Media Briefings

Connecting Talent with Opportunity
 
Throughout the global economy, there is a mismatch between the labor pool and the labor market. Good jobs exist at many employers, and good workers are available, but too often they can’t find each other. The consequences include high unemployment and underemployment, decreased productivity, and slow economic growth.

According to our analysis of this situation, the problem actually involves the intersection of three trends we’ve been following for more than a decade:

1. The apparent shortage of jobs for skilled workers

2. The apparent shortage of skilled workers at companies that need to hire them

3. The emergence of online talent platforms, which just might provide the solution

Let’s start with the apparent shortage of jobs for skilled workers.

In countries throughout the world, between one-third and one-half of the working age population is either jobless or barely working. Adding up the impact on just seven countries - Brazil, China, Germany, India, Japan, the United Kingdom, and the United States - 850 million people are unemployed or underemployed, according to a new report from the McKinsey Global Institute by James Manyika, Susan Lund, Kelsey Robinson, John Valentino, and Richard Dobbs.1
 
There are many obstacles preventing workers from finding jobs:

- Workers could be in the wrong location.

- They may have the wrong skills for the job openings.

- They may be in the right location with the right skills, but never find out that the perfect position for them is available.

Another problem is that young people are not entering the workforce at the same rate as previous generations. Today, nearly 75 million young people are officially unemployed, but the number of their peers who are not even trying to find a job, get an education, or acquire skills through training programs is in the hundreds of millions, according to McKinsey.

The four-year college degree, which until recently was the key that unlocked a lucrative career, no longer turns the tumblers of the new employment marketplace. A recent LinkedIn survey found that 37 percent of respondents believe their current job doesn’t fully utilize their skills or provide a sufficient challenge. In other words, they’re overeducated and underemployed.

With so many people either overqualified for their current jobs or looking for work, it would seem that employers would find it easy to hire qualified candidates for every position. But that’s not the case.

This leads to the second problem: the shortage of skilled workers at companies that need to hire them.

Several studies have produced results that parallel those of a worldwide 2014 survey of 37,000 companies by the multinational human resource consulting group Manpower Inc.2

The firm reported that 36 percent of employers are unable to find the talent they need to fill their job openings. The types of workers in short supply include not just software engineers, but a wide range of occupations including welders, electricians, healthcare workers, and drivers.

According to McKinsey research, “by 2018, the United States alone could face a shortage of up to 190,000 people with deep analytical skills as well as 1.5 million managers and analysts with the know-how to use big data to make effective decisions. These shortfalls are even more acute at the global level. A study by the World Health Organization projects that the current shortage of 7.2 million healthcare workers worldwide is likely to grow to 12.9 million by 2035.3 While much of the gap is concentrated in the emerging world, it also affects developed economies, where 40 percent of nurses are projected to leave the healthcare field over the next decade.”

When employers can’t find the right candidates, positions go unfilled, or they are filled by people who lack the skills, education, or experience that the work demands. The results include diminished quality, service, or productivity, as well as missed opportunities for creativity, innovation, and growth.
 
So, to sum up what we’ve covered so far:

- Between one-third and one-half of the global working age population is unemployed or underemployed because they can’t find jobs.

- More than one-third of companies worldwide can’t find the workers they need.

The solution to the problems posed by these first two trends is to find a way to match qualified workers with eager employers. Fortunately, technology provides the answer, thanks to the emergence of online talent platforms.
 
Online platforms have been around for two decades. Match.com launched in 1995 to connect single people with each other; eBay was founded the same year to connect buyers and sellers. Today, millions of small businesses use e-commerce platforms like Amazon and Alibaba to sell their wares to the global marketplace.

Online talent platforms can serve the same purpose for employers and job candidates. McKinsey defines them as “marketplaces and tools that can connect individuals to the right work opportunities.” With hundreds of millions of users around the world, they already have reached critical mass.

Websites such as Monster, Careerbuilder, and LinkedIn allow users to post their resumes and employers to post job openings. In this way, job seekers can search for the right position from a vast amount of opportunities, while HR directors can widen the net to find the right candidates from among millions of potential employees.

