With many economists predicting a recession this year caused by high inflation, high interest rates and slowing growth in global economies, the business scenario becomes more challenging. Many companies will need to work harder to achieve their profit margins. One approach is clear, however, says Nela Richardson, chief economist at ADP, a global benchmark in payroll and human capital management solutions and co-director of the ADP Research Institute (Adpri). Companies must invest in their people to remain agile and competitive.
in the search People at Work 2022: A Global Workforce View – from the ADP Research Institute, with nearly 33,000 workers in 17 countries around the world, it was already clear that fewer respondents felt their role or industry was safe and the majority of respondents – 62% – had considered changing roles or had already made the switch, all with the interest of preparing the career for the future. Around 14% had not yet considered a move but were worried about its prospects.
For Nella Richardson, this scenario leads to five global trends in the job market:
Great Deceleration: The war in Ukraine, high inflation and China's economic slowdown are likely to contribute to slower global growth in 2023. It's a big turnaround from 2021, when economic growth soared to 61TP3Q after governments increased public spending by account of the pandemic. In 2022, the rising cost of living weighed on many advanced economies. This year, growth is likely to slow further because of geopolitical risk, uncomfortably high inflation and a third, more insidious dynamic – weak productivity. Whether in France, China or Brazil, there is only one way for national economies to grow over time: workers need to become more productive, and this has become a worldwide challenge. Labor productivity is in decline, which means workers are taking longer to deliver fewer goods and services, and this is not a short-term trend.
Persistence of inflation: Globally, inflation is expected to ease in 2023 from the very high levels of 2022. But it is unlikely to return to the levels that Europe, Asia and North America enjoyed before the pandemic. In this new world, salary policy becomes more complex and employers live in uncertain times, as labor shortages persist and increases in the cost of living become sharp or unpredictable. Turnover will continue to plague companies as workers shift jobs to secure higher wages.
Increasing wages: Globally, real wages fell by almost 1% in the first half of 2022, the first drop in this century, according to the International Labor Organization. While the cost of living has skyrocketed in many parts of the world, wages have not kept pace. Even with moderate inflation this year, wage growth will need to remain robust for workers to feel the full benefit of lower price gains.
Shrinking workforce: Since 1990, the global labor force participation rate has fallen steadily, from over 65% of people of working age to less than 60%, according to a World Bank analysis based on data from the International Labor Organization. There was also a regional concentration. Asian countries account for over 57% of the global workforce. In contrast, the US, Canada and Mexico together account for 26% of global GDP but provide only 5% of the workforce.
This mismatch between the geography of wealth and work will continue to affect how business works. In the past, worker mobility and immigration helped to even out the differences, as rich countries attracted skilled and unskilled workers in search of better wages and prospects. Now globalization and immigration are at stake. Physical mobility can be replaced by remote work, which allows people to stay where they are while their jobs migrate. The impact of this new dynamic on wages is uncertain and may determine the shape of the global talent market in the future.
Accelerating the digital economy: In 2005, only 16% of the global population used the Internet. Today, more than half the world is online. Internet usage increased by 5% during the height of the pandemic lockdowns as consumers around the world shifted spending, socializing and entertainment to digital platforms. In the business world, emerging technologies that have supported remote work during the pandemic have become commonplace. Consumers have already embraced online commerce, and in this new world, the challenge for businesses is to make digital more personal and make the consumer or customer feel special, as well as keep employees engaged.
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