This presentation offers highlights from a new report by the McKinsey Global Institute, "A labor market that works: Connecting talent with opportunity in the digital age".
From shopping to social media, online platforms have transformed major segments of the global economy. They now are about to do the same for labor markets around the world. MGI examines the stubborn disconnect between people and jobs and the potential for online talent platforms to unlock real economic value over the next decade by creating better, faster matching between workers and available work opportunities.
Read the report in full:
http://mckinsey.com/Insights/Employment_and_growth/Connecting_talent_with_opportunity_in_the_digital_age
McKinsey Global Institute Report - A labor market that works: Connecting talent and opportunity in the digital age
1. A labor market that works:
Connecting talent and
opportunity in the digital age
JUNE 4TH, 2015
Any use of this material without specific permission
of McKinsey & Company is strictly prohibited
2. McKinsey & Company | 1
Companies that adopt these technologies can increase revenue,
reduce costs, and improve profit margins by ~275 basis points
3
To capture the opportunity, we need to close the digital divide,
harness the data to inform education and training choices, address
data ownership and privacy, and rethink labor regulations and worker
benefits
4
Key messages
2
Online talent platforms could have enormous economic impact
and societal benefits
▪ Increase global GDP by $2.7 trillion by 2025
▪ Improve work outcomes for 540 million people
▪ Enhance innovation, creative destruction, and the overall skill mix
of economies
1 Online talent platforms improve transparency and efficiency in
labor markets by matching workers with traditional jobs, creating
digital marketplaces for freelance work, and enabling employers to
recruit and retain talent
3. McKinsey & Company | 2
Labor market challenges
are bigger than people
think
4. McKinsey & Company | 3SOURCE: BLS; OECD; UN; World Bank; ILO; national sources; McKinsey Global Institute analysis
30 to 45 percent of the working-age population is
economically underutilized in countries around the world
NOTE: Part-time employment data are not available for China, Brazil, and India. For Japan we use non-regular employment as a proxy. The percent of
people unemployed is lower than the unemployment rate because the latter has only the labor force in the denominator
1 Inactive, unemployed, and part-time
62 60 59 52
74 70
54
13 13 20
28 23 24 25 23 25
44
100% = 1,010
4
United
States
834139
5
United
Kingdom
202
6
4
Germany Japan
78
3
Brazil
41
5
China
54
4
2
India
%; million people UnemploymentInactive Full-timePart-time
77 1721 37 273 41 381
Working-age
population (age 15–64)
by status and country,
2013
Total number of
underutilized workers1
Million
~850
5. McKinsey & Company | 4
300 million youth worldwide are not in employment,
education or training
SOURCE: OECD; ILO; Eurostat; UN; McKinsey Global Institute analysis
7
14
14
17
23
24
35
43
52
53
54
Japan
Brazil
United States
United Kingdom
France
Ireland
Portugal
Italy
Greece
Spain
South Africa3
Youth unemployment rate, 2013 or latest
% of the labor force aged 15–24
Youth not in employment,
education or training
Thousand people, aged 15-24
6,409
871
121
717
104
90
1,728
451
6,954
6,721
821
~300 million
worldwide
6. McKinsey & Company | 5
1.5
1.8
5.5
4.2
1.7
1.0
0.8
0.5
0.2
Arts, design & entertainment
Maintenance & repair
Social services
Natural & social science
Architecture & engineering
Healthcare practitioners
18.7Construction & extraction
Cleaning & maintenance 10.7
Production
Food services
Computer & mathematical
Labor markets around the world suffer from skill shortages
and matching problems
SOURCE: Burning Glass; BLS; McKinsey Global Institute analysis
Ratio of number of unemployed people to job postings in the United States, 2014
Too few
workers
Matching
problems?
