Too Much Time Onboarding?
Remember when talented people used to search far and wide for companies that offered the best career opportunities? Today, the tables have turned. Companies are competing fiercely for talent from all over the world, as the demand for skilled professionals surpasses the supply.
Without the right talent, companies will struggle to execute projects, develop new products, or expand into new markets, leading to slow growth and decreased revenue. Moreover, global talent shortage could result in lost annual revenue of $8.5 trillion by 2030 if organizations don’t take caution, according to a Korn Ferry study.
This article will explore the causes of the talent shortage, the industries affected the most, and actionable solutions for overcoming the talent shortage in 2024.
6 Reasons Why There is a Global Talent Shortage
Demographic Shift in the Workforce
The aging population, particularly the retirement of the baby boomer generation, is a significant driver of the global talent shortage. With a considerable portion of the workforce leaving due to retirement, industries need more experienced professionals to fill the void in knowledge and skills.
Companies in sectors heavily reliant on experienced workers, such as manufacturing, healthcare, and finance, find it challenging to replace the institutional knowledge and skills held by retirees.
Shortage of Skilled Employees
Supply of skilled employees is dwindling for reasons, such as retirement, shortage of skills, schools and colleges not providing proper training and so on.
Here are some stats to illustrate this:
1) According to a The Wall Street Journal article, over 300,000 U.S. accountants and auditors left their jobs in the past two years - representing a 17% decline.
2) According to research by Nash Squared’s Digital leadership report, 68% of the digital leaders in the UK said a lack of skills is standing in their way, while 57% said they would never have enough access to enough tech staff.
3) The India's Graduate Skill Index: 2023 report (published by online talent assessment company Mercer | Mettl) states that only 45% of Indian graduates who apply for jobs are employable and have the skills to meet the industry’s rapidly changing demands.
The bottom line: Companies are grappling with the need for more skilled workers. They are facing (and will face) project delays, hindered innovation, and increased competition for a limited pool of qualified professionals. The inability to quickly adapt to technological changes may result in a loss of competitive advantage and impede overall growth and development.
Employees Leaving the Workforce to Work as Contractors
More professionals are choosing freelance and contract work over conventional full-time positions, as it offers greater flexibility, autonomy, and a diverse range of projects.
The rise in contract work poses challenges for companies aiming to build stable, long-term teams. Organizations may struggle to retain talent and create a cohesive company culture as the workforce becomes more fragmented and transient. Additionally, companies must adapt to managing a more flexible and remote workforce.
Technological Shift & Advent of AI
The ongoing technological shift, marked by automation and the integration of artificial intelligence (AI), is fundamentally altering the nature of work. Jobs are evolving, requiring employees to adapt to new technologies and develop digital skills to remain relevant.
Companies needing more tech-savvy professionals may experience challenges in implementing and maximizing the benefits of new technologies.
Higher Turnover Rates due to Burnout
Modern work environments, characterized by increased workloads, constant connectivity, and high expectations, contribute to higher rates of burnout among employees, leading to resignations. Companies witnessing higher turnover rates due to burnout face the risk of losing valuable talent and the associated recruitment and training costs. Its impact on employee morale and productivity can lead to decreased overall organizational performance and hinder achieving strategic goals.
Pent-up Demand from the Pandemic
The global COVID-19 pandemic disrupted the workforce, causing widespread layoffs and hiring freezes. As economies recover, there is a pent-up demand for skilled professionals across various sectors as businesses adapt to new market conditions and pursue growth opportunities.
After the pandemic, companies are in a highly competitive talent acquisition landscape. This demand for skilled workers, in turn, is leading to challenges in recruiting and retaining talents across all industries.
What Does a Talent Shortage Mean for Businesses?
From rising costs to the threat of unfair competition, this crisis is shaking the foundations of businesses globally in the following ways:
Escalating Talent Costs: The scarcity of skilled professionals drives up remuneration, making it expensive to secure the right talent amidst fierce competition.
