McKinsey Global Institute Report - A labor market that works: Connecting talent and opportunity in the digital age

McKinsey Global Institute Report - A labor market that works: Connecting talent and opportunity in the digital age

• 1.
  A labor marketthat works: Connecting talent and opportunity in the digital age JUNE 4TH, 2015 Any use of this material without specific permission of McKinsey & Company is strictly prohibited
• 2.
  McKinsey & Company| 1 Companies that adopt these technologies can increase revenue, reduce costs, and improve profit margins by ~275 basis points 3 To capture the opportunity, we need to close the digital divide, harness the data to inform education and training choices, address data ownership and privacy, and rethink labor regulations and worker benefits 4 Key messages 2 Online talent platforms could have enormous economic impact and societal benefits ▪ Increase global GDP by $2.7 trillion by 2025 ▪ Improve work outcomes for 540 million people ▪ Enhance innovation, creative destruction, and the overall skill mix of economies 1 Online talent platforms improve transparency and efficiency in labor markets by matching workers with traditional jobs, creating digital marketplaces for freelance work, and enabling employers to recruit and retain talent
• 3.
  McKinsey & Company| 2 Labor market challenges are bigger than people think
• 4.
  McKinsey & Company| 3SOURCE: BLS; OECD; UN; World Bank; ILO; national sources; McKinsey Global Institute analysis 30 to 45 percent of the working-age population is economically underutilized in countries around the world NOTE: Part-time employment data are not available for China, Brazil, and India. For Japan we use non-regular employment as a proxy. The percent of people unemployed is lower than the unemployment rate because the latter has only the labor force in the denominator 1 Inactive, unemployed, and part-time 62 60 59 52 74 70 54 13 13 20 28 23 24 25 23 25 44 100% = 1,010 4 United States 834139 5 United Kingdom 202 6 4 Germany Japan 78 3 Brazil 41 5 China 54 4 2 India %; million people UnemploymentInactive Full-timePart-time 77 1721 37 273 41 381 Working-age population (age 15–64) by status and country, 2013 Total number of underutilized workers1 Million ~850
• 5.
  McKinsey & Company| 4 300 million youth worldwide are not in employment, education or training SOURCE: OECD; ILO; Eurostat; UN; McKinsey Global Institute analysis 7 14 14 17 23 24 35 43 52 53 54 Japan Brazil United States United Kingdom France Ireland Portugal Italy Greece Spain South Africa3 Youth unemployment rate, 2013 or latest % of the labor force aged 15–24 Youth not in employment, education or training Thousand people, aged 15-24 6,409 871 121 717 104 90 1,728 451 6,954 6,721 821 ~300 million worldwide
• 6.
  McKinsey & Company| 5 1.5 1.8 5.5 4.2 1.7 1.0 0.8 0.5 0.2 Arts, design & entertainment Maintenance & repair Social services Natural & social science Architecture & engineering Healthcare practitioners 18.7Construction & extraction Cleaning & maintenance 10.7 Production Food services Computer & mathematical Labor markets around the world suffer from skill shortages and matching problems SOURCE: Burning Glass; BLS; McKinsey Global Institute analysis Ratio of number of unemployed people to job postings in the United States, 2014 Too few workers Matching problems? Too much unemployment ~4.0 million job postings ~8.5 million unemployed people
• 7.
  McKinsey & Company| 6 Labor market fluidity – or the rate of job change – is declining across countries SOURCE: OECD; National Sources; McKinsey Global Institute Share of people whose current job tenure is less than one year1 % of total employment, 0 5 10 15 20 25 30 Brazil United States 201310080604022000 Japan Italy France Germany United Kingdom 1 Proxy for labor market fluidity. -3.7 0.3 -1.4 -1.7 -5.5 -1.6 -1.3 Declining labor market fluidity may contribute to higher long-term unemployment and reduced wage gains Change, 2000–13 Percentage points
• 8.
