportSenior Manager KPMG in the United Kingdom author Bernard Salt is based in MelbourneInternational Executive Services and is the author of two best-selling books Mr Peter DolanKPMG in the United States on demographic trends. He is a columnist PartnerMr Bernard Salt International Executive Services with The Australian newspaper, a regular(Author) KPMG in the United States on the corporate speaking circuit, andPartner manages a dedicated group of advisers Mr Andy Hutt within the Melbourne office specializingNational Markets Partner in commercial demographic research. SeeKPMG in Australia International Executive Services www.bernardsalt.com.auMr Joel Bevin KPMG in Australia(Principal Researcher) Principal Researcher Joel Bevin works as Mr Achim Mossmann a senior adviser at KPMG in Australia.Senior Adviser Managing Director Joel is an economist with a specialRisk Advisory Services International Executive Services interest in demographics at anKPMG in Australia KPMG in the United States international level. He is also interestedMs Sarah Read in the evolving nature of globalization and Mr René PhilipsDirector the connection between demographics PartnerRisk Advisory Services and social and economic development. International Executive ServicesKPMG in Australia KPMG in Belgium For further comment regarding the content or the conduct of the Ms Kathy Thompson research, contact Bernard Salt in the Consultant Melbourne office of KPMG in Australia International Executive Services on +61 3 9288 5513 or by email at KPMG in the United Kingdom bsalt@kpmg.com.au© 2008 KPMG International. KPMG International provides no client services and is a Swiss cooperative with which the independent member firms of the KPMG network are affiliated. All rights reserved.
  3. 3. ContentsForeword ........................................................................................................................ 1Executive summary ....................................................................................................... 21 Introduction ............................................................................................................ 52 Labor market outlook for selected countries ...................................................... 7 2.1 Outlook for the US ....................................................................................... 7 2.2 Outlook for other nations ............................................................................. 93 Strategic and policy responses .......................................................................... 13 3.1 The rise of skilled migration ....................................................................... 13 3.2 The role of corporate expatriates ............................................................... 144 Migration in a flat and creative world ............................................................... 16 4.1 Reasons for globalization of the labor market ........................................... 16 4.2 Thomas Friedman’s world ......................................................................... 17 4.3 Corporate responses .................................................................................. 18 4.4 The rise of the creative class ..................................................................... 195 Global migration flows ....................................................................................... 206 Measures of skills convergence ......................................................................... 24 6.1 Convergence in literacy .............................................................................. 24 6.2 Migrant integration and labor market outcomes ........................................ 257 Global migration and cultural deference .......................................................... 27 7.1 Reasons for the ‘brain drain’ ...................................................................... 27 7.2 Why losing skilled young labor is an important tax issue .......................... 28 7.3 The workforce Diaspora ............................................................................. 308 Fertility and the demographic faultline ............................................................. 31 8.1 What is the demographic faultline? ........................................................... 31 8.2 Why fertility rates dropped suddenly causing the faultline ........................ 32 8.3 The solution of increasing labor force participation ................................... 33© 2008 KPMG International. KPMG International provides no client services and is a Swiss cooperative with which the independent member firms of the KPMG network are affiliated. All rights reserved.
  4. 4. 9 A global perspective ............................................................................................ 35 9.1 Global economic convergence and divergence ......................................... 35 9.2 The spread of the multinational corporation .............................................. 36 10 Business response to the global labor market ................................................. 39 10.1 Background to interviewed corporations ................................................... 40 10.2 The rising demand for talent ...................................................................... 41 10.3 Recruiting strategies .................................................................................. 42 10.4 Challenges of global mobility ..................................................................... 44 10.5 Demand for international assignments ...................................................... 45 10.6 Managing the expectations of Generation Y ............................................. 45 10.7 Emerging regions and labor challenges ..................................................... 46 10.8 Looking to the future ................................................................................. 47 10.9 The global economic environment ............................................................. 49 10.10 Common themes ....................................................................................... 49 11 Implications for managing a global workforce ................................................. 50 What does it all mean? ............................................................................................... 52 Bibliography ................................................................................................................. 54© 2008 KPMG International. KPMG International provides no client services and is a Swiss cooperative with which the independent member firms of the KPMG network are affiliated. All rights reserved.