Rising Production Costs: Scarce talent leads to increased production expenses, resulting in higher prices for products and services across diverse sectors.
Impact on Service Quality: Inadequate talent could compromise on the quality of business operations, leaving end-users with subpar products and services.
Revenue Erosion: Businesses exhaust revenue on talent acquisition, diminishing returns and jeopardize financial stability in pursuing expertise.
Unequal Competition: Financially robust businesses secure top talent, overshadowing smaller counterparts and creating unequal competition.
Economic Deceleration: Insufficient talent impedes business operations, causing a decline in production rates and triggering a potential global economic slowdown.
What Sectors are Impacted the Most by the Global Talent Crunch?
About 75% of average responses, agreed in a survey (conducted by Manpower Group) that talent crunch exists in their country. Their findings also indicate that the topmost profession in demand is the IT & Data Industry, with the largest shortage in countries like Taiwan, Portugal, Singapore, and China.
The following is a list of sectors most affected by the crisis:
- IT & Technology
The rapid evolution of technology and digital transformation initiatives across industries is a significant cause of the shortage in the IT sector. The demand for skilled professionals who can navigate emerging technologies, such as cloud computing, cybersecurity, and software development, outstrips the supply. The World Economic Forum mentions that currently, there is a global talent shortage of 3 million cybersecurity professionals, considering the increased use of digital technology.
- Semiconductor Industry
The specialized nature of semiconductor manufacturing and design requires a workforce with unique physics, engineering, and material science skills. The Semiconductor Industry Association, in partnership with Oxford Economics, has found that among the 115,000 jobs projected to be required by America in the semiconductor industry by 2030, nearly 58% (67,000 jobs) risk going unfilled. The shortage is exacerbated by the increasing demand for semiconductors in various electronic devices, automotive technologies, and emerging technologies like 5G, resulting in a substantial skills gap.
In the US, accounting firms are projected to have an annual vacancy of 136,400 accounting and auditing jobs between 2021 and 2031, according to the Bureau of Labor Statistics. This talent gap is partly due to the younger generation's declining interest in accounting and auditing careers. Moreover, the changing regulatory landscapes, increasing complexity in financial reporting, and the need for expertise in emerging areas like data analytics and cybersecurity also contribute to a significant shortage of qualified accountants.
- Artificial Intelligence (AI)
The fast-paced growth of AI technologies across industries has created a high demand for professionals with expertise in machine learning, natural language processing, and data science. However, the numbers found by studies on the expertise available on AI are alarming. For example, it has been found that only 2.5% of India's engineers possess AI technology knowledge. The scarcity is intensified by the interdisciplinary nature of AI, requiring individuals with a blend of technical and domain-specific expertise, making them a rare and sought-after talent pool.
- Restaurants & Hotels
According to the Job Openings and Labor Turnover Survey (JOLTS) data from BLS, staff shortage persisted in 2023, with 1.5 million job openings in the restaurants & accommodations sector combined. This indicates that the hospitality industry needs more skilled personnel, with many open positions. Staff turnover, changing work preferences, and difficulties attracting professional chefs, hospitality managers, and service staff have also contributed to the shortage.
- Wholesale & Retail Trade
Mercer found in 2021 that the retail sector was facing a significant talent shortage, with a considerable percentage of employers expressing concerns about recruitment challenges, and it will likely not improve in 2024. The retail industry's shortage is driven by the increasing demand for skilled professionals who can navigate the shift toward e-commerce, digital marketing, and supply chain management.
- Finance & Banking Sector
Regulatory changes, digital transformation, and the increasing complexity of financial products majorly influence the financial industry's shortages. Banks increasingly opt for cutting-edge technological tools like AI, APIs, Self-Service Platforms, Banking of Things (BoT), and Blockchain. This and the growing interest in Fintech Applications and Hyper-Personalized Banking can significantly drive the sector's estimated deficit of 10.7 million workers by 2030.
