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The Hays Global Skills Index (the ‘Index’) is an annual assessment of the issues and trends impacting skilled labour markets and examines the dynamics at play across 34 markets, determining how easy or difficult it is for organisations to find the skilled professionals they need.

In addition to the deep analysis of some of the world’s largest labour markets, the report highlights several factors impacting economies globally, including wage stagnation and its potential causes, the disappearance of mid-skilled jobs and occupational gender segregation.

This year’s Index, the eighth edition to date, reveals two pressures are having particularly important and opposing impacts on skilled labour markets around the world. Our research has found that ‘talent mismatches’ are worsening in many of the labour markets featured within the Index, at the same time wage premiums paid for high-skilled occupations are typically easing.

The divide between the skills held by jobseekers and those sought by employers continues to grow and is evidenced by our talent mismatch Indicator, which has increased in 16 of the 34 featured labour markets this year – amid a landscape of rising long-term unemployment and growing numbers of unfilled job vacancies. This is a critical issue which has worsened since the inception of the Index in 2012, as the average talent mismatch score has increased since that date, reaching its highest-ever level this year.

In contrast, the wage premium paid to workers in high-skilled occupations has widely fallen, relative to those in low-skilled roles. Whether this is driven by stagnating wages in high-skilled roles, or stronger wage growth among low-skilled occupations, differs from labour market to labour market. The largest overall reduction in wage premiums has been experienced across the Americas region, with beneficial knock-on effects for employers’ costs.

Overall, labour market conditions remain similar to last year, with the average Index score unchanged at 5.4 – halting a steady rise since the Index began in 2012. Underneath this figure, however, are widespread variations among the 34 labour markets featured. To help tell the wider story, the data for each market is complemented by the insights of Hays experts on the ground to describe the unique challenges each labour market is facing today.

One positive development of recent years has been the widespread drop in unemployment rates across the economies in the Index. However, this decline in the number of jobseekers has not typically seen an increase in wages, as might have been expected. This report investigates some of the possible reasons behind the continued wage stagnation across the globe.

One potential explanation is the increased concentration of firms geographically, particularly in local labour markets, which reduces competition for talent and gives hiring firms more power in setting wages. This, alongside the increased prevalence of ‘non-compete’ and ‘no-poach’ agreements, may be reducing competition in some labour markets.

An alternative explanation is the so called ‘fissuring’ of workplaces, whereby large firms trim their workforces to focus on their core business while outsourcing other tasks, such as IT support and cleaning services. This ends the practice of offering a general pay rise to all staff, including non-core workers. Meanwhile, specialist providers of the outsourced services compete primarily on price, applying downward pressure on wages at these firms.

A third explanation is the rise of machines in many workplaces, which has shifted wage bargaining power in favour of firms as they become ever more able to replace the roles which are vulnerable to automation.

But the reality is likely to be a complex blend of all these trends, and the Index offers market-specific insights into what is really going on. Outsourcing and automation are also having other impacts on skilled labour markets. In many industrialised economies, they are driving the disappearance of the ‘mid-skilled’ job (such as clerical work and repetitive production tasks) – leading to a hollowing out of the labour market, whereby the amount of low- and high-skilled jobs continues to grow while the number employed in mid-skilled jobs declines. As many roles remain highly gendered, the implications of this job polarisation for female and male workers – and their wages – may differ greatly, as this report explores.

Labour markets across the globe continue to be placed under pressure as businesses are struggling more than ever to find the skilled talent they need. Outlined in this report are some of the most important challenges facing the global labour market at present, and failure to address these issues will only exacerbate them over time. Continued access to skilled labour and the development of a robust talent pipeline will provide businesses with the opportunity to thrive and allow for long-term economic success.

Regional overview

Europe and the Middle East (EME)

  • The Overall Index Score for Europe and the Middle East has fallen from 5.5 in 2018 to 5.4, suggesting that, on average, pressure on EME countries’ skilled labour markets has eased.
  • Downward pressure on the Overall Index Score is driven by lower wage premiums paid to high-skilled workers, with wage inequality decreasing between high- and low-skilled workers whether organised by industry or occupation.

Asia Pacific

  • Economic growth in this region is forecast to be 4.9% this year – higher than the global average of 3.3%, driven by strong growth in China and India.
  • Asia Pacific’s Overall Index Score rose to 5.0 in 2019 from 4.9 last year, suggesting skilled labour market conditions have tightened and that employers will find it more difficult to attract and retain talent in the region.
  • The main driver of this change was the increased wage gap between high- and low-skilled industries, plus a growing talent mismatch.

The Americas

  • The Overall Index Score for the Americas fell to 5.6 this year, from 5.7 in 2018.
  • Wage growth in high-skilled occupations has been generally outpaced by wage growth in low-skilled roles across the Americas, driving down the Index score for wage pressure in high-skilled occupations.