  5. 5. The Global Skills Convergence ForewordIn The Global Skills Convergence KPMG The Global Skills Convergence presents of interviewees: here is a generationpresents the thought-provoking notion the demographic case for an imminent that requires – perhaps even demandsthat growth in the supply of skilled and global skills convergence. It also – transparency of leadership and theunskilled labor in the developed world may canvasses the views of some of the development of individually tailoredslow in the next decade as Baby Boomers world’s leading corporate practitioners career plans.exit the workforce. More people exiting on the subject of managing a globalthen entering the workforce leads to workforce in an era of increased demand Whatever your views on the subjectwhat author Bernard Salt describes as for skills and talent. of an imminent global skills and labora ‘demographic faultline’. shortage or on the challenges of managing And nowhere is this issue more prevalent Generation Y, this study presents freshSuch a development would prompt than in KPMG’s own workforce. With more ideas that will surely test the thinking ofchanges in the way in which talent than 123,000 staff and 7,100 partners many global corporations. And, it is foris managed globally by multinational worldwide we are constantly adjusting to this very reason that I believe The Globalcorporations. For example, skilled labor in changes in client demand. These changes Skills Convergence should be mandatoryone region might be transferred to a region must be managed against a background of reading for anyone involved in managing awith a skills deficit. And while this process shifts in the availability of talent. global workforce in the 21st century.sounds simple enough, the process ofmoving staff from place to place requires Interestingly, one of the common themescareful management based on sound emerging from the interviews in this Tim Flynnadvice. This is where KPMG’s International study was the challenge of recruiting and ChairmanExecutive Services practice has built its retaining 20-somethings otherwise known KPMG Internationalsuccessful global practice and it is why this as Generation Y. And I am pleased to saygroup commissioned this study. that I concur with the broad response© 2008 KPMG International. KPMG International provides no client services and is a Swiss cooperative with which the independent member firms of the KPMG network are affiliated. All rights reserved.
  6. 6. The Global Skills ConvergenceExecutive summaryThe Global Skills Convergence argues that where the fertility rate remained high for mid-1970s which impacts labor marketsthere is a demographic faultline running much of the 20th century. The baby boom precisely 40 years later. Could this be thethrough much of the developed world neither started nor ended in the Latino issue that knocks China off its currentwhich will impact negatively on the supply Christian, African, Indian or Arab worlds. growth trajectory?of labor and talent during the next decade. The end of the western baby boom wasThe faultline is the time at which more signaled in the 1960s by the arrival of, KPMG’s global International ExecutiveBaby Boomers (born 1946-1961) exit the and access to contraception and by the Services (IES) practice has accessed, withworkforce than Generation Ys (born changed expectations and priorities of permission, unpublished data from the1976-1991) and Millenniums (born women. Again, these developments United Nations Population Division which1991-2006) enter the workforce at age applied in some countries and not others. shows the net flow of migrants between15. The delayed entry into the workforce a range of countries this decade and againcaused by a longer engagement with The demographic faultline applies at ten years earlier. Unfortunately, this dataeducation means that the faultline is different times in different countries. The set does not include information for thelargely an interplay between retiring Baby pool of people from which Japan draws US. However, what it does show is theBoomers and newly arriving Generation Ys its labor force began to contract in the recent outflow of Poles to developedwith Generation X caught in between. mid-1990s. In the United States (US) European Union nations as well as of the slowdown in the rate of growth in Romanians to Italy and of PakistanisThe demographic faultline is caused by the productive population begins at the to the United Kingdom (UK). There werethe sudden jump in fertility that followed end of this decade. In China the faultline also net outflows from the UK to Spainthe end of World War II. This initial ‘jump’ applies from the middle of next decade. and Australia.in 1946 was the beginning of the baby The diminution in the number of peopleboom and it applied largely to western in China aged 15-64 results from theeconomies with the exception of Ireland application of the one-child policy in the© 2008 KPMG International. KPMG International provides no client services and is a Swiss cooperative with which the independent member firms of the KPMG network are affiliated. All rights reserved.
  7. 7. The Global Skills Convergence The point being, that changes to the Here is a generation that is highly Interview subjects confirmed theirgeo-political landscape facilitated the flow educated and has been global in experience with the skills shortageof labor from an area of surplus (Poland) their thinking from an early age. This although they often described this asto areas of demand such as the UK. is a generation that has postponed a lack of talent in the right location.The other driver of migration is the commitment to relationships and that Interviewees were especially challengedpursuit of lifestyle. values travel. Educated Generation Ys by Generation Y whom they almost are especially predisposed to working universally described as ‘less loyal’The argument advanced in this study is for ‘branded’ global corporations, such than previous generations. The counterthat in the 21st century, labor and talent is as BNP Paribas and other businesses argument to this lack of loyalty displayedincreasingly able to flow seamlessly across interviewed, that have the capacity to by Generation Y has in fact been createdthe globe. This concept of the propel them into a global career. This by the employers themselves. Businessesfree-flow of the elements of business means that skill shortages in one country at the top of the business cycle offerwas first put forward by US journalist and can be addressed by transferring talent employees opportunities and rewardsauthor Thomas Friedman in his 2005 book out of another country. On the other however as the market moves towardsThe World is Flat. Friedman argued that the hand, it also means that a skills shortage the base of the cycle, employers tend todismantling of political barriers, evolution caused by a demographic faultline can eliminate surplus labor and cut retirementof technology and the globalization of be exacerbated by the ‘flighty’ values of and other benefits.business is leading to a ‘flat world’ where today’s 20-somethings.capital, technology and information flow Interviewees also commented thatbetween markets. It