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Korn Ferry Study Reveals Company Payrolls Could Soar Long-Term Due to Global Skilled Talent Shortages
Salaries for highly skilled workers could boom as global talent shortages take hold, according to a new study* by Korn Ferry. Left unchecked, the salary surge could add $2.5 trillion to annual payrolls globally by 2030, jeopardizing companies’ profitability and threatening business models.
“The new era of work is one of scarcity in abundance: there are plenty of people, but not enough with the skills their organizations will need to survive,” said Bob Wesselkamper, Global Head of Korn Ferry Rewards and Benefits Solutions. “While overall wage increases are just keeping pace with inflation, salaries for in-demand workers will skyrocket if companies choose to compete for the best and brightest on salary alone.”
Korn Ferry’s Salary Surge study estimates the impact of the global talent shortage, as identified in Korn Ferry’s recent Global Talent Crunch study, on payrolls in 20 major global economies at three milestones: 2020, 2025 and 2030, and across three sectors: financial and business services; technology, media and telecommunications (TMT); and manufacturing. It measures how much more organizations could be forced to pay workers, above normal inflation increases.
The salary surge could undermine market dominance within sectors:
- Financial and business services face a potential wage increase of more than $440 billion by 2030; this is more than double the wage premium of the other sectors examined.
- The wage premium for TMT could almost triple within the next decade, surging from more than $59 billion in 2020 to $160 billion by 2030.
- Manufacturing, a critical driver of growth for many emerging economies, could stall under the impact of additional salary increases of more than $197 billion by 2030.
The study also reveals the huge impact the salary surge will have at a country level:
- U.S. and Japanese companies can expect to pay the most: the U.S. could face a wage premium of more than $531 billion by 2030; Japan is predicted to pay approximately an additional $468 billion by 2030.
- Smaller markets with limited workforces are likely to feel the most pressure. By 2030, Singapore and Hong Kong could expect salary premiums equivalent to more than 10 percent of their 2017 GDP**.
- While the U.K. and France can expect a better short-term outlook, by 2030 the U.K.’s wage premium may be equivalent to 5 percent of its 2017 GDP** and France’s may reach 4 percent of its 2017 GDP**.
- By 2030, China could see an additional salary increase of more than $342 billion.
- India is the only economy that can expect to avoid upward spiraling wages, as unlike any other country in the study, it will have a highly skilled talent surplus at each milestone.
- The average pay premium (what employers could have to pay over and above the amount that salaries would rise over time due to normal inflation) per worker across the 20 economies is $11,164 per year; however, Hong Kong could face a staggering $40,539 per year per highly skilled worker; Singapore could expect to pay an extra $29,065; and Australia $28,625 more by 2030.
“Buying in talent from the market is unsustainable. Instead, companies must focus on engaging and reskilling their current workers,” said Alan Guarino, vice chairman, Korn Ferry CEO and Board Services. “With existing highly skilled workers, leaders must focus on what really drives retention. We know that employees who have the opportunity for career development, benefit from inspiring leadership and feel their work has purpose are more likely to stay at an organization, and—crucially—will be more engaged and productive.”
“In tomorrow’s world of work, the employees who will succeed won’t necessarily be the people with the highest level of academic achievement,” said Guarino. “Instead, they will be the ones who are adaptable and willing to learn, with enough flexibility to handle rapidly shifting working environments and less hierarchical structures. Companies need to identify the talent of tomorrow and help them achieve their potential.”
**GDP figures based on 2017 IMF estimates
Source: Korn Ferry