  McKinsey & Company| 7 Across countries, 37% of surveyed workers say their jobs do not fully utilize their skills SOURCE: LinkedIn Job Seeker Survey, 2014; N=1,510 % of respondents who selected “finding a better skill set fit,” “more challenging work,” and “a more impactful role” as the three top factors enticing them to pursue a new job opportunity n = 1,510 2727 36 393940 48 United States BrazilChinaUnited Kingdom IndiaGermanyJapan All countries = 37
• 9.
  McKinsey & Company| 8 Online talent platforms are part of the solution
• 10.
  McKinsey & Company| 9 Online talent platforms are a rapidly evolving set of websites, apps, and tools that match workers with jobs 1 All companies are illustrative and not exhaustive, many span multiple functions Digital talent management tools to streamline recruiting and training Online marketplaces for contingent work Examples More transparent, efficient matching of individuals with traditional jobs
• 11.
  McKinsey & Company| 10SOURCE: LinkedIn 2015, McKinsey Global Institute analysis Country Members, million United Kingdom 18 France 10 Italy 8 United States of America 115 India 31 Brazil 21 Canada 11 Mexico 7 China 9 Australia 7 364 296 218 161 102 64 13 14 2015122010 11 Compound annual growth rate, 2010–15 = LinkedIn facilitated ~1 million hires in 2014 LinkedIn’s growth is an example of the rapid adoption of online talent platforms 1 Compound annual growth rate Geographic distribution of members – top 10 countries, 2015 Number of LinkedIn members by the first quarter of each year Million members 41.6%
• 12.
  McKinsey & Company| 11 The freelance economy is already large: 1 out of 8 workers in business services are freelancer professionals Self-employed professionals in business services1 as share of total %, 2014 or latest2 SOURCE: Eurostat; BLS; OECD; McKinsey Global Institute analysis 1 Includes unincorporated self-employed individuals in information and communications, finance, professional, technical, and scientific services, and administration that do not have any other employees 2 Based on data from 2011 for the US 28 26 11 7 7 8 8 9 9 10 11 14 15 16 18 Austria Finland Sweden Denmark Ireland Germany Portugal Spain Belgium United Kingdom Netherlands Greece Italy France United States
• 13.
  McKinsey & Company| 12 Online marketplaces for freelance work are small but growing rapidly SOURCE: “Freelancing in America”, an independent survey commissioned by Freelancers Union & Elance-oDesk; McKinsey Global Institute analysis 1 Numbers represent most recent available data, between 2013 and 2015 2,500,000 freelancers 160,000 drivers 60,000 drivers 25,000 service providers 10,000 physicians 6,000 drivers 4,000 messengers 5,400 MBA consultants 1,000 personal shoppers 225 messengers Platform Number of individuals in the US1
• 14.
  McKinsey & Company| 13 55% of part-time workers – and 30% of full-time workers -- would increase their hours for more pay % of respondents of LinkedIn survey SOURCE: LinkedIn global survey, 2015; McKinsey Global Institute analysis NOTE: Numbers may not sum due to rounding. 7 38 55 31 54 15 No changeIncrease hours Decrease hours Part-time employed n = 704 Full-time employed n = 11,918
• 15.
  McKinsey & Company| 14 Percent reduction in job search time due to use of online talent platforms % reduction in transition time (n = 6,924) Online talent platforms significantly reduce job search time and improve job options 39 43 45 46 48 50 56 China Germany United States Brazil All countries = Japan India United Kingdom 41 43 44 44 44 46 52 All countries = China United States Japan Germany United Kingdom India Brazil Respondents that say online talent platforms broaden or improve job options % of survey respondents (n = 5,750) SOURCE: LinkedIn global survey, 2015; McKinsey Global Institute analysis 45 47
• 16.
  McKinsey & Company| 15 Online talent platforms have significant economic benefits
• 17.
