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Focus on Europe and the Middle East (EME)

Economic growth in the Europe and the Middle East (EME) region is forecast to slow to 1.4% this year, having grown by 1.9% in 2018. Subdued growth is expected in many European economies amid wavering consumer and business confidence.

The Overall Index Score for the 19 countries in the EME region has decreased slightly, from 5.5 in 2018 to 5.4. This suggests that, on average across EME countries, pressures on high-skilled labour markets have eased slightly, meaning that firms should find it easier to attract and retain workers with the required skills. That being said, there is some variation between countries within the region, and between different components of the Index, as shown in Figure 7.

Downward pressure on the Overall Index Score in the EME region comes from a narrowing of the wage premium paid to high-skilled workers – with wage inequality decreasing between high- and low-skilled workers when organised both by industry and occupation. Wage Pressure in High-Skill Industries Indicator fell in 12 of the 19 EME countries, with Portugal, Hungary and the Czech Republic experiencing the largest drops – driven by relatively weak wage growth in high-skilled sectors such as finance and insurance.

Meanwhile six countries saw their Wage Pressure in High-Skill Occupations Indicator fall, with the most significant decreases visible in Switzerland and Spain.

In contrast, the pressure on labour markets arising from talent mismatch increased in the EME region overall. This Indicator score was up in 9 EME countries, driven by gradually rising long-term unemployment and unfilled job vacancy rates. Indeed, of the 17 EME countries with available data, 12 experienced rising long-term unemployment last year, while only three countries (Hungary, Poland and Portugal) had a lower rate of job vacancies than the year before.

Real wage growth has also maintained pressure within the EME region’s labour markets. It is estimated to be slightly greater in 12 EME countries, with the largest increases occurring in the United Arab Emirates (4.73% in 2019 versus 2.58% in 2018), the United Kingdom (1.39% versus 0.31%) and Spain (0.74% versus – 0.34%).

Focus on Asia Pacific

Economic growth in the Asia Pacific region is forecast by the IMF to be 4.9% this year – slightly below the 2018 figure of 5.0%, but still significantly higher than the global average of 3.3%. This is largely driven by China and India, where real GDP growth is forecast to be 6.3 and 7.3% respectively in 2019. Excluding these two countries, growth across the rest of the Asia Pacific region is forecast to be only 1.5% this year (compared to 1.9% last year).

Asia Pacific’s Overall Index Score rose to 5.0 in 2019, up from 4.9 last year, suggesting that labour market conditions have tightened slightly across the region, making it harder for organisations to find skilled labour. Among the seven Indicators that contribute to the Overall Index Score, four increased and one dropped from 2018, as shown in Figure 8.

The main driver of the increased pressure in Asia Pacific labour markets is the growing wage gap between high- and low-skilled industries.

This is largely due to a significant rise in high-skilled wage premiums in India, following three years of decline, which was reinforced by a slight rise in the average Talent Mismatch Indicator across the region. In 5 of the 7 Asia Pacific markets for which data was available, the unfilled job vacancy rate increased, while rising long-term unemployment drove the Talent Mismatch score upwards in New Zealand.

This upward movement in both the wage pressure in high-skill industries and Talent Mismatch Indicators is, however, partly offset by a fall in the high-skilled wage premium when assessed by occupation. In Singapore and New Zealand in particular, wage growth among high-skilled occupations was outpaced by wage growth in low-skill roles in 2019.

Focus on the Americas

The IMF forecasts that economic growth in the Americas region is to slow to 2.2% in 2019, well below the 2.7% growth achieved in 2018. GDP growth is projected to slow in four of the region’s six countries that feature in the Index, compared to 2018; Brazil and Colombia the two countries featured within the Index expected to see stronger growth this year.

The Overall Index Score for the Americas fell to 5.6 in 2019, down from 5.7 last year. This suggests that conditions in the region’s high-skilled labour markets have remained broadly stable, although this is not reflected by the Indicators. As Figure 9 illustrates there has been opposing movement across the Indicators, with three Indicators rising compared to last year, while the other four fell.

A large drop in the occupational wage premiums paid for high-skilled labour created downward pressure on the Overall Index Score. This Indicator fell for all countries in the Americas region except Brazil, which experienced a very slight rise.

In Chile, the drop was triggered by falling wages in several high-skilled occupations – most notably, public administration roles – while in the other countries that saw a decline, wage growth in high-skilled occupations was outpaced by low-skilled jobs. In Brazil, meanwhile, strong wage growth in high-skilled service roles prevented the occupational wage gap from narrowing, and thus its Indicator score from falling.

As with our other two global regions, the Americas has faced increased problems of talent mismatch, with this Indicator score rising by 0.1. However, there is some disparity within the region, with the Latin American countries of Colombia, Chile, and Brazil all seeing their Talent Mismatch scores ease. Lower unemployment in these countries suggests the attributes that job seekers possess are now better suited to employers’ needs than in the recent past.

The overall increase in the Americas’ Talent Mismatch score is therefore driven by sizeable rises in the US and Canada. In both countries, long-term unemployment as a share of total unemployment has steadily risen above pre-recession levels, while in the US, the unfilled jobs vacancy rate has also increased significantly.

Conclusions

Understanding what is changing in the global labour market, and what is driving these changes, is important for educators, businesses, policymakers and of course for workers themselves. The Hays Global Skills Index highlights the latest changes in the global labour market by analysing a broad selection of 34 markets around the globe.

Overall, high-skilled labour market conditions remain similar to last year across the markets featured within the Index. The most significant drivers in the 2019 Index have had an opposing effect on labour markets, with the slight increase in pressure arising from worsening talent mismatch offset by easing high-skilled wage premiums when assessed by occupation.

In the EME region, wage gaps between high- and low-skilled workers have narrowed both by industry and occupation.

This counteracted the combined effects of decreasing labour market flexibility, a growing talent mismatch and an increase in overall wage pressures.

In contrast, the wage gap between high- and low-skilled industries has presented the main issue for the Asia Pacific region. The rise in this Indicator is driving the region’s overall score upwards, along with (to a lesser extent) increasing talent mismatch.

Within the Americas region, talent mismatch continues to dampen hiring in North America. The effect of this – as well as falling participation rates and reduced education flexibility – has outweighed the impact that shrinking wage premiums for high-skilled workers have had on the Overall Index Score, both across industries and occupations.