Global labor imbalance: Some countries see a surplus of jobs while others see higher unemployment

While it has had no trouble filling giant soccer stadiums for this summer’s World Cup, host country Brazil may not find it as easy to fill jobs for its economy in the decades to come.

Brazil, according to an extensive new economic forecast, is not alone. The global economy is likely to see striking labor imbalances in the coming years, with countries like Brazil and Germany projected to fall millions short of the workers they need to sustain current growth trends, while economies such as China, the United States and South Africa will have to deal with millions more workers than there are jobs for them to fill by the year 2030.

Brazil, according to the Boston Consulting Group (BCG) forecast released late last month, doesn’t need more soccer fans. It needs more Brazilians.

“It has been projected for a while that the deficit mentioned in the survey would materialize if the country and government do not respond to the challenge of educating and training workers,” said Paulo Sotero, director of the Brazil Institute at the Washington, D.C.-based Wilson Center.

The global upshot of the worker imbalances, according to BCG senior partner Rainer Strack, are “serious.”

“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,” Mr. Strack said.

With too many workers and not enough jobs, countries such as China and the United States face potentially high unemployment rates, shrinking tax bases and a loss of broad-based worker skills. With too few workers, by contrast, an economy can find itself with critical jobs going unfilled, spiraling wage inflation and an inability to compete on the international stage.

Even with the “right” number of workers, an economy can be hindered by a mismatch of skills, something many believe is already facing the United States in the quest to fill needed tech and engineering jobs.

Brazil, for example, faces a shortage of up to 8.5 million workers in 2020 if it hopes to maintain current growth rates, according to the BCG report, “The Global Workforce Crisis: $10 Trillion At Risk.” By 2030, that number could increase to 40.9 million.

Despite having the world’s seventh largest economy, a large aging population threatens growth and stability in Brazil. Gaps in the country’s education system block many from the workforce as they aren’t qualified for a number of positions.

The consulting firm looked at workforce supply and demand in 25 major economies to determine the outlook for 2030. The bottom line: Some $10 trillion of global production is at risk due to nations being unable to fill the jobs available, or not creating enough jobs for available workers.

Germany, like Brazil, is expected to have a shortage of workers. Most of Latin America, in contrast to Brazil, could see significant economic growth over this same period of time. Other countries, like Italy and Canada, face surpluses in the short run, but then shortages are projected to develop by 2030.

The United States is said to have a surplus of up to 22 million workers in 2020, and still face a surplus of at least 7.4 million workers by 2030.

The Obama administration has tried to reduce the projected number of “surplus” workers by boosting aid for so-called STEM — science, technology, engineering and math — education and training. Secretary of Commerce Penny Pritzker told a Washington conference held Thursday by the Aspen Institute that many foreign companies want to invest in the United States’ economy because of its commitment to business and education.

“The department has made a skilled workforce a priority for commerce,” she said. “All training needs to be business-led and job-driven.”

The new outlook for Brazil’s economy is a sharp turnaround from 2010, when the country was praised for being among the first economies to emerge from the global financial crisis. But Brazil’s GDP growth dropped from 7.5 percent in 2010 to 0.9 percent in 2012.

Alberto Ramos leads Latin America economic research for Goldman Sachs’ Global Investment Research. He said the workforce in Brazil faces “shifting demographics,” but added he doesn’t believe that Brazil will run out of workers just by extrapolating from current trends.

Questioning what “a shortage of workers” means, he said, “if you have less, you produce less. If you have more, you produce more.”

Mr. Ramos suggested that Brazil should invest more in education and capital, and less on labor-intensive activities, due to the demographics of the workforce.

“What we have to do if the population is aging this optimal window is passing, and we have to make the existing labor force more productive,” he said.

Both surpluses and shortages can raise sensitive political questions for governments, over immigration, labor standards, taxes and retirement ages. Germany recently reduced the retirement age for many workers from 65 to 63 — precisely the wrong way to go if a country truly faced looming labor shortfalls.

“Policymakers are dramatically underestimating the score of this challenge,” Mr. Strack told the Financial Times newspaper last week. “By 2030, this will be a global problem.”

Both Mr. Sotero and Mr. Ramos said they believed the World Cup — and the 2016 Summer Olympics to be held in Rio — would have very little impact on the long-term economy. If anything, it would improve tourism to the country.

“Sports events may temporarily help here and there,” Mr. Sotero said. “Many people exaggerate the potential of sports events having a major impact on the economy. [But] it’s not sporting events that will help the economy grow — it’s a concerted effort to invest in infrastructure.”