  McKinsey & Company| 16 Online talent platforms can boost GDP and employment in at least five ways SOURCE: McKinsey Global Institute 1 Increasing participation: Enabling inactive and under-employed workers to new and/or flexible work arrangements that increase hours worked 5 Reducing informality: Shifting individuals from informal to formal employment with higher productivity 4 Better matches: Helping individuals find jobs that better fit their talent, raising productivity 3 New matches: Helping under-staffed companies and unemployed jobseekers to find new types of matches that were not available to them 2 Faster matches: Decreasing the duration of unemployment by helping companies and workers find each other faster
• 18.
  McKinsey & Company| 17SOURCE: MGI Online Talent Platform Model, McKinsey Global Institute analysis Global GDP impact of online talent platforms by 2025, $ billion Online talent platforms could increase global GDP by $2.7 trillion by 2025 and raise employment by 72 million FTEs 1,270 700 335 2,700 290 Total impact, 2025 Higher productivity 625 Reduced unemployment 105 Higher participation1 805 1 Includes increasing participation among people who currently do not work and increasing hours among part-time workers. 2 Full-time equivalents. NOTE: Numbers may not sum due to rounding. 72 47 25 2.0 Employment increase Million FTE2 GDP increase % 0.9 0.6 0.5 New matches Better matches Reduced informality Faster matches
• 19.
  McKinsey & Company| 18 GDP impact of online talent platforms by focus country, 2025 Percent of GDP 0.5 0.5 0.5 0.5 0.3 0.5 0.7 0.7 0.6 0.4 0.2 0.5 0.2 0.9 1.1 0.9 0.8 0.8 0.7 1.2 0.8 1.5 2.4 1.9 2.3 1.7 1.5 2.0 Reduced unemployment Increased productivity All countries SOURCE: MGI Online Talent Platform Model Higher participation 0.5 0.5 0.9 1.9 512 68 70 78 485 222 69 1,504 GDP increase (in USD bn) 4.1 0.8 0.7 0.9 12.9 11.3 2.7 33.3 2.7% 2.4% 1.9% 1.5% 1.7% 2.2% 1.6% 2.0% Employment increase (m; %) The impact of online talent platforms differs across countries
• 20.
  McKinsey & Company| 19SOURCE: MGI Online Talent Platforms Model 0.5%-0.9%<0.4% >0.9% GDP 2-3%<2% >3% Employment NOTE: Numbers may not add up due to rounding. Country GDP % of GDP Increased participa- tion % of GDP Faster Matches % of GDP New Matches % of GDP Better Matches % of GDP Reduced Informality % of GDP GDP billion Employment % of Emp 1000 people Spain 3.3 0.8 1.7 0.4 0.2 0.2 58 4.4 748 Greece 3.2 0.9 1.5 0.4 0.2 0.2 10 4.3 161 Portugal 2.5 0.8 1.0 0.3 0.1 0.2 7 3.2 140 Italy 2.5 1.0 0.9 0.2 0.2 0.2 52 3.1 734 United States 2.3 1.1 0.6 0.1 0.4 0.1 512 2.7 4,091 France 2.3 1.1 0.7 0.1 0.3 0.1 64 2.9 784 Belgium 2.2 1.1 0.5 0.1 0.3 0.2 12 2.7 120 Sweden 2.1 0.9 0.6 0.1 0.4 0.1 11 2.5 119 Finland 2.1 1.0 0.5 0.1 0.3 0.1 5 2.5 61 Denmark 2.1 0.9 0.5 0.1 0.4 0.1 6 2.4 67 Canada 2.0 1.0 0.5 0.1 0.4 0.1 41 2.4 436 United Kingdom 2.0 0.9 0.5 0.1 0.4 0.1 68 2.4 766 Australia 1.9 1.0 0.4 0.1 0.4 0.1 28 2.2 271 Germany 1.7 0.8 0.4 0.1 0.4 0.1 70 1.9 708 South Korea 1.6 0.9 0.2 0.0 0.4 0.1 39 1.8 416 Netherlands 1.6 0.7 0.3 0.0 0.4 0.1 14 1.8 147 Singapore 1.7 1.0 0.2 0.0 0.3 0.1 9 1.9 67 Japan 1.5 0.7 0.2 0.0 0.4 0.1 78 1.6 906 The impact of online talent platforms varies across advanced economies Reduced unemployment Higher productivity
• 21.