can be argued that As part of this study interviews were Generation Y has an ‘expectation’ ofFriedman stopped one step short of a conducted with key personnel at global longevity and of having an internationallogical extension to this argument. In a corporations who have, or have had, career. While interviewees weretruly ‘flat world’, labor and talent will also responsibility for managing a global concerned about the skills shortage,flow from market to market. The free flow workforce. In many cases interview many believed they could manage theof talent and labor is more feasible this subjects had more than 25 years situation by improving the retention ofcentury than it was last century due to experience. The interviews were older workers and by encouraging greaterpolitical change and greater accessibility completed with executives based participation by women who may wantto cheap airfares, although it must be said in Australia, France, Germany, the to return to work after having children.that the dynamics of mobility may change UK and the US. They were drawn Interviewees were especially challengedas a result of rising energy costs. from global businesses in energy and by the difficulty in securing the right talent natural resources, financial services, and inserting them into often isolated andThe newest arrivals into the global manufacturing, retail and technology. The difficult locations. This process requiredprofessional workforce are same line of discussion was followed with leading edge remuneration packages andGeneration Y otherwise known as each interviewee. There was a surprising other support including language andthe children of the Baby Boomers. commonality to the responses. Three culture training. Several intervieweesGeneration Y in the developed world, formal interviews were also conducted talked of the need to increasingly tailorand even in China where they are often with representatives of KPMG’s IES career paths for staff.referred to as ‘little emperors’, have practice to provide a broad overview ofgenerally been raised in an era industry trends over the last 25 years.of prosperity.© 2008 KPMG International. KPMG International provides no client services and is a Swiss cooperative with which the independent member firms of the KPMG network are affiliated. All rights reserved.
  8. 8. The Global Skills Convergence • Manage the expectations of staff before, but especially after completion of an international assignment: sometimes it can seem a bit mundane returning to head office after the excitement and exotica of an international posting. • Manage Generation Y’s expectations and provide them with constant feedback as they progress towards career goals. • Benchmark best practice in remuneration and ensure that the most effective tax arrangements are in place for staff, for the corporation, and to meet official requirements. The Global Skills Convergence is a study that was commissioned by KPMG’s global IES practice. The research was directed and authored by KPMG in Australia Demographer, Bernard Salt and Principal Researcher, Joel Bevin andThe interviews, combined with the • Ensure, as far as possible, that local supported by numerous staff. The studydemographic research, provide a unique staff manage the group’s operations in was completed over 7 months toperspective on the current skills and labor each country. August 2008; it comprises bothshortage. It shows that there will be a demographic research as well as aslow-down, if not a contraction, in the • Tailor career paths and remuneration series of interviews with the Heads ofpool from which the labor force will be packages and consider concepts Human Resources and Global Mobility atdrawn at the end of this decade in the including delayed bonuses and global businesses. The report is intendedUS and by the middle of next decade in performance-based pay. to be distributed globally to KPMG’smany other developed markets. Some • Understand the inter-relationships IES practice clients as part of the thoughtof the key learnings that flow from the between business and politics, and leadership program. Soft copies ofinterviews are as follows. the strength of familial relationships in the report can be downloaded from some emerging markets. www.kpmg.com/globalskillsconvergence• Establish a leadership group and invest in that group’s development.• Make sure they have exposure to “The international mobility of talent delivers foreign markets and understand local culture and sensitivities. diversity of viewpoint … our business, all business, needs different viewpoints.” Brian Ambrose, Global Mobility, KPMG© 2008 KPMG International. KPMG International provides no client services and is a Swiss cooperative with which the independent member firms of the KPMG network are affiliated. All rights reserved.
  9. 9. The Global Skills Convergence 1 IntroductionThis report presents original research on The proposition behind this study is that between countries, escalate the flowthe issue of the global skills convergence the rate of growth in the labor market of migrant workers to address labor andas measured by migration and labor in much of the developed world will skills shortages.mobility. It focuses specifically on the slow over the next decade as the Babymanagement and policy issues associated Boomer generation exit the workforce. It But whereas the developed world iswith these trends for global businesses is argued that in many nations the supply entering a phase of diminished growthand government. of new workers in Generation X and in the worker population, the developing Generation Y is insufficient to offset the world is quite different. There wasThe report was commissioned by KPMG scale of the exiting Baby Boomers. no baby boom in much of the LatinoInternational via its global IES practice Christian, African and Arab worlds wherewhich provides advice to global companies As a consequence it is argued that the the fertility rate* remained high for moremoving staff between countries. rate of workforce growth will decelerate or less the whole of the 20th century. and in some nations actually decline over There is no imminent diminution in theThe study involves demographic research the next decade. At the very least, this supply of labor coming through theaccessing previously unpublished data ‘demographic faultline’ based on the workforce in these nations.sourced (with approval) from the United baby boom generation moving beyondNations. It also draws on a number of the workforce will place downwardinterviews with key executives who have pressure on labor force participationeach had in excess of 25 years experience rates and, again to varying degreesin managing a global workforce includingmembers of the leadership team ofKPMG’s global IES practice.* The fertility rate is the number of children that would be born per woman and is a better indicator of fertility than the birth rate, which measures births per 1,000 people, as it is not affected by the age distribution of the population.© 2008 KPMG International. KPMG International provides no client services and is a Swiss cooperative with which the independent member firms of the KPMG network are affiliated. All rights reserved.
