The size of the global labor force is approaching its peak

Horizons article
June 5, 2023

Recent research has shown that humanity may have already passed the peak of the growth of the global working population. In this Horizon, we explore the implications of this scenario, as well as the extreme scenario in which a decline of the working population leads to a reevaluation of immigration.

The global labor force is approaching its peak

In the past three decades the global economy has benefitted from a continuous growth of the global labor force as a result of a growing working age population, largely (but not exclusively) driven by the reintegration of China and Eastern Europe into the global economy. That growth, however, may have reached its peak. Most developed markets – as well as large emerging markets like China and South Korea – see their populations grow older and may soon see their labor forces decline. Economists Charles Goodhart and Manoj Pradhan call this The Great Demographic Reversal and in their book they argue its implications will be broad. Employees in developed countries are likely to benefit through higher wages, but these rising labor costs are also likely to result in higher prices for goods and services. This could force businesses to innovate to make up for labor shortages and cost increases. Indeed, this is already happening. In restaurants, for instance, app-based ordering systems are (partly) replacing waiters. Hospitals are exploring the use of helper robots to ease the burden of overworked staff. Generative AI, meanwhile, is becoming an important tool for knowledge workers.

Broaden your horizons
  • This article from Business Insider on The Forever Labor Shortage, gives insights on how labor shortage will change the balance of power in the labor market from employers to employees.  
  • With a decreasing total labor force and an increase in young people aiming for a college degree the amount of trade skilled workers is shrinking. Many skilled trades face shortages already, and those shortages have environmental consequences. This article from the New Yorker discusses the need for traded skilled workers and the increasing shortage.
  • Germany has been Europe’s economic engine for decades. But its resilience is breaking down, and this article dives deeper into the underlying reasons.
Reevaluating immigration

If we are indeed reaching the peak in the global labor force, some countries may shift their political position on immigration. In his book MOVE: Where People Are Going for a Better Future, Parag Khanna argues that companies will increasingly ask for policies that make it easier to recruit people abroad to fulfill their vacancies. Some governments are already changing course. Germany, where recent surveys show that 50% of firms have cut production due to labor shortages, created the “Opportunity Card” to appeal to highly skilled migrants from non-EU countries. South Korea – which has one of the lowest birth rates in the world – also changed course. Between 2004 and 2010, South Korea opened its borders to low-skilled immigration through a series of immigration and citizenship reforms. Whereas South Korea had only 49,000 long-staying foreign nationals in 1990, that number increased to 2.52 million by the end of 2019, making up 4.9% of a population of about 51 million. It is by no means inevitable, but it is possible that more and more countries will adapt similarly, even though immigration policy is only a temporary solution to global demographic decline.


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