- Manufacturing Sector
Deloitte suggests that without changing their workforce's skill composition, manufacturing companies will likely experience a 2.1 million skilled workers shortage between 2020 and 2030. Factors contributing to this include the retirement of experienced workers, lack of interest among younger generations in pursuing manufacturing careers, and the growing need for employees with advanced technical skills due to industry automation and modernization.
- Telecom & Media
The European Commission's Digital Economy and Society Index highlights that 4 out of 10 talents lack basic digital skills, impacting the industry's ability to innovate and adapt to technological advancements. The rapid evolution of telecommunications and media technologies, such as 5G, streaming services, and augmented reality, creates a demand for skilled professionals in network infrastructure, content creation, and digital marketing.
A World Health Organization (WHO) report emphasizes a global shortfall of 10 million healthcare professionals by 2030, including skilled workers, doctors and nurses. An aging population drives the healthcare sector's shortage, increased demand for healthcare services, and the complex nature of modern medical treatments. The COVID-19 pandemic has also heightened the need for skilled healthcare professionals, contributing to the existing shortage.
Strategies for Addressing the Global Talent Shortage
Talent scarcity presents a significant challenge for businesses, but it also offers remarkable opportunities to rethink, diversify, and enhance your workforce as part of your global expansion strategies. Navigate this complex landscape and secure the talent you need with these tips:
Harness Talent From Abroad
Talent distribution is uneven globally, with certain regions like Southeast Asia and Latin America brimming with skilled professionals. For example, a study by Macro Polo indicates that only 31% of AI researchers in the US come from the region. Notably, 27% & 11% of AI talents in the US are China & India undergraduates, respectively. This shift in the world's talent pool is because education investments, job opportunities, and even immigration policies are playing a tug-of-war with skilled professionals, concentrating them in certain regions while leaving others bare. It's a complex equation, but one we can tackle by leveling the playing field with the right strategy.
Recognizing this imbalance paves the way for strategic global hiring. Tap into these underutilized talent pools by leveraging the support of global partners who help you hire international employees, manage their employment and payroll, and handle legal and regulatory constraints. Don't be afraid to expand your search beyond traditional markets – you might discover a diamond in the rough.
Invest in Internal Growth
Upskilling and reskilling your existing workforce can be a valuable solution for the global talent crunch. Provide training programs on emerging technologies and relevant skills like data analysis and critical thinking. This addresses your immediate needs and fosters loyalty and engagement among your employees.
Recognize Potential Beyond Resumes
Ditch rigid experience requirements and embrace the potential. Assess candidates based on their aptitude, adaptability, and eagerness to learn. Look for soft skills like communication, teamwork, and problem-solving – these often outweigh years of experience in a rapidly changing talent landscape.
Retain Employees With Good Employee Benefits & Workplace Engagement
Back in 2017, a study by the Society for Human Resource Management reported that employers will need to spend the equivalent of 6-9 months of an employee’s salary to find and train their replacement. That means an employee salaried at $60,000 will cost the company anywhere from $30,000 to $45,000 to hire and train a replacement.
Retaining talent has become more expensive now that the market is tighter than usual. Create a work environment that fosters employee well-being and satisfaction. Offer competitive compensation packages, flexible work arrangements, and ample opportunities for growth and development. Invest in your employees' success, and they'll invest in yours.
Build Agile Teams
Embrace the rise of the gig economy. Consider supplementing your core team with skilled contractors for specific projects or seasonal demands. This flexibility allows you to access specialized expertise without the burden of permanent overhead. Remember, a well-balanced blend of permanent employees and contractors can bridge the talent gap and keep your workforce nimble.
Reimagine Your Hiring With An EOR
One of the best (and the safest and most scalable) ways to escape the global talent crunch is to partner with an Employer of Record (EOR). An EOR employs international workers on your behalf, handling onboarding, payroll, taxes, benefits, and compliance. With this approach, you can tap into a wider talent pool without worrying about the complexities, costs, and risks of cross-border hiring.
Explore Gloroots to learn more about partnering with a global EOR.