  10. 10. The Global Skills ConvergenceIn addition, the advent of Generation Y It is argued that the stage is being setinto the developed world’s workforce is over the next decade for the flow of talentprompting different behaviors with regard and labor between the developed and theto career mobility. Today’s 20-somethings developing worlds. In some cases theseare generally far better educated and flows have already started and they are‘connected’ into the global economy expected to escalate as growth in thethan any previous generation and as a pool of labor diminishes in theconsequence, they are predisposed to the developed world.concept of an international career. Migration flows will however be limitedThis predisposition by educated elements by political barriers in some areas, but inof Generation Y is being acknowledged by other places labor will be aggressivelyglobal businesses that now actively pursue pursued and transacted between bothpolicies of global mobility. And not simply developed and developing countries.for the purpose of holding on to ‘flighty’Generation Y workers but because they see In an increasingly ‘flat world’, labor andcommercial benefits in the cross-fertilization talent will flow from where it is in excess,of talent and labor on a global scale. to where it is required, as a result of both push (domestic conflict forcing migrantsWhile Generation Y will be a key focus to flee) and pull (higher wages drawingof businesses in the coming decades, migrants in) factors.understanding the motivations of futuregenerations, the Millenniums (those born This study documents these flows andafter 1991), will be an important factor their impacts, and considers the responsegoing forward. Born into a technologically of global corporations to these shifts. Itintegrated world, this generation will also articulates the way in which somehave the technical and conceptual skills aspects of the global workforce mightto adapt to occupations of the future. The unfold in the second and third decadesMillenniums are likely to demand a career of the 21st century.that provides a flexible transition betweenideas and will expect location andtraditional working hours to be irrelevantto their success. “I know it’s very popular to talk about theAnd finally beyond the demographic,generational and corporate policy factors world being flat … but people aren’t flat.”that seem to be driving trends in global Matt Burns, Lockheed Martin Corporationworkforce mobility, there is the impact ofrecent geo-political shifts. Political changeat the highest global level is opening newterritories for western-styled developmentwhich permits and even encourages anassociated inflow of workers and talent.© 2008 KPMG International. KPMG International provides no client services and is a Swiss cooperative with which the independent member firms of the KPMG network are affiliated. All rights reserved.
  11. 11. The Global Skills Convergence 2 Labor market outlook for selected countriesIn the developed world generally around 65 to the US. But again, without a deep shift This analysis revealed a range of outlookspercent of the population aged over 16 is in the way that a society reproduces and for the labor market population in both theengaged within the labor force. In the US, cares for children, there is little scope for developed and the developing world.the participation rate has increased from a further increase in the participation rate.around 55 percent in the 1960s to around . Outlook for the USthe 65 percent over the last 20 years as This means that both the US and China and Figure 1a shows the results of thiswomen remained in or returned to the nations ranging between these extremes analysis for the US between 1950 andworkforce after having and raising children. will increasingly rely on population growth 2050. Over the 55 years to 2005 the in the working-age group to support future number of people added to the poolHowever, as the participation rate has expansion of the workforce. from which the US labor force is drawnapproached the mark of 65 percent, the hovered around the two million mark.capacity for even further gains is limited As part of this study, data and forecasts And the reason is that during this phase,without a fundamental reorganization of have been accessed from the United the number of people exiting the pool atthe method of family creation and gender Nations Population Division (the World 65 was always exceeded by the numberroles. This means that the outlook for labor Population Prospects are revised on a entering at 15.market growth in many developed nations biennial schedule) and other nationalis largely dependent upon the inflow of a statistics bodies in order to examine netmigrant population in the working group. annual change in the population aged 15-64 year over a 100-year timeframe inThe participation rate in China, on the 195 countries.other hand, has remained between 75percent and 80 percent over the last twodecades reflecting a very different society© 2008 KPMG International. KPMG International provides no client services and is a Swiss cooperative with which the independent member firms of the KPMG network are affiliated. All rights reserved.
