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According to a 2024 ManpowerGroup survey, 75% of global employers are facing difficulties filling vacant positions. On a basic level, the reason behind this struggle is simple: there aren’t enough people with the right skills for the roles that employers need to fill.
Talent shortages can make it harder for a company to meet its goals, and have a serious impact on its profitability and competitiveness. They can also cause significant damage to employee morale since existing employees often end up being overworked. On a broader level, global talent scarcity also affects the labour market and the economy, slowing down growth and innovation worldwide.
As we’ve discussed before, some of the reasons behind the talent shortage the world is currently facing are demographic in nature. Others are related to changes in the way we work recent technological advancements. In this article, we’ll discuss what’s behind the talent scarcity crisis — and what innovative companies can do about it.
Understanding the global talent scarcity problem
The talent scarcity crisis can’t be explained by one factor alone. Instead, it’s due to a number of different circumstances coming together at the same time. Read on for some of the main reasons behind the global talent shortage.
Retiring Baby Boomers and falling birth rates
The generation known as the Baby Boomers were born during a huge surge in births after the Second World War, and entered the workforce in the 1960s and ‘70s. Now in their 60s and 70s, a large number of Baby Boomers are preparing to retire — and many have done so already.
At the same time, birth rates have been steadily declining in many major economies since the 1970s. The total birth rate is currently below the replacement rate — the level needed to sustain a stable population — in all 27 EU member states. According to data from the OECD, the working-age population across all OECD countries is already falling. Put simply, more people will leave the labour force than join it over the next few decades.
Historically low unemployment
After peaking in 2020, the unemployment rate across OECD countries has held steadily below 5% since April 2022. In the EU, the rate is at a historical low of 6%. In short, there are fewer people in the labour force who don’t already have a job than ever before — meaning employers have shallower talent pools to source from.
At the same time, many industries experienced a sharp rise in vacancies after the early stages of the pandemic. While the rate has dropped since its peak in Q2 2022, it remains well above the pre-COVID level. With more open jobs and fewer unemployed people to fill them, it’s no surprise that employers are finding it more and more difficult to source qualified candidates.
Reduced labour force participation
A country’s unemployment rate only counts the people who are out of work but actively looking for a job. A more hidden problem is people dropping out of the workforce altogether. As of August 2024, 22.2% of the population in the UK is economically inactive, compared to 20.7% five years ago. And in the USA, labour force participation has been on a downward trend since the early 2000s.
There are various reasons behind this phenomenon:
- Early retirements: Over the past few years, more older workers than expected have left the labour market in the UK, the US, and other countries. This may have partially been driven by concerns about safety during the pandemic.
- Illness and disability: There’s also some evidence that COVID may have resulted in more people leaving the workforce due to long-term illness or disability. In the UK, for example, the main reason cited among 50–69-year-olds leaving the job market in Q2 2022 was illness.
- Childcare challenges: The rising cost of childcare in many countries means that for many female employees, returning to work after having a baby is no longer a smart financial decision. This is a particular concern in the US, where costs spiked 30% between 2019 and 2023.
Technological advancements and skills mismatch
Over the past decade, we’ve seen huge advancements in technology and digitalisation. As a result, more and more jobs require specialised skills, which may simply not be available on the talent market.
According to a recent Randstad study, 66 million jobs have been created in the 15 countries studied over the last decade. Of those, 14.6 million required at least an intermediate level of education. Talent in emerging areas like AI, automation, cybersecurity and data science is hard to come by simply because the pace at which new technologies are being created is faster than the rate at which skilled professionals can be trained.
Innovative solutions to address the talent scarcity problem
Many of the factors described above can only be solved by governments — if at all. That said, innovative companies will always find ways to get ahead in the war for talent, which is only going to intensify over the next few decades. Here are a few strategies you could put in place today.
