The Global Skills Convergence

The Global Skills Convergence
Issues and ideas for the management of an international workforce

ADVISORY

by Bernard Salt

September 2008

Report steering committee The steering committee would also like The steering committee would also
This report represents the culmination to acknowledge the contribution of the like to recognize the contribution to
of 7 months work for a global following people who provided feedback this study made by Sally Mikkelsen,
steering committee including the and direction on the study. Senior Adviser at KPMG in Australia and
following people. Ashima Bist, Graduate Trainee at KPMG in
Mr Ben Garfunkel Australia. The steering committee would
Ms Rosheen Garnon Partner like to thank the partners and staff of KPMG
(Steering Committee Chair) International Executive Services member firms who contacted and set up
Partner KPMG in the United States the interviews with industry executives.
International Executive Services
Mr Nicholas Bacon If you have any queries regarding
KPMG in Australia
Partner access to further copies of this report
Ms Mary Kay Woods International Executive Services please contact the nominated KPMG
Partner KPMG in the United Kingdom member firm representative in the
International Executive Services relevant country as indicated on the
Ms Jill Storey
KPMG in the United States inside back cover.
Partner
Ms Stephanie Bolakowski International Executive Services KPMG in Australia partner and report
Senior Manager KPMG in the United Kingdom author Bernard Salt is based in Melbourne
International Executive Services and is the author of two best-selling books
Mr Peter Dolan
KPMG in the United States on demographic trends. He is a columnist
Partner
Mr Bernard Salt International Executive Services with The Australian newspaper, a regular
(Author) KPMG in the United States on the corporate speaking circuit, and
Partner manages a dedicated group of advisers
Mr Andy Hutt within the Melbourne office specializing
National Markets
Partner in commercial demographic research. See
KPMG in Australia
International Executive Services www.bernardsalt.com.au
Mr Joel Bevin KPMG in Australia
(Principal Researcher) Principal Researcher Joel Bevin works as
Mr Achim Mossmann a senior adviser at KPMG in Australia.
Senior Adviser
Managing Director Joel is an economist with a special
Risk Advisory Services
International Executive Services interest in demographics at an
KPMG in Australia
KPMG in the United States international level. He is also interested
Ms Sarah Read in the evolving nature of globalization and
Mr René Philips
Director the connection between demographics
Partner
Risk Advisory Services and social and economic development.
KPMG in Australia
KPMG in Belgium For further comment regarding the
content or the conduct of the
Ms Kathy Thompson
research, contact Bernard Salt in the
Consultant
Melbourne office of KPMG in Australia
on +61 3 9288 5513 or by email at
KPMG in the United Kingdom
bsalt@kpmg.com.au

© 2008 KPMG International. KPMG International provides no client services and is a Swiss cooperative with which the independent member firms of the KPMG network are affiliated. All rights reserved.

Contents

Foreword ........................................................................................................................ 1

Executive summary ....................................................................................................... 2

1 Introduction ............................................................................................................ 5

2 Labor market outlook for selected countries ...................................................... 7

2.1 Outlook for the US ....................................................................................... 7

2.2 Outlook for other nations ............................................................................. 9

3 Strategic and policy responses .......................................................................... 13

3.1 The rise of skilled migration ....................................................................... 13

3.2 The role of corporate expatriates ............................................................... 14

4 Migration in a flat and creative world ............................................................... 16

4.1 Reasons for globalization of the labor market ........................................... 16

4.2 Thomas Friedman’s world ......................................................................... 17

4.3 Corporate responses .................................................................................. 18

4.4 The rise of the creative class ..................................................................... 19

5 Global migration flows ....................................................................................... 20

6 Measures of skills convergence ......................................................................... 24

6.1 Convergence in literacy .............................................................................. 24

6.2 Migrant integration and labor market outcomes ........................................ 25

7 Global migration and cultural deference .......................................................... 27

7.1 Reasons for the ‘brain drain’ ...................................................................... 27

7.2 Why losing skilled young labor is an important tax issue .......................... 28

7.3 The workforce Diaspora ............................................................................. 30

8 Fertility and the demographic faultline ............................................................. 31

8.1 What is the demographic faultline? ........................................................... 31

8.2 Why fertility rates dropped suddenly causing the faultline ........................ 32

8.3 The solution of increasing labor force participation ................................... 33


9 A global perspective ............................................................................................ 35

9.1 Global economic convergence and divergence ......................................... 35

9.2 The spread of the multinational corporation .............................................. 36

10 Business response to the global labor market ................................................. 39

10.1 Background to interviewed corporations ................................................... 40

10.2 The rising demand for talent ...................................................................... 41

10.3 Recruiting strategies .................................................................................. 42

10.4 Challenges of global mobility ..................................................................... 44

10.5 Demand for international assignments ...................................................... 45

10.6 Managing the expectations of Generation Y ............................................. 45

10.7 Emerging regions and labor challenges ..................................................... 46

10.8 Looking to the future ................................................................................. 47

10.9 The global economic environment ............................................................. 49

10.10 Common themes ....................................................................................... 49

11 Implications for managing a global workforce ................................................. 50

What does it all mean? ............................................................................................... 52