  12. 12. The Global Skills ConvergenceFigure a – Net annual change in the population of the US aged -, 90-00 Baby Boomers enter Generation X enter Generation Y enter Millenium generation the workforce the workforce the workforce enters the workforce 3,000,000 2,500,000United States 2,000,000 1,500,000 1,000,000 500,000 0 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050Source: KPMG International 2008, US Census BureauHowever, between 2012 and 2026 the and unskilled labor into the labor market The reverse might apply to generationsannual rate of growth is expected to places upward pressure on the rate of (such as Generation Y and possibly thecontract by half, which will result in less remuneration and migrant workers are Millenniums) where because of a shift inthan one million being added to the labor increasingly drawn to the higher wages the underlying demographics, they areforce each year. offered in the US. confident their skills and labor will always be in demand. Generation Y is unfazed by,The issue here, is that over the last 40 Superimposed over the 100-year and even challenging of, authority at anyears, the US economy has become labor force population growth charts is age when most Baby Boomers and manyaccustomed to accessing a labor force the era in which each of the four ‘working Generation X would have accepted thefrom a population pool that has expanded generations’ entered the labor market. status quo.at a predictable rate of two million peryear. But by the end of this decade, the Baby Boomers in the US (and elsewhere) The other issue is that in today’s globaltransitioning of the Baby Boomers beyond entered the workforce in the late 1960s labor market both skilled and unskilled laborthe workforce results in a diminution in and 1970s during a period of rising with the means and ambition, can flowthis pool’s rate of expansion. population growth. Generation X entered from one country to another. And especially the workforce in the 1980s and early 1990s if there have been recent changes toAll of a sudden the economy must adjust when the rate of growth in the working-age geo-political barriers. The rapid globalizationto accessing labor from a pool that is population had flattened out. Generation Y of business, combined with a predispositionexpanding at a much-reduced rate. This on the other hand, entered the workforce by educated under-35s to think globally,is the so-called ‘demographic faultline’ in the late 1990s and in the current decade and regional variation in the value of labor,caused by more people exiting than which has been an era of falling rates of is leading to the evolution of a globalentering the labor force. growth in the working-age population. workforce. Managing that workforce andThe initial response to this situation In broad terms, this demographic context the expectations of its participants is now ais likely to be a tightening of the suggests that generations entering the major issue for global businesses.unemployment rate although many workforce in an era of a rising labor The demographic context in whichof the skills required may not be in supply (such as Baby Boomers and some workers, and indeed generations enter thesufficient supply domestically. A skills Generation X) regard the balance of power workforce, can have a profound impact onshortage therefore ensues and, as a in the workplace as remaining with the employee values.consequence, there are heightened calls employer. Indeed, this experience mightfor an expansion of the migration program. be expressed as a deep respect for (andThe slowdown in the supply of skilled possibly even fear of) authority.© 2008 KPMG International. KPMG International provides no client services and is a Swiss cooperative with which the independent member firms of the KPMG network are affiliated. All rights reserved.
  13. 13. The Global Skills Convergence 9For example, the Baby Boomers might in the 1950s and 1960s, household . Outlook for other nationshave been born in the 1950s but they formation in the 1970s and 1980s, and The 100-year perspective on the laborentered the labor market in the 1970s peak consumerism in the 1990s and in market pool for the US is repeated inwhen it was rising. This led to a set of this decade, will also underpin a labor and other developed nations such as Australiabehaviors in the workplace where if that skills shortage next decade. (see Figure 1b) and Canada (Figure 1c)Baby Boomer did not perform as required, where there is also a projected diminutionthen ‘dump them’, reach into the labor This is not to say that the US labor market in the rate of growth in the laborpool ‘bucket’ and recruit another worker. will contract. Rather, it is to say that the market population. economy must adapt quickly to a laborGeneration X entered the labor market market that is increasingly constrained by However, in other developed nations thein the late 1980s and early 1990s when a reduced number of people entering the immediate outlook is for the labor marketthe rate of growth in the labor pool had 15-64 age group. population to transition from recentreached a plateau. growth to contraction as early as next The long-term outlook for the labor force decade. Indeed in Japan the labor marketGeneration Y, on the other hand, began to population shows a recovery in the 2030s, population has been in decline since theenter the labor market early this decade and which has been labelled the ‘Latino Lift’. mid-1990s (see Figure 1d).in a different paradigm altogether. Yes, the This results from differential fertilitylabor market is expanding but it is expanding rates in the US. The Latino fertility rate in Over the 40 years to 1990, the number ofat a reducing rate: if that Generation Y does the US is almost three times the white people aged 15-64 in Japan had increasednot perform as required, then you can’t fertility rate. This shift is already impacting every year by between 500,000 and onereach into the ‘bucket’ and recruit another, consumer trends and is especially evident million underpinning a rising workforcebecause the ‘bucket’ is shallower. in the youth market: the world is likely and consumer base. This was good news to see less ‘white kids frolicking on the for the Japanese economy: not only doesThis demographic shift transfers the beach in Coca Cola advertisements’ an increase in 15-64 year olds contributebalance of power in the workplace from the and more hip-hop, street and grunge to depth in the workforce, and to the taxemployer (up to the 1990s) to the employee influences coming out of urban and base, but it also supports a rising demand(from the current decade onwards). Hispanic environments in the future. for consumer goods and services.The US is entering a phase over the nextdecade that is quite unlike any period inthe late 20th century. The baby boom thatunderpinned the rise of the youth-marketFigure b – Net annual change in the population of Australia aged -, 90-00 Baby Boomers enter Generation X enter Generation Y enter Millenium generation the workforce the workforce the workforce enters the workforce 250,000 200,000Australia 150,000 100,000 50,000 0 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050Source: KPMG International 2008, Australian Bureau of Statistics© 2008 KPMG International. KPMG International provides no client services and is a Swiss cooperative with which the independent member firms of the KPMG network are affiliated. All rights reserved.