Look for non-traditional talent pools to source from
When talent is hard to come by, companies need to tap into unexplored markets. That might mean:
- Hiring remote talent outside of your geographic area
- Looking at candidates with less traditional career paths
- Using skills-based hiring instead of focusing on education and experience
- Developing specific campaigns to attract senior talent (e.g. over 55s)
Build partnerships with educational institutions
New candidates are graduating every year, and the smartest companies look to tap into that talent pool directly at its source by partnering with educational institutions like universities and colleges. For example, you could:
- Set up internship and work experience programmes to develop future talent
- Work with educational institutions to develop curricula that equip students for the future of work
Invest in technology for talent identification and development
In competitive markets, the right talent is key to sourcing, assessing, selecting and developing candidates. You should consider:
- Using AI-powered tools to speed up the shortlisting process
- Investing in advanced L&D platforms to develop your existing team
- Using technology to optimise workflows in hard-to-fill roles
Leverage benefits to encourage retention
The benefits you offer could give you an edge over your competitors when it comes to retaining talent. Think carefully about how your benefits package encourages different groups of employees to stick around for longer. That might mean offering:
- Generous parental leave packages for young employees starting families
- Education and training benefits that help employees build new skills
- Benefits that improve work-life balance, such as flexible work arrangements
- Benefits specifically targeted at older workers who may be a retention risk
Upskill, reskill and redeploy existing employees
One thing is clear: it’s going to get harder and harder to find new employees. Over the next few years, putting in place strategies to get the most out of your existing workforce will be key. For example, you could consider:
- Setting up an internal talent marketplace to redeploy talent effectively
- Providing ongoing training that helps employees learn new skills
- Designing job shadowing and mentorship programmes that encourage employees to try new things
Work on retaining and recruiting over 55s
Retaining your highly skilled older workers could be key to meeting your goals as the talent scarcity crisis worsens. Recruiting senior employees who have left the workforce but now want to return can also be a valuable strategy. You could try:
- Rethinking benefits to specifically target older workers
- Setting up dedicated recruitment campaigns to target senior talent
- Implementing retention bonuses and additional incentives
Explore alternative workforce solutions
The talent scarcity crisis is going to require companies to think outside the box. And being flexible in how you engage with talent could be key to beating your competitors as the situation develops. That means being open to things like:
- Job sharing and part-time roles
- Remote and asynchronous workers
- Independent contractors, freelancers and gig workers
- Hiring talent overseas through an employer of record (EoR)
Innovative solutions from the real world
Wondering what these tactics look like in practice? Here’s how a few leading companies are putting the strategies above into action:
- Companies including AXA, McDonald’s and EasyJet all have specific recruitment campaigns designed to target older workers.
- French skincare brand L’Oréal is leveraging AI through a recruitment chatbot that engages with candidates and answers questions, improving candidate experience and boosting efficiency.
- Software development company Atlassian has built a talent community that allows them to engage with candidates prior to hiring, ensuring a steady pipeline of talent.
- Tech giant Adobe has developed a comprehensive internship programme with mentorship, professional development workshops and hands-on experience, helping to identify and nurture future talent.
Best practices for beating the talent scarcity crisis
Leveraging the strategies above could help you to find the people you need, even in tough markets. Here are a few best practices to help you get ahead:
- Get leadership buy-in first: Unusual or unconventional hiring practices often face resistance — which means support from leadership is crucial. To get their buy-in, focus on the potential benefits of the solutions you’re proposing and the risk of sticking to traditional methods.
- Embrace remote work where possible: Being open to remote work could be key to finding the talent you need, who may not be located where you are. These days, employees don’t even need to be located in your country, thanks to international engagement solutions like employers of record (EoR).
- Track key metrics to measure performance: Your talent strategy shouldn’t be set in stone. Instead, you need to constantly assess your processes to see what’s working. Tracking metrics related to recruitment like time-to-hire and cost-per-hire can help you hone your processes, and keeping an eye on employee retention and engagement rates is smart too.
Smart companies need to act now to overcome the talent scarcity crisis
According to a Korn Ferry report, by 2030, there will be a global talent shortage of more than 85 million people — roughly the population of Germany. While governments will have to take the lead by making talent availability a priority, the smartest organisations are taking the onus of training, upskilling, and developing talent themselves.
Companies that want to ensure they have the people they need to meet their organisational goals in the years to come can’t afford to wait. Instead, you need to start building systems and processes that will allow you to source and retain the talent you need now — before it’s too late.