  McKinsey & Company| 20 Country GDP % of GDP Increased participa- tion % of GDP Faster Matches % of GDP New Matches % of GDP Better Matches % of GDP Reduced Informality % of GDP GDP billion Employment % of Emp 1000 people South Africa 3.9 1.1 2.1 0.1 0.2 0.4 20 5.0 861 Colombia 3.1 0.9 1.4 0.2 0.1 0.5 25 3.7 946 Philippines 2.7 0.9 0.9 0.1 0.2 0.6 22 2.9 1,359 Russia 2.5 0.9 0.7 0.1 0.2 0.6 82 2.5 1,605 Hungary 2.5 1.0 0.8 0.2 0.2 0.4 7 2.9 110 Nigeria 2.5 1.3 0.3 0.1 0.2 0.7 20 2.6 1,889 Turkey 2.5 1.3 0.4 0.1 0.3 0.4 41 2.8 799 Brazil 2.4 0.8 0.8 0.1 0.1 0.6 69 2.6 2,686 Peru 2.3 0.8 0.5 0.1 0.2 0.8 12 2.0 320 Chile 2.3 0.9 0.8 0.1 0.2 0.3 12 2.8 210 Mexico 2.3 1.0 0.6 0.1 0.1 0.4 60 2.6 1,349 Poland 2.2 0.9 0.6 0.1 0.4 0.2 27 2.5 353 Indonesia 2.2 0.9 0.8 0.1 0.1 0.3 57 2.7 3,538 Kenya 2.2 1.1 0.4 0.1 0.2 0.4 3 2.4 536 Czech Republic 1.9 0.8 0.4 0.1 0.4 0.1 7 2.1 103 Malaysia 1.9 1.1 0.1 0.0 0.2 0.5 16 2.0 286 India 1.9 1.2 0.2 0.0 0.2 0.3 222 2.2 11,343 Thailand 1.8 0.8 0.1 0.0 0.1 0.8 20 1.3 511 China 1.5 0.7 0.4 0.0 0.1 0.2 485 1.7 12,868 SOURCE: MGI Online Talent Platforms Model NOTE: Numbers may not add up due to rounding. Online talent platforms can also have significant impact in developing countries GDP Employment 0.5%-0.9%<0.4% >0.9% 2-3%<2% >3% Reduced unemployment Higher productivity
• 22.
  McKinsey & Company| 21 230 200Higher participation Better matches Reduced informality 540 50 Reduced job search time 60 7 6 41 United Kingdom Japan Brazil United States India China 92 Germany 8 21 77 SOURCE: MGI Digital Labor Model; McKinsey Global Institute analysis 1 1 4 5 10 9.1 8.1 18.5 14.2 11.2 16.1 12.5 x % of the working-age population1 x % of the working-age population 1 People aged 15-64. Numbers may not add up due to rounding. People who can benefit from online talent platforms by impact mechanism Million people, 2025 People who can benefit from online talent platforms by country Million people, 2025 Up to 540 million people around the world could benefit from improved job outcomes
• 23.
  McKinsey & Company| 22 Online talent platforms may have significant long-term economic benefits as well Improved effectiveness of spending on labor market programs and education Enhanced innovation and entrepreneurship Improved skill mix and human capital development of economies Increased productivity through company impact
• 24.
  McKinsey & Company| 23 Online talent platforms create value for companies
• 25.
  McKinsey & Company| 24 Poor talent management increases employee turnover – adding to recruiting and hiring costs SOURCE: LinkedIn Job Seeker survey, 2014; McKinsey Global Institute analysis 20 20 22 27 30 Lack of challenge in the job Dissatisfaction with compensation/benefits Lack of rewards/recognition for my contributions Unsatisfactory leadership of senior management Lack of opportunities for advancement Survey question: “Which of the following contributed to your decision to leave your previous employer?” % of respondents (n = 29,825) Top performers are 2.5x more productive than the average worker Attrition costs are up to 2X the salaries of knowledge workers
• 26.