  14. 14. 0 The Global Skills Convergence“Globalization is forcing us to invest in emerging markets and ‘skill up’ thepopulations of developing countries who will be our future labor force.”Rodney Scaife, AOLFigure c – Net annual change in the population of Canada aged -, 90-00 Baby Boomers enter Generation X enter Generation Y enter Millenium generation the workforce the workforce the workforce enters the workforce 400,000 350,000 300,000 250,000Canada 200,000 150,000 100,000 50,000 0 -50,000 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050Source: KPMG International 2008, Statistics CanadaFigure d – Net annual change in the population of Japan aged -, 90-00 Baby Boomers enter Generation X enter Generation Y enter Millenium generation the workforce the workforce the workforce enters the workforce 2,000,000 1,500,000 1,000,000Japan 500,000 0 -500,000 -1,000,000 -1,500,000 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050Source: KPMG International 2008, Statistics Bureau of JapanFigure e – Net annual change in the population of China aged -, 90-00 Baby Boomers enter Generation X enter Generation Y enter Millenium generation the workforce the workforce the workforce enters the workforce 20,000,000 15,000,000 10,000,000China 5,000,000 0 -5,000,000 -10,000,000 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050Source: KPMG International 2008, UN Statistics Division© 2008 KPMG International. KPMG International provides no client services and is a Swiss cooperative with which the independent member firms of the KPMG network are affiliated. All rights reserved.
  15. 15. The Global Skills Convergence However, from 1994 onwards the number Japan might increase its workforce In the two key developing nations, Chinaof people aged 15-64 in Japan began participation rate, but this figure currently and India, population growth trends differto contract. All of a sudden, there were stands at 60 percent, compared to a markedly. In China (see Figure 1e), themore people exiting the labor market participation rate in the US of 66 percent. rate of growth is expected to slow as thepool at the age of 65 than entering at 15. effects of the one-child policy are realized.There are now fewer consumers, and In order for Japan to lift its participation From 2016 onwards, the number oftherefore taxpayers, in Japan today than rate 6 percentage points to a level that people aged 15-64 will actually contract.there were in 1994. But this is only part of is commensurate with the US and otherthe problem. Japan must now support a developed nations, there would have Meanwhile, in India (see Figure 1f)greater population base aged 65 years and to be a fundamental change in the growth in the working-age population isover from a diminishing pool of workers engagement of (married) women in expected to remain elevated over theaged 15-64. the workforce. next 40 years as a result of less restrained population strategies and improvedJapan does not have a culture of In other words, cultural constraints limit economic growth that has supportedimmigration and so any diminution in the Japan’s response to its demographic larger families.scale of the worker base is unlikely to problems. In Japan, the labor forcebe offset by an increase in the migrant participation rate for males is close to In the developed nations of westernworker intake. 85 percent while it remains at around 60 Europe such as Germany (Figure 1g), the percent for females. UK (Figure 1h), France (Figure 1i), andFigure f – Net annual change in the population of India aged -, 90-00 Baby Boomers enter Generation X enter Generation Y enter Millenium generation the workforce the workforce the workforce enters the workforce 16,000,000 14,000,000 12,000,000 10,000,000 8,000,000India 6,000,000 4,000,000 2,000,000 0 -2,000,000 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050Source: KPMG International 2008, UN Statistics DivisionFigure g – Net annual change in the population of Germany aged -, 90-00 Baby Boomers enter Generation X enter Generation Y enter Millenium generation the workforce the workforce the workforce enters the workforce 800,000 600,000 400,000Germany 200,000 0 -200,000 -400,000 -600,000 -800,000 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050Source: KPMG International 2008, Eurostat© 2008 KPMG International. KPMG International provides no client services and is a Swiss cooperative with which the independent member firms of the KPMG network are affiliated. All rights reserved.