The sites’ advanced search engines and algorithms focus and filter the enormous data available so a company looking for its ideal candidate - Ivy League graduate, five to seven years’ experience, Midwestern location, no more than two previous employers - can funnel the overwhelming number of interested candidates into a manageable number of individuals who are likely to succeed in the position.

With more than 364 million members worldwide, including 115 million in the U.S., LinkedIn is the largest platform, and in 2014 it facilitated nearly one million hirings, according to McKinsey.

While LinkedIn matches individuals with traditional jobs, apps like Uber, TaskRabbit, and Upwork connect freelance or contingent workers to companies and individuals willing to hire them to perform small gigs, such as chauffeuring an executive to the airport, cleaning an apartment, or designing a Web page. Rather than hiring an employee, the users of these apps pay for a single transaction.

The result is the so-called “gig economy,” in which workers who either can’t find or don’t want a full-time job working for a single employer use these online marketplaces to make a living by stringing together work for multiple clients.

Upwork’s online marketplaces offer tasks from four million businesses for nine million freelancers from 180 countries. Uber has 160,000 active drivers, who earned more than $650 million in payments in the fourth quarter of 2014 alone. TaskRabbit provides work for 30,000 people who perform household chore or run errands.

Combined, these two types of online talent platforms - sites like LinkedIn that match employers with qualified candidates for full-time jobs, and apps like Upwork that connect freelancers with clients that need “gigs” performed on a transactional basis - allow unemployed people to find work, and companies to find workers.

Of course, these platforms are only in the early stages of development; just as eBay, Match.com, and Amazon have become more useful and more disruptive to traditional competitors over time thanks to network effects and advanced technology, it’s likely that sites like LinkedIn and Upwork will evolve into platforms that will take over the traditional HR role of recruiting talent for corporations.

Based on our analysis of this trend, we offer the following forecasts:

First, the impact of online talent platforms on the global economy will be immense.

McKinsey estimates that “as many as 230 million [people worldwide] could find new jobs more quickly, reducing the duration of unemployment, while 200 million who are inactive or employed part-time could gain additional hours through freelance platforms. As many as sixty million people could find work that more closely suits their skills or preferences, while an additional fifty million could shift from informal to formal employment.” Based on increased workforce participation, better matching of skills with job openings, and improved productivity, online talent platforms could add $2.7 trillion, or 2 percent, to global GDP by 2025. That’s equivalent to the GDP of the United Kingdom.4
 
Second, online talent platforms can help in reshaping the education system to better prepare young people for the workforce.

The vast amounts of data generated by the platforms will reveal the skills that are actually in demand by employers in real time. Using this insight, schools and training programs will adapt to the realities of the labor market and create new curricula to equip students with the type of education that will lead to job offers.

Third, in order for online platforms to reach their full potential, broadband access will have to become ubiquitous.

In the U.S., fifty million people still do not have internet connections. The situation is worse in China, where more than half of the population lacks internet access, and in India, where more than 80 percent of people are not online. To provide the same opportunities for everyone, and to draw from the widest possible pool of candidates, governments will need to build out the infrastructure to provide people with low incomes, or those who live in remote locations, equal access to employers.

References
1. For access to the report, “A Labor Market that Works: Connecting Talent with Opportunity in the Digital Age,” visit the McKinsey website at:

http://www.mckinsey.com/insights/employment_and_growth/connecting_talent_with_opportunity_in_the_digital_age

2. For more information about employers’ inability to find candidates to fill their job openings, visit the Manpower Group website at:

http://www.manpowergroup.com/wps/wcm/connect/manpowergroup-en/home/newsroom/news-releases/global+talent+shortage+hits+seven-year+high-.Ve87L0sR9fM

3. For more information about the global shortage of healthcare workers, visit the World Health Organization website at:

http://www.who.int/mediacentre/news/releases/2013/health-workforce-shortage/en/

4. For access to the report, “A Labor Market that Works: Connecting Talent with Opportunity in the Digital Age,” visit the McKinsey website at:

http://www.mckinsey.com/insights/employment_and_growth/connecting_talent_with_opportunity_in_the_digital_age