Talent Shortage

Some of this panic is overdone and linked to the business cycle: there was much ado about the "war for talent" in America in the 1990s, until the dot-com bubble burst. People often talk about shortages when they should really be discussing price. Eventually, supply will rise to meet demand and the market will adjust. But while you wait, your firm might go bust. The evidence is that the talent shortage is likely to get worse. Nobody disputes that demand for talent-intensive skills is rising. The value of "intangible" assets, everything from skilled workers to patents to know-how, has ballooned from 20% of the value of companies in the S&P 500 to 70% today. The share of American workers doing jobs that call for complex skills has grown three times as fast as employment overall. As other economies move in the same direction, global demand is rising quickly. As for supply, much of the developed world is haunted by demographics. By 2025, the number of people aged 15-64 is projected to fall by 7% in Germany, 9% in Italy and 14% in Japan. Even in still-growing America, the imminent retirement of the baby-boomers means companies will lose large numbers of experienced workers in a short time (by one count, half the top people at America's 500 leading companies will leave in the next five years). Meanwhile, two things are making it much harder for companies to adjust. The first is the collapse of loyalty. Companies happily chopped out layers of managers during the 1990s; now people are likely to repay them by moving to the highest bidder. The second is the mismatch between what schools are producing and what companies need.