  16. 16. The Global Skills Convergencethe Netherlands (Figure 1j), the trend is In some countries this manifests as a upward pressure on labor costs and ansimilar to Japan. Over the next decade slowdown in the rate of growth; in others acceleration in the demand for talent andthere will be a broad downturn in the it is apparent through a contraction in the labor. And in a globalized labor market,rate of growth, of what can be broadly number of people in the productive age that talent and labor will increasingly flowdefined as the productive age group group. The speculation is that the impact into markets where skilled and unskilledof the national population, in the majority on the economy, and on the labor market, workers are in highest demand.of developed countries. will be the same: this will lead toFigure h – Net annual change in the population of the UK aged -, 90-00 Baby Boomers enter Generation X enter Generation Y enter Millenium generation the workforce the workforce the workforce enters the workforce 300,000 250,000 200,000 150,000 100,000UK 50,000 0 -50,000 -100,000 -150,000 -200,000 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050Source: KPMG International 2008, EurostatFigure i – Net annual change in the population of France aged -, 90-00 Baby Boomers enter Generation X enter Generation Y enter Millenium generation the workforce the workforce the workforce enters the workforce 600,000 500,000 400,000 300,000France 200,000 100,000 0 -100,000 -200,000 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050Source: KPMG International 2008, EurostatFigure j – Net annual change in the population of the Netherlands aged -, 90-00 Baby Boomers enter Generation X enter Generation Y enter Millenium generation the workforce the workforce the workforce enters the workforce 200,000 150,000Netherlands 100,000 50,000 0 -50,000 -100,000 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050Source: KPMG International 2008, Eurostat© 2008 KPMG International. KPMG International provides no client services and is a Swiss cooperative with which the independent member firms of the KPMG network are affiliated. All rights reserved.
  17. 17. The Global Skills Convergence 3 Strategic and policy responsesThe total number of international migrants But by the 1980s these flows in many, but The inclusion of a series of Easternhas increased from close to 90 million in not all, destination countries were being European nations into the European1975, to over 190 million 30 years later, filtered to focus on skilled migration. It is Union at the turn of the century,in 2005. While global populations have after all, more efficient for a host nation resulted in Poles flowing to Ireland andgrown steadily, international migrants still to attract skilled young workers who can Lithuanians and Bulgarians to the UK.account for an increasing proportion of easily and immediately enter the workforce British retirees and ‘lifestylers’ movedthe population, rising from 2 percent and begin making a contribution – by to the kinder climate of Spain. And within 1975, to 3 percent 30 years later. consuming, reproducing and paying tax. the demise of the Soviet Union at the end(United Nations population division). of last century, Russians flowed out ofResponses to these flows have differed . The rise of skilled migration their homeland to opportunities in otherbetween countries based on geo-political Towards the end of the 20th century, European nations.circumstances and cultural attitudes. new flows of immigration opened up. Traditional flows such as from the UK toIn the later decades of the 20th century, Australia and from Mexico to the US werethere were shifts in attitudes towards augmented by new flows made possibleinternational migration flows. In the by geo-political as well as lifestyle shifts.immediate post-war period, economicmigrants with few or no skills flowedout of Europe into countries like the US,Canada and Australia. “…at a global level the competition for knowledge-based employees is intense.” Rodney Scaife, AOL© 2008 KPMG International. KPMG International provides no client services and is a Swiss cooperative with which the independent member firms of the KPMG network are affiliated. All rights reserved.
  18. 18. The Global Skills Convergence“Corporations need to have the confidence to And there is something to be said for this approach. After all, while the firstthink the unthinkable: where are we going to generation of unskilled migrants may struggle financially and even culturally,be in a decade’s time, long after I am gone, and they inevitably work hard so as to propel their children into the mainstream usuallywhat is necessary for us to get there? … this via the education system. Indeed manywill inevitably lead to the case for globalization of today’s most successful participants in western business and society are theand in that case, there is a need to start now to offspring, particularly the grandchildren, of the unskilled migrants who arrived in theset in place an international mindset.” first two decades of the 20th century. The same success is becoming visible withIan Donald, Abbeywell Associates the children of the migrants who arrived after the end of World War II.But there were also new flows at this Amid this multiplication of education, However, there are a number of countriestime out of Asia and especially from labor and lifestyle migrants, many favored that continue to limit to free flow ofVietnam and China to the US and destination countries began to implement migrants of all abilities. Some westernAustralia. Indians too began to move a points-based system which award points European countries including Germanymore freely away from the sub-continent for age, skills and language capabilities and France currently impose certainat about this time. In the Middle East, in order to filter-in the most desirable requirements on potential immigrantsthe rise of sovereign states such as the migrants. A threshold of points is required such as requiring immigrants receive a jobUnited Arab Emirates, Kuwait and Qatar in to achieve migrant status which allows offer before they can enter the country.the late 1990s, and the early years of the the host nation to monitor and controlnew century, attracted unskilled labor out inflow based on the skills required by the . The role of corporateof Pakistan and the Philippines, as well local economy. expatriatesas highly skilled talent from