Sure, the unemployment rate is at a record low. But hiring will eventually get easier for employers…right? Wrong. The latest forecasts show the labor shortage deepening, not easing up.
How much worse will it get? A recent Korn Ferry study estimates there will be a global shortage of 85.2 million workers by 2030. The U.S. is on the precipice of a dire talent drought, which is further exacerbated by an ageing population: Baby Boomers are retiring at the rate of 10,000 people every day for the next decade.
Only one country will escape the impending talent drought: India. The Korn Ferry study predicts a highly-skilled talent surplus of over 240 million workers by 2030, crediting this surplus to India’s demographics of working-age citizens and government programs that teach high-demand skills.
What’s causing the crisis?
Several factors are contributing to the crisis: demographics, technology, and a fundamental shift in the way work is done. The digital economy has triggered a spike in demand for highly-skilled labor while automating away low-skilled jobs. Companies need employees who can leverage new technologies to increase efficiency, innovate products, and empower agile teams.
None of this is news. But the scale of it is shocking. The labor shortage will more than quadruple between 2020 and 2030. Yet most business leaders do not realize the enormity and compounding nature of it.
Most executives believe that labor shortages are cyclical instead of systemic: 66% agree there will be a deficit of highly skilled talent by 2020, but only 52% predict there will be a shortage by 2030.
“Right now, companies are feeling the pain,” says Alan Guarino, vice-chairman of Korn Ferry’s CEO, “but they don’t feel it with the level of intensity that they should. Many CEOs are sleepwalking their way into a crisis.”
Technology will not solve the problem
Unfortunately, even executives who are aware of the impending crisis seem to think technology will save them. 74% of executives believe that technology – not people – will be their biggest value creator by 2030. Technology may soften the severity of the crisis – and, ironically, may have indirectly catalyzed the crisis – but it will not solve it.
A 2018 SumTotal/HR.com study similarly admonished against the reliance on technology to bail companies out: Organizations that named technology and automation as most important to digital transformation at their companies – and downplayed the people-centric skills of critical thinking and innovation – were more likely to already be lagging behind in the process of digital transformation.
As technology continues to transform industries and the very nature of work, organizations must not rely on technology as the panacea for their labor woes at the expense of developing key competencies in their people.
How can companies weather the drought?
The talent pool is shrinking, recruiting is expensive, and salaries will surge as companies compete for labor.
So what’s the answer – relocating U.S. companies to India? Spurring the birth rate (like this viral ad campaign in Denmark)?
Before anyone considers such an effort, let’s make an important distinction here: The talent drought is a shortage of skills, not a shortage of people. This is the silver lining.
Here’s what HR can do to quell the crisis:
- Start Succession Planning: HR needs to have a view of who’s next – not only for executive roles but also for mid-level roles throughout the organization. The same technology that can enable succession planning can power career planning for employees – and give them a clear future at the organization.
- Align with the CEO and CFO: HR cannot be a solely operational department, separated from strategic initiatives. Talent strategy should fuel – and inform – the overall company goals.
- Hire for potential. Start with the raw materials, and build the talent the organization needs.
- Reward with Learning Opportunities – not just Salaries: Talent development accomplishes the dual goal of strengthening the company’s EVP (Employee Value Proposition) while cultivating the talent needed. Through development programs, companies can organically build an attractive employer brand, compounding the effect of their L&D investment.
Be in it for the long haul
There is no easy fix. Retraining employees can’t be a one-off effort; it must be a continuous, sustained endeavor. But if companies construct the framework now, they can develop the programs needed to train and retrain employees.
As organizations stare down the talent drought, they must recognize the rising price of water and start budding their own self-sustaining oases.
Learn more about SumTotal’s Talent Development solution at sumtotalsystems.com.