Some US trucking companies are offering big signing bonuses to the few new qualified drivers who enter the industry. In Germany, construction workers negotiated a nearly 6% raise because their employers are so worried about finding replacements if workers leave. And in Japan, manufacturers who normally would be easing out workers over age 60 are giving them pay raises.
This, however, may be only the beginning of a ground-shaking trend. By 2030, thanks to a global shortage of as many as 85 million workers, organizations worldwide could be paying an additional $2.5 trillion to secure talent, according to an exclusive Korn Ferry study. “The combined effect of these twin pressures could jeopardize profitability and threaten business models,” says Ben Frost, Korn Ferry’s vice president and general manager of Reward Products.
In “The Salary Surge,” Korn Ferry compared the projections on the talent shortage with the salary data the firm has on 24,000 organizations. The report models a wage premium, the additional amount employers will need to pay over and above inflation, for various economies around the world. A 1% shortage of talent in a market translates to a 1% wage premium for the available workforce.
The US likely will face the biggest wage premium, $531 billion by 2030. But the world’s largest economy is by no means alone in facing higher wage costs for scarcer talent. Indeed, seven nations have wage premiums of $100 billion or more by 2030. And China, which doesn’t have to worry about a premium in the immediate future, will face a premium of $343 billion annually by 2030. “China, Russia, and some other countries may be lulled into a false sense of security by the delayed onset of their skilled-labor shortages. But if they don’t take action soon, they could rank among the most severely affected by 2030,” Frost says.
The study follows an earlier landmark Korn Ferry study, “The Global Talent Crunch,” which identified an impending global shortage of labor in the next 12 years. This new report breaks down the salary pay premiums by 20 economies and three sectors: finance, manufacturing, and technology-media-telecommunications.
The new report says that since skilled workers will be in a better position to demand higher salaries, employers will need to adjust their recruitment and retention practices to ensure that their top talent doesn’t leave for the highest bidder. Indeed, buying needed talent from the market will become too costly to remedy the situation alone, says Mark Thompson, a Korn Ferry senior client partner. “Companies will need to focus on retaining and reskilling existing workers instead,” Thompson says.