across the But the flow of permanent migrants is justEnglish-speaking business world. Some nations have even introduced part of the story of modern global labor a ‘culture test’ for candidate migrants mobility. Skilled non-permanent workers,And from the early 1990s onwards, to ensure they appreciate the history, more commonly known as corporatethere was also acceleration in the flow of geography and culture of the host nation. expatriates, are playing an increasing roleinternational students from the developing The points-based approach to immigration in the spread of global business. Especiallyworld largely to the west. Student flows has been adopted over the last two so, as geo-political shifts ‘open up’ neware not counted in permanent migration decades by countries such as Australia, territories requiring the infrastructure, themovements and so these are in addition the UK, Canada and New Zealand. technology and the range of consumerto the flow of skilled and unskilled labor. The US on the other hand continues goods and services that are already wellDrawn by greater opportunities for a higher to focus on ‘family’ rather than ‘skills’ established in the west.level of education (and ultimately higherwages) students in developing countries migration, although the focus is beginning One role of the developed world isare increasingly aiming for positions in to shift to place greater emphasis on the to introduce the systems and theprestigious tertiary institutions in the skilled component. The argument for infrastructure necessary to elevate theUS and parts of Europe – and often more ‘family’ as opposed to a ‘skills’ migration quality of life and the standard of living inaccessible institutions in countries such is often ideological in that a nation that newly ‘opened’ countries. Not only doesas Australia, Canada and New Zealand. accepts unskilled migrants truly presents this add to global political and economic itself as a ‘land of opportunity’. stability, but also opens up new markets© 2008 KPMG International. KPMG International provides no client services and is a Swiss cooperative with which the independent member firms of the KPMG network are affiliated. All rights reserved.
  19. 19. The Global Skills Convergence for global business. Corporate expatriatesin finance, accounting, property, energy,resources and manufacturing industriesoften play a major role in this stabilizingphase and facilitation of the free andsmooth flow of this talent is a keychallenge for global business.Later in the study, there is a summaryof a series of interviews conductedwith experienced managers of humanresources for global corporations. Oneconstant theme evident during theseinterviews was the need for globalbusinesses to introduce corporateexpatriates into developing countries fora period of time (many said 3-5 years) tomanage and direct the introduction of newservices and in many cases, to identifyand nurture local talent.The historical flow of labor becamemore strategic in the period followingWorld War II. As companies began toexpand overseas, the movement ofcorporate expatriates became morepronounced. This was most evidentwith companies based in the US whosent employees on internationalassignment overseas to manageexpansion and company subsidiaries.It took another major geo-political event, thebreak-up of the former USSR, to providefurther stimulation as skilled corporateexpatriates flowed into former Sovietstates in the 1990s, in order to assist thosenations in upgrading the local built-forminfrastructure and support services.“Operating in the global market, we manage talent between regionsand across borders to enable effective knowledge transfer.”Rodney Scaife, AOL© 2008 KPMG International. KPMG International provides no client services and is a Swiss cooperative with which the independent member firms of the KPMG network are affiliated. All rights reserved.
  20. 20. The Global Skills Convergence4 Migration in a flat and creative worldThe proposition being put forward by this . Reasons for globalization In addition to these political and economicstudy is that demographic change in the of the labor market developments, there is also the argumentdeveloped world will lead to a labor and Some events which facilitated these flows that today’s younger generation ofskills shortage next decade as the Baby include the dismantling of the former workers under the age of 30 – theBoomers move beyond the workforce. USSR, the expansion of the European so-called Generation Y – are more likelyThis shift is coupled with historically low Union membership base, the opening to be predisposed to a global career thanfertility rates in the late 1990s that will fail up of China and India and the rise of preceding generations. Part of this logicto offset this phenomenon, at least in the sovereign states in the Middle East. is the expansion of global businessesshort term. providing more opportunities to think and Even the late 2007 sub-prime crisis in work globally.Coinciding with this ‘demographic the US, which has also affected thefaultline’ are a number of other factors economies of the UK and western But there is also the argument that thisleading to a heightened demand for, and Europe during 2008, is having the effect generation raised on the Internet isincidence of, cross-border migration. of transferring surplus skills out of these simply better exposed to global issuesInternational migration trends reveal an markets into the still-booming markets than previous generations. In addition,increasing number of labor migrants as of Hong Kong, Singapore and Shanghai. there has been a shift in the prioritiescountries open up their borders to address This development has been confirmed of Generation Y away from finding alooming labor and skill shortages. by discussions with multinational long-term partner, buying a house and corporations who are constantly starting a family in their 20s. (These ‘life monitoring both the geo-political and goals’ are typically postponed to the 30s economic environment to ensure that by educated and skilled Generation Ys.) global labor requirements are met. Instead, Generation Y seems to be living a much less structured life where a sense© 2008 KPMG International. KPMG International provides no client services and is a Swiss cooperative with which the independent member firms of the KPMG network are affiliated. All rights reserved.

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