Too much
unemployment
~4.0 million
job postings
~8.5 million
unemployed
people
7. McKinsey & Company | 6
Labor market fluidity – or the rate of job change – is
declining across countries
SOURCE: OECD; National Sources; McKinsey Global Institute
Share of people whose current job tenure is less than one year1
% of total employment,
0
5
10
15
20
25
30
Brazil
United States
201310080604022000
Japan
Italy
France
Germany
United Kingdom
1 Proxy for labor market fluidity.
-3.7
0.3
-1.4
-1.7
-5.5
-1.6
-1.3
Declining labor
market fluidity
may contribute to
higher long-term
unemployment
and reduced
wage gains
Change,
2000–13
Percentage
points
8. McKinsey & Company | 7
Across countries, 37% of surveyed workers say their jobs do
not fully utilize their skills
SOURCE: LinkedIn Job Seeker Survey, 2014; N=1,510
% of respondents who selected “finding a better skill set fit,” “more challenging work,” and
“a more impactful role” as the three top factors enticing them to pursue a new job opportunity
n = 1,510
2727
36
393940
48
United
States
BrazilChinaUnited
Kingdom
IndiaGermanyJapan
All countries = 37
10. McKinsey & Company | 9
Online talent platforms are a rapidly evolving set of
websites, apps, and tools that match workers with jobs
1 All companies are illustrative and not exhaustive, many span multiple functions
Digital talent
management tools to
streamline recruiting
and training
Online marketplaces
for contingent work
Examples
More transparent,
efficient matching of
individuals with
traditional jobs
11. McKinsey & Company | 10SOURCE: LinkedIn 2015, McKinsey Global Institute analysis
Country
Members,
million
United Kingdom 18
France 10
Italy 8
United States of America 115
India 31
Brazil 21
Canada 11
Mexico 7
China 9
Australia 7
364
296
218
161
102
64
13 14 2015122010 11
Compound
annual growth
rate, 2010–15 =
LinkedIn facilitated ~1 million hires in 2014
LinkedIn’s growth is an example of the rapid adoption of
online talent platforms
1 Compound annual growth rate
Geographic distribution of members – top 10
countries, 2015
Number of LinkedIn members by the first quarter
of each year
Million members
41.6%
12. McKinsey & Company | 11
The freelance economy is already large: 1 out of 8 workers in business
services are freelancer professionals
Self-employed professionals in business services1 as share of total
%, 2014 or latest2
SOURCE: Eurostat; BLS; OECD; McKinsey Global Institute analysis
1 Includes unincorporated self-employed individuals in information and communications, finance, professional, technical, and scientific services, and
administration that do not have any other employees
2 Based on data from 2011 for the US
28
26
11
7
7
8
8
9
9
10
11
14
15
16
18
Austria
Finland
Sweden
Denmark
Ireland
Germany
Portugal
Spain
Belgium
United Kingdom
Netherlands
Greece
Italy
France
United States
13. McKinsey & Company | 12
Online marketplaces for freelance work are small but
growing rapidly
SOURCE: “Freelancing in America”, an independent survey commissioned by Freelancers Union & Elance-oDesk;
McKinsey Global Institute analysis
1 Numbers represent most recent available data, between 2013 and 2015
2,500,000 freelancers
160,000 drivers
60,000 drivers
25,000 service providers
10,000 physicians
6,000 drivers
4,000 messengers
5,400 MBA consultants
1,000 personal shoppers
225 messengers
Platform Number of individuals in the US1
14. McKinsey & Company | 13
55% of part-time workers – and 30% of full-time workers --
would increase their hours for more pay
% of respondents of LinkedIn survey
SOURCE: LinkedIn global survey, 2015; McKinsey Global Institute analysis
NOTE: Numbers may not sum due to rounding.
