Gloomy outlook for SA labour

 ·1 Jul 2014

South Africa faces one of the gloomiest prospects for the labour market in the world by 2020, according to a new report by The Boston Consulting Group (BCG).

In its report, titled The Global Workforce Crisis: $10 Trillion at Risk, BCG examined the workforce supply-and-demand dynamics in 25 major economies – including the G20 – to forecast the extent of labor shortages and surpluses for 2020 and 2030.

Overall, by 2020, many countries will still be experiencing a surplus, the group said – but by 2030, this surplus will for most have turned into a massive shortfall, according to the report.

“The consequences for many nations’ growth and competitiveness are serious,” said Rainer Strack, a BCG senior partner and a coauthor of the study.

“Governments, companies, and other institutions must begin to take action now if they hope to avert the potentially long-lasting damage to national and regional economies, as well as to the global economy.”

Of all the economies examined, Brazil and South Africa face the worst prospects on both ends of the spectrum.

Brazil is expected to have a shortage of up to 8.5 million workers by 2020; by 2030 this could increase five-fold to 40.9 million people – 33% of the labour supply.

On the other end of the scale, South Africa faces a labour surplus of 36% by 2020 – a number which is expected to climb to 39% by 2030.

A high labour surplus speaks to high levels of unemployment, which subsequently cuts the tax base and raises the cost of social services while raising the risk of social instability.

“In the long term, surpluses can lead to the attrition of skills and ultimately reduce an economy’s competitiveness and attractiveness to investors,” BCG said.

“But the problems with shortages can be equally harmful to the economy because job openings cannot be filled. This fuels wage inflation and, above all, impedes business growth and competitiveness.”

Other regions highlighted in the report include Germany – which is expected to face a shortage of 10 million workers by 2030 – while nations such as China, France, Italy and the UK are all expected to face labour surpluses in 2020, and shortages in 2030.

The shortage/surplus balance is determined by BCG calculating the size of the labor force that each country would need to keep GDP and productivity growth for 2020 and 2030 at historical levels.

Labour shortages / surpluses projected worldwide (% of workforce)

Country 2020 (20-year growth rate scenario)
2030 (20-year growth rate scenario)
South Africa 36% 39%
Argentina 24% 30%
Saudi Arabia 30% 20%
Russia 11% 15%
Sweden 9% 8%
United States 10% 4%
Turkey 8% 4%
India 6% 1%
Egypt 9% 0%
Indonesia 5% 0%
United Kingdom 6% -1%
France 6% -1%
Japan 3% -2%
Spain 17% -3%
China 7% -3%
Italy 8% -4%
Netherlands 10% -7%
Mexico 6% -8%
Poland 5% -10%
Switzerland -5% -10%
Canada 3% -11%
Australia -2% -16%
Germany -4% -23%
South Korea -6% -26%
Brazil -7% -33%

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