Do we have the workforce for the growth we want?

The world is "going digital" and "going green" at unprecedented rates. This raises the question as to how should the world navigate this "twin transition", while the shifting demographics are driving labour market dynamics?

Changing demographics, politics and the global value chains, as well as technological developments and a global move towards the green transition, are impacting both the world of work and overall productivity. So how do these changes affect the prospects for the growth we want?

Here are our insights into how we can build a workforce for greater productivity and growth.

Advanced economies with decreasing fertility rates and ageing populations are facing labour shortages. Sustaining and boosting economic growth will require bringing more women and the unemployed and the underemployed into the labour force as well as immigration. But this has produced frictions between policies to attract immigrants, especially skilled workers and growing anti-immigrant sentiments that are bolstering the political right.

On top of this, the labour markets in advanced economies face two key trends that impact growth. Those with high wages, labour standards and robust social security have relatively higher cost of labour, often coupled with higher unemployment.

Conversely, in countries with relatively low unemployment, working conditions and social protection have deteriorated with risks that low wages and precarious work might hinder growth. How can we balance good decent jobs for workers and dynamic labour supply for firms to sustain and boost economic growth?

In the Global South, labour market dynamics are linked to economic volatility linked to overexposure to external shocks. This points to a need to balance growth generated by global trade with local value creation. Also, countries with large shares of informal workers – nearly 85% in Sub-Saharan Africa– need to integrate them into less precarious jobs that afford them the capacity to plan for the future, which is essential for sustained growth.

As one-third of the global labour force in the next three decades will come from Africa, we need to invest in both education and vocational training in Africa to secure the workforce needed for the world economy.

Developments in digital technology are accelerating like we’ve never seen before, and today’s children will likely hold jobs that don’t yet exist today. Or will they need to worry about being replaced by highly intelligent robots? Unlikely. But such digitalization trends will surely create new jobs requiring higher-skilled workers.

The rapid technological developments require continuous life-long learning to upskill workers for future jobs. From remote conferencing to running a business in the metaverse or harnessing generative AI, the ability to continuously acquire new skills will be a prerequisite for workers to succeed.

Yet, certain skills and jobs will become obsolete, and this could happen faster than job creation generated by new technologies. Such a trend could undermine growth if job creation and investment in human capital cannot keep up with the cohorts of young people entering the workforce.

Similarly, the green transition will require continuous upskilling for the workforce. Skills needed for the green jobs may not be the same as those of displaced workers from carbon-intensive industries. To add to this challenge, carbon-intensive industries are often geographically concentrated, and new green jobs may not be created in the same regions.

Beyond vocational training, the geographical disparities in job losses and job creations requires place-based policies and removal of barriers to worker mobility. For workers who lose jobs and cannon be upskilled, protection and social support must be ensured for a "just" transition.

With the world ‘going digital’ and ‘going green’, the model of value creation will need to be transformed from one that solely considers economic contributions to growth, to one that includes social value added, community involvement and environmental protection.

Younger generations’ motivation towards work and expectations for more flexibility and creativity are at odds with classic labour laws. Are digital nomads more productive and creative?

The proof is in the pudding, but reforms in labour laws and regulations could better balance the needs of employers and workers to increase productivity across all sectors, especially those that will drive the digital and green economy of the future we want.

Also, the pandemic has led capable workers to workers to become entrepreneurs or opt for early retirement while living on basic passive income. These new trends and the changing values of the young generations could be harnessed as a growth catalyst.

To meet the rapidly evolving needs of labour markets to drive future growth, preparing workers must start in early stages of education. This requires a fundamental shift in the concept of educational systems where traditionally public authorities are responsible for basic education, and later on, firms take charge of worker training.

We need a new model where governments (or primary and secondary educational institutions), universities and employers collaborate continuously to equip future and current workers with the knowledge and skills to be productive.

And such collaboration needs to ensure effective education systems and vocational training for all. Life-long learning and upskilling must become a right and a requirement, rather than a privilege only for those who can afford it.

By taking such steps, we can help build a workforce for the future, improve productivity and drive the growth we want – for the benefit of everyone.

The authors, Kumi Kitamori, Mohammad Ali Rashed Lootah and Roselyne Chambrier, are members of the Global Future Council on the Future of Growth.