7
38
55
31
54
15
No changeIncrease hours Decrease hours
Part-time employed
n = 704
Full-time employed
n = 11,918
15. McKinsey & Company | 14
Percent reduction in job search time due to use of
online talent platforms
% reduction in transition time
(n = 6,924)
Online talent platforms significantly reduce job search time
and improve job options
39
43
45
46
48
50
56
China
Germany
United States
Brazil
All countries =
Japan
India
United Kingdom
41
43
44
44
44
46
52
All countries =
China
United States
Japan
Germany
United Kingdom
India
Brazil
Respondents that say online talent platforms
broaden or improve job options
% of survey respondents
(n = 5,750)
SOURCE: LinkedIn global survey, 2015; McKinsey Global Institute analysis
45 47
16. McKinsey & Company | 15
Online talent platforms
have significant economic
benefits
17. McKinsey & Company | 16
Online talent platforms can boost GDP and employment
in at least five ways
SOURCE: McKinsey Global Institute
1 Increasing participation: Enabling inactive and
under-employed workers to new and/or flexible
work arrangements that increase hours worked
5 Reducing informality: Shifting individuals from
informal to formal employment with higher
productivity
4 Better matches: Helping individuals find jobs that
better fit their talent, raising productivity
3 New matches: Helping under-staffed companies
and unemployed jobseekers to find new types
of matches that were not available to them
2 Faster matches: Decreasing the duration
of unemployment by helping companies
and workers find each other faster
18. McKinsey & Company | 17SOURCE: MGI Online Talent Platform Model, McKinsey Global Institute analysis
Global GDP impact of online talent platforms by 2025, $ billion
Online talent platforms could increase global GDP by $2.7 trillion
by 2025 and raise employment by 72 million FTEs
1,270
700
335
2,700
290
Total impact,
2025
Higher
productivity
625
Reduced
unemployment
105
Higher
participation1
805
1 Includes increasing participation among people who currently do not work and increasing hours among part-time workers.
2 Full-time equivalents.
NOTE: Numbers may not sum due to rounding.
72 47 25
2.0
Employment
increase
Million FTE2
GDP increase
% 0.9 0.6 0.5
New matches
Better matches
Reduced informality
Faster matches
19. McKinsey & Company | 18
GDP impact of online talent platforms by focus country, 2025
Percent
of GDP
0.5
0.5
0.5
0.5
0.3
0.5
0.7
0.7
0.6
0.4
0.2
0.5
0.2
0.9
1.1
0.9
0.8
0.8
0.7
1.2
0.8
1.5
2.4
1.9
2.3
1.7
1.5
2.0
Reduced
unemployment
Increased
productivity
All
countries
SOURCE: MGI Online Talent Platform Model
Higher
participation
0.5 0.5 0.9 1.9
512
68
70
78
485
222
69
1,504
GDP increase
(in USD bn)
4.1
0.8
0.7
0.9
12.9
11.3
2.7
33.3
2.7%
2.4%
1.9%
1.5%
1.7%
2.2%
1.6%
2.0%
Employment
increase (m; %)
The impact of online talent platforms differs across
countries
20. McKinsey & Company | 19SOURCE: MGI Online Talent Platforms Model
0.5%-0.9%<0.4% >0.9%
GDP 2-3%<2% >3%
Employment
NOTE: Numbers may not add up due to rounding.
Country
GDP
% of
GDP
Increased
participa-
tion
% of GDP
Faster
Matches
% of GDP
New
Matches
% of GDP
Better
Matches
% of GDP
Reduced
Informality
% of GDP
GDP
billion
Employment
% of Emp 1000 people
Spain 3.3 0.8 1.7 0.4 0.2 0.2 58 4.4 748
Greece 3.2 0.9 1.5 0.4 0.2 0.2 10 4.3 161
Portugal 2.5 0.8 1.0 0.3 0.1 0.2 7 3.2 140
Italy 2.5 1.0 0.9 0.2 0.2 0.2 52 3.1 734
United States 2.3 1.1 0.6 0.1 0.4 0.1 512 2.7 4,091
France 2.3 1.1 0.7 0.1 0.3 0.1 64 2.9 784
Belgium 2.2 1.1 0.5 0.1 0.3 0.2 12 2.7 120
Sweden 2.1 0.9 0.6 0.1 0.4 0.1 11 2.5 119