  McKinsey & Company| 25 Online talent platforms create value for companies by improving recruiting and talent acquisition, talent management, and long-term planning Recruiting and talent acquisition Example providers, 2015 ▪ More efficiently filter candidates ▪ Use more data to assess candidate fit ▪ Find better quality candidates ▪ Tailor cultivation approach to each offeree ▪ Discover hard-to-find, niche talent Managing individual and group talent ▪ Form more effective teams and groups ▪ Tailor onboarding and training ▪ Find internal expertise and knowledge Planning for the future ▪ Anticipate and plan for future talent needs ▪ Predict and optimize attrition ▪ Plan succession paths
• 27.
  McKinsey & Company| 26 The potential impact is driven by different mechanisms in different types of companies Low Medium High Recruiting Managing talent Planning for the future Impact mechanism Plan for succession paths Anticipate and plan for future talent needs Predict and optimize attrition Find internal expertise and knowledge Form more effective teams and groups Personalize training & learning opportunities Tailor onboarding Use candidate data for better assessment More efficiently filter to select interviewees Discover hard-to-find, niche talent Tailor cultivation approach to each offeree Find better quality candidates Total profit impact, bps Prof. services 540 Hospital 230 Bank 255 Manu- facturing 120390 High tech Retail 110 Total profit increase bps 40 45 20 15 35 10 1 10 5 10 5 80 275 SOURCE: McKinsey Global Institute analysis None
• 28.
  McKinsey & Company| 27 Cost reduction2, % Output increase1, % Incremental impact of online talent platforms Em- ployees 2,000 5,000 10,000 100,000 10,000 15,000 Profit impact, bpsRevenues $0.5 billion $2.5 billion $2.4 billion $31.7 billion $11.1 billion $2.8 billion Online talent platforms can increase revenue by up to 9 percent and reduce costs by up to 7 percent 9 7 4 3 3 2 5 6 4 6 7 4 120 255 110 540 230 390 1 Includes productivity gains in front- and middle-office workers, which can translate into revenue or other increased output opportunities 2 Includes productivity effect in middle- and back-office workers and savings in recruiting, interviewing time, training, onboarding, and attrition costs SOURCE: McKinsey Global Institute analysis Hospital Professional services Manu- facturing Bank High Tech Retail Model company 5% 5% 275 bpsAverage
• 29.
  McKinsey & Company| 28 Capturing the opportunity
• 30.
  McKinsey & Company| 29 Policymakers: Capturing the opportunity 1 Create universal access to digital infrastructure and digital literacy skills 29 4 Rethink labour regulations and provision of worker benefits for freelance workers 3 Establish legal and regulatory frameworks for data ownership, privacy, and data security 2 Open public databases and statistics to facilitate skill forecasting and planning
• 31.
  McKinsey & Company| 30 Individuals: Navigating the new world of work 1 Broader choices, greater agency. 38% of survey respondents say online talent platforms enabled them to get jobs they would not have found 3 Finding the right job. Hires from online talent platforms are 8X more likely to be in their role two years later than other hires 2 More informed decisions. More transparency on skills demanded, credentials needed, and job placement record of schools and training providers 30 4 Flexible work arrangements. Increasing participation for some; choosing to be your own boss for others
• 32.
  McKinsey & Company| 31 Companies: Rethinking talent management 31 2 Build the capabilities within HR to enable advanced analytics 1 Digitize and redesign recruiting, training, performance review and operating processes 3 Develop more granular talent forecasting and talent pipeline management 4 Manage the company's external talent brand
• 33.
  McKinsey & Company| 32 Thank you Follow us on Twitter: www.mckinsey.com/mgi Download our reports: @mckinsey_mgi