The World’s Aging Workforce and What Your Business Should do About It

Despite projected growth in the global population from 6.9 billion to 7.6 billion in 2020, the working-age population is expected to decline. In fact, aging will likely add 360 million older people (Baby Boomers) to the world’s pool of those not participating in the labor force.

XYZ University publishes Scary Stats each Halloween, and this latest stat just might be the scariest of 2015:

Despite projected growth in the global population from 6.9 billion to 7.6 billion in 2020, the working-age population is expected to decline. In fact, aging will likely add 360 million older people (Baby Boomers) to the world’s pool of those not participating in the labor force.

There are few exceptions to this aging trend. India’s workforce is getting younger with one-third of the country’s population under the age of 15. Other developing market economies with young labor forces include Brazil, Mexico, Africa, and Indonesia.

But the rest of the world is aging. And there’s no sugar-coating it – this aging trend will hinder the growth rate of the global labor supply. Consider this:

1. Japan already has more people exiting the workforce than there are workers prepared to enter it;

2. In the Europe, 2010 marked the first time more workers retired than joined the workforce. This labor gap is at 200,000 currently, but expected to surge to 8.3 million by 2030;

3. By the end of this decade, Russia, Canada, South Korea, and China will also have more people at retirement age than are entering the workforce.

Ladies and gentlemen, the war for talent is heating up. Way up. Get ready for a skills-scarce world.

An estimated 31% of employers worldwide find it difficult to fill positions because of talent shortages in their markets, reports the Talent Shortage Survey from Manpower. Why can’t companies find the right talent despite the growing ranks of college-educated workers?

Part of the answer has to do with the rising skill level needed in the evolving global economy.

Another element is the failure of educational systems to produce an adequate base of talent to meet these changing needs. Although educational access is growing worldwide, not enough students graduate with the skills desired by global employers.

Change is happening so fast, we’re failing to keep up. To be more accurate – America is failing to keep up.

Researchers at the Princeton-based Educational Testing Service administered a test, sponsored by the OECD, designed to measure the job skills of adults born after 1980 in 23 different countries.

When they analyzed the results by age group and nationality, the results were shockingly bad for young Americans.

According to the study, despite the fact that American Millennials (Gen Y) are now the most educated generation ever, they scored far below their international peers; 17 out of 23 in literacy, 21 out of 23 in numeracy, and 18 out of 20 in problem solving in technology-rich environments.

What does all this mean for your business?

First, it means developing strategies for hiring, retaining, and training the workers who will give your business a competitive advantage must become the priority. Take a lesson from PwC, which spends millions each year on student recruitment, identifying high potentials during their sophomore year in college and courting and mentoring them throughout the remainder of their college careers.

Second, it also likely means businesses from all industries will need to significantly step up their efforts to shape public education and training systems. Never before have education and job-specific training been so important. Businesses will have to be more proactive and intentional about building pipelines of workers with the right skills for the 21st-century global economy.

Apple recently partnered with the Thurgood Marshall College Fund, which represents and supports students attending historically black colleges and universities (HBCUs), medical schools, and law schools. As part of the collaboration, Apple is giving TMCF more than $40 million to help develop talent pipelines into the tech industry, including Apple.

Third, as management shifts to younger generations, companies will need to shift their focus onto enhancing the next generation’s skill sets—especially in regards to leadership. The Deloitte 2015 Global Human Capital Trends report surveyed and interviewed more than 3,300 business and HR leaders from 106 countries. Half the respondents rated their leadership shortfalls as “very important,” yet only 31 percent believe their leadership pipeline is “ready.”

Generation X (ages 34-50 in 2015) has been stuck in middle management for so long, many haven’t had the opportunity to utilize or gain leadership skills. Generation Y (ages 20-33) is expected to become the majority of the workforce by 2015, but this young demographic is still emerging from college and entry-level careers.

While it’s encouraging to know that younger generations are expected to significantly grow their managerial skills by 2020, the onus is on companies to give them equitable opportunities to gain the right mentors, sponsors, career experiences, and training to capitalize on this potential. Unfortunately, this is proving difficult for many organizations because Boomers remain at the helm, determined to lead and resisting the participation of younger generations.

But the stats are clear: Boomers won’t be working forever and widespread retirements are imminent. The long-predicted aging workforce crisis and skilled labor shortage is upon us. I hope that today’s leaders will do all they can to lead their companies responsibly and strategically, leaving behind companies that are well prepared to succeed and prosper for generations to come.

Scared yet? You should be. Talent is our greatest resource. Not buildings or real estate or even technology. Every organization needs talent to survive, so make talent development the priority.

Do it now before it’s too late.