Finland 2.1 1.0 0.5 0.1 0.3 0.1 5 2.5 61
Denmark 2.1 0.9 0.5 0.1 0.4 0.1 6 2.4 67
Canada 2.0 1.0 0.5 0.1 0.4 0.1 41 2.4 436
United Kingdom 2.0 0.9 0.5 0.1 0.4 0.1 68 2.4 766
Australia 1.9 1.0 0.4 0.1 0.4 0.1 28 2.2 271
Germany 1.7 0.8 0.4 0.1 0.4 0.1 70 1.9 708
South Korea 1.6 0.9 0.2 0.0 0.4 0.1 39 1.8 416
Netherlands 1.6 0.7 0.3 0.0 0.4 0.1 14 1.8 147
Singapore 1.7 1.0 0.2 0.0 0.3 0.1 9 1.9 67
Japan 1.5 0.7 0.2 0.0 0.4 0.1 78 1.6 906
The impact of online talent platforms varies
across advanced economies
Reduced
unemployment Higher productivity
21. McKinsey & Company | 20
Country
GDP
% of
GDP
Increased
participa-
tion
% of GDP
Faster
Matches
% of GDP
New
Matches
% of GDP
Better
Matches
% of GDP
Reduced
Informality
% of GDP
GDP
billion
Employment
% of Emp 1000 people
South Africa 3.9 1.1 2.1 0.1 0.2 0.4 20 5.0 861
Colombia 3.1 0.9 1.4 0.2 0.1 0.5 25 3.7 946
Philippines 2.7 0.9 0.9 0.1 0.2 0.6 22 2.9 1,359
Russia 2.5 0.9 0.7 0.1 0.2 0.6 82 2.5 1,605
Hungary 2.5 1.0 0.8 0.2 0.2 0.4 7 2.9 110
Nigeria 2.5 1.3 0.3 0.1 0.2 0.7 20 2.6 1,889
Turkey 2.5 1.3 0.4 0.1 0.3 0.4 41 2.8 799
Brazil 2.4 0.8 0.8 0.1 0.1 0.6 69 2.6 2,686
Peru 2.3 0.8 0.5 0.1 0.2 0.8 12 2.0 320
Chile 2.3 0.9 0.8 0.1 0.2 0.3 12 2.8 210
Mexico 2.3 1.0 0.6 0.1 0.1 0.4 60 2.6 1,349
Poland 2.2 0.9 0.6 0.1 0.4 0.2 27 2.5 353
Indonesia 2.2 0.9 0.8 0.1 0.1 0.3 57 2.7 3,538
Kenya 2.2 1.1 0.4 0.1 0.2 0.4 3 2.4 536
Czech Republic 1.9 0.8 0.4 0.1 0.4 0.1 7 2.1 103
Malaysia 1.9 1.1 0.1 0.0 0.2 0.5 16 2.0 286
India 1.9 1.2 0.2 0.0 0.2 0.3 222 2.2 11,343
Thailand 1.8 0.8 0.1 0.0 0.1 0.8 20 1.3 511
China 1.5 0.7 0.4 0.0 0.1 0.2 485 1.7 12,868
SOURCE: MGI Online Talent Platforms Model
NOTE: Numbers may not add up due to rounding.
Online talent platforms can also have
significant impact in developing countries
GDP
Employment
0.5%-0.9%<0.4% >0.9%
2-3%<2% >3%
Reduced
unemployment Higher productivity
22. McKinsey & Company | 21
230
200Higher participation
Better matches
Reduced informality
540
50
Reduced job search time
60
7
6
41
United Kingdom
Japan
Brazil
United States
India
China 92
Germany
8
21
77
SOURCE: MGI Digital Labor Model; McKinsey Global Institute analysis
1
1
4
5
10
9.1
8.1
18.5
14.2
11.2
16.1
12.5
x % of the working-age population1 x % of the working-age population
1 People aged 15-64. Numbers may not add up due to rounding.
People who can benefit from online talent
platforms by impact mechanism
Million people, 2025
People who can benefit from online talent
platforms by country
Million people, 2025
Up to 540 million people around the world could benefit
from improved job outcomes
23. McKinsey & Company | 22
Online talent platforms may have significant long-term
economic benefits as well
Improved effectiveness of spending on labor market
programs and education
Enhanced innovation and entrepreneurship
Improved skill mix and human capital development
of economies
Increased productivity through company impact
24. McKinsey & Company | 23
Online talent platforms
create value for
companies
25. McKinsey & Company | 24
Poor talent management increases employee turnover –
adding to recruiting and hiring costs
SOURCE: LinkedIn Job Seeker survey, 2014; McKinsey Global Institute analysis
20
20
22
27
30
Lack of challenge in the job
Dissatisfaction with
compensation/benefits
Lack of rewards/recognition
for my contributions
Unsatisfactory leadership
of senior management
Lack of opportunities
for advancement
Survey question: “Which of the following contributed to your
decision to leave your previous employer?”
