How labour market conditions have changed since last year’s Index.
This year’s Hays Global Skills Index (‘The Index’) continues to investigate the performance of skilled labour markets across the globe, and for the first time includes Romania (see Figure 4). While the average score across the new sample of 34 markets is 5.3, the average excluding Romania – 5.4 – is unchanged from 2018.23. Beneath the Overall Index Scores, however, there has been considerable variation in some key components of the Index.
The main pressure pushing up the average Overall Index Score comes from the Talent Mismatch Indicator, which rose to 6.7 in 2019 from 6.6 last year (see Figure 4). This Indicator score has risen in 16 markets since 2018, driven largely by rising long-term unemployment as a share of total unemployment, and a rise in unfilled job vacancies. This suggests that in these markets, there is a growing mismatch between the skills that job applicants possess and those that are being sought by employers. This marks a continued trend of a growing talent mismatch over recent years, with the average Indicator score steadily rising since the Index began in 2012 – and reaching its highest level this year.
The degree to which talent mismatch is an issue varies significantly between our three global regions. The average score rose by 0.1 in the Americas, driven in particular by a growing skills gap in Canada and the US. Elsewhere, the talent mismatch score rose by 0.2 in the Asia Pacific, and 0.1 in Europe and the Middle East.
Talent mismatch is problematic in that vacant positions are open for longer, resulting in higher unemployment and reduced output. It can also result in new hires being less well matched to job requirements, as companies settle on workers who don’t have the required skill-set, which adversely impacts their productivity.
“In Switzerland and the US, wage growth for workers in high-skilled occupations was outpaced by wage growth for low-skilled occupations, reducing the occupational wage skill premium to below its historical norm.”
Two other noteworthy Indicators in this year’s Index reflect the changes in wage differentials between high- and low-skilled workers, both across different occupations and industrial sectors.
The average score for the wage pressure in high-skill occupations Indicator fell to 4.0 in 2019, down from 4.2 in 2018 – offsetting this year’s overall rise in the Talent Mismatch Indicator – as the premium paid to workers in high-skilled occupations relative to low-skilled has declined. The Wage Pressure in High-Skill Occupations Indicator has eased in all regions, with the most significant drop (0.5) occurring across the Americas.
At a labour market level, the largest decreases in this Indicator were experienced in Switzerland, Spain, and the US. In Switzerland and the US, wage growth for workers in high-skilled occupations was outpaced by wage growth for low-skilled occupations, reducing the occupational wage skill premium to below its historical norm.
In Spain, the impact was two-fold: wages paid to those in high-skilled occupations fell, while there was strong wage growth among low-skilled roles.
Meanwhile, the greatest regional variation among the Overall Index Score and seven Indicators was seen in wage pressure in high-skill industries. In Europe and the Middle East, this Indicator score fell by 0.2 from 2018, suggesting a pattern of narrowing industry wage gaps as wage growth in low-skilled industries outpaces that in high-skilled sectors.
In contrast, this Indicator rose by 0.6 in the Asia Pacific region, making it the main upward driver for that region’s Overall Index Score. This growing industry wage gap, driven by strong wage growth in high-skilled sectors, increases the pressure on firms operating in these sectors.
Global economic outlook
Global economic growth is expected to slow in 2019, with the International Monetary Fund (IMF) forecasting real GDP growth of 3.3% – down from 3.6% in 2018. This follows a period of relatively strong, sustained growth since the financial crisis, with global GDP growth having averaged 3.8% between 2010 and 2018.
The slight slowdown is mirrored by the 34 markets featured in the Index. For these markets, the IMF forecasts economic growth to average 2.9% in 2019, down from 3.2% in the previous year. This would be expected to slow the growth in corporates’ demand for high-skilled labour.