% of respondents (n = 29,825)
Top performers are
2.5x more
productive than the
average worker
Attrition costs are
up to 2X the salaries
of knowledge
workers
26. McKinsey & Company | 25
Online talent platforms create value for companies by improving recruiting and
talent acquisition, talent management, and long-term planning
Recruiting
and talent
acquisition
Example providers, 2015
▪ More efficiently filter candidates
▪ Use more data to assess candidate fit
▪ Find better quality candidates
▪ Tailor cultivation approach to each offeree
▪ Discover hard-to-find, niche talent
Managing
individual
and group
talent
▪ Form more effective teams and groups
▪ Tailor onboarding and training
▪ Find internal expertise and knowledge
Planning for
the future
▪ Anticipate and plan for future talent needs
▪ Predict and optimize attrition
▪ Plan succession paths
27. McKinsey & Company | 26
The potential impact is driven by different mechanisms
in different types of companies
Low Medium High
Recruiting
Managing
talent
Planning
for the
future
Impact mechanism
Plan for succession paths
Anticipate and plan for future talent needs
Predict and optimize attrition
Find internal expertise and knowledge
Form more effective teams and groups
Personalize training & learning opportunities
Tailor onboarding
Use candidate data for better assessment
More efficiently filter to select interviewees
Discover hard-to-find, niche talent
Tailor cultivation approach to each offeree
Find better quality candidates
Total profit impact, bps
Prof.
services
540
Hospital
230
Bank
255
Manu-
facturing
120390
High
tech Retail
110
Total
profit
increase
bps
40
45
20
15
35
10
1
10
5
10
5
80
275
SOURCE: McKinsey Global Institute analysis
None
28. McKinsey & Company | 27
Cost reduction2, %
Output
increase1, %
Incremental impact of online talent platforms
Em-
ployees
2,000
5,000
10,000
100,000
10,000
15,000
Profit impact, bpsRevenues
$0.5 billion
$2.5 billion
$2.4 billion
$31.7 billion
$11.1 billion
$2.8 billion
Online talent platforms can increase revenue by up to 9
percent and reduce costs by up to 7 percent
9
7
4
3
3
2
5
6
4
6
7
4 120
255
110
540
230
390
1 Includes productivity gains in front- and middle-office workers, which can translate into revenue or other increased output opportunities
2 Includes productivity effect in middle- and back-office workers and savings in recruiting, interviewing time, training, onboarding, and attrition costs
SOURCE: McKinsey Global Institute analysis
Hospital
Professional
services
Manu-
facturing
Bank
High Tech
Retail
Model
company
5% 5% 275
bpsAverage
30. McKinsey & Company | 29
Policymakers:
Capturing the
opportunity
1 Create universal access to digital
infrastructure and digital literacy skills
29
4 Rethink labour regulations and provision of
worker benefits for freelance workers
3 Establish legal and regulatory frameworks for
data ownership, privacy, and data security
2 Open public databases and statistics to
facilitate skill forecasting and planning
31. McKinsey & Company | 30
Individuals:
Navigating the new
world of work
1 Broader choices, greater agency. 38% of survey
respondents say online talent platforms enabled
them to get jobs they would not have found
3 Finding the right job. Hires from online talent
platforms are 8X more likely to be in their role two
years later than other hires
2 More informed decisions. More transparency on
skills demanded, credentials needed, and job
placement record of schools and training providers
30
4 Flexible work arrangements. Increasing
participation for some; choosing to be your own
boss for others
32. McKinsey & Company | 31
Companies:
Rethinking talent
management
31
2 Build the capabilities within HR to enable
advanced analytics
1 Digitize and redesign recruiting, training,
performance review and operating processes
3 Develop more granular talent forecasting and
talent pipeline management
4 Manage the company's external talent brand
33. McKinsey & Company | 32
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