Bibliography ................................................................................................................. 54



Foreword

In The Global Skills Convergence KPMG The Global Skills Convergence presents of interviewees: here is a generation
presents the thought-provoking notion the demographic case for an imminent that requires – perhaps even demands
that growth in the supply of skilled and global skills convergence. It also – transparency of leadership and the
unskilled labor in the developed world may canvasses the views of some of the development of individually tailored
slow in the next decade as Baby Boomers world’s leading corporate practitioners career plans.
exit the workforce. More people exiting on the subject of managing a global
then entering the workforce leads to workforce in an era of increased demand Whatever your views on the subject
what author Bernard Salt describes as for skills and talent. of an imminent global skills and labor
a ‘demographic faultline’. shortage or on the challenges of managing
And nowhere is this issue more prevalent Generation Y, this study presents fresh
Such a development would prompt than in KPMG’s own workforce. With more ideas that will surely test the thinking of
changes in the way in which talent than 123,000 staff and 7,100 partners many global corporations. And, it is for
is managed globally by multinational worldwide we are constantly adjusting to this very reason that I believe The Global
corporations. For example, skilled labor in changes in client demand. These changes Skills Convergence should be mandatory
one region might be transferred to a region must be managed against a background of reading for anyone involved in managing a
with a skills deficit. And while this process shifts in the availability of talent. global workforce in the 21st century.
sounds simple enough, the process of
moving staff from place to place requires Interestingly, one of the common themes
careful management based on sound emerging from the interviews in this Tim Flynn
advice. This is where KPMG’s International study was the challenge of recruiting and Chairman
Executive Services practice has built its retaining 20-somethings otherwise known KPMG International
successful global practice and it is why this as Generation Y. And I am pleased to say
group commissioned this study. that I concur with the broad response



Executive summary

The Global Skills Convergence argues that where the fertility rate remained high for mid-1970s which impacts labor markets
there is a demographic faultline running much of the 20th century. The baby boom precisely 40 years later. Could this be the
through much of the developed world neither started nor ended in the Latino issue that knocks China off its current
which will impact negatively on the supply Christian, African, Indian or Arab worlds. growth trajectory?
of labor and talent during the next decade. The end of the western baby boom was
The faultline is the time at which more signaled in the 1960s by the arrival of, KPMG’s global International Executive
Baby Boomers (born 1946-1961) exit the and access to contraception and by the Services (IES) practice has accessed, with
workforce than Generation Ys (born changed expectations and priorities of permission, unpublished data from the
1976-1991) and Millenniums (born women. Again, these developments United Nations Population Division which
1991-2006) enter the workforce at age applied in some countries and not others. shows the net flow of migrants between
15. The delayed entry into the workforce a range of countries this decade and again
caused by a longer engagement with The demographic faultline applies at ten years earlier. Unfortunately, this data
education means that the faultline is different times in different countries. The set does not include information for the
largely an interplay between retiring Baby pool of people from which Japan draws US. However, what it does show is the
Boomers and newly arriving Generation Ys its labor force began to contract in the recent outflow of Poles to developed
with Generation X caught in between. mid-1990s. In the United States (US) European Union nations as well as of
the slowdown in the rate of growth in Romanians to Italy and of Pakistanis
The demographic faultline is caused by the productive population begins at the to the United Kingdom (UK). There were
the sudden jump in fertility that followed end of this decade. In China the faultline also net outflows from the UK to Spain
the end of World War II. This initial ‘jump’ applies from the middle of next decade. and Australia.
in 1946 was the beginning of the baby The diminution in the number of people
boom and it applied largely to western in China aged 15-64 results from the
economies with the exception of Ireland application of the one-child policy in the



The point being, that changes to the Here is a generation that is highly Interview subjects confirmed their
geo-political landscape facilitated the flow educated and has been global in experience with the skills shortage
of labor from an area of surplus (Poland) their thinking from an early age. This although they often described this as
to areas of demand such as the UK. is a generation that has postponed a lack of talent in the right location.
The other driver of migration is the commitment to relationships and that Interviewees were especially challenged
pursuit of lifestyle. values travel. Educated Generation Ys by Generation Y whom they almost
are especially predisposed to working universally described as ‘less loyal’
The argument advanced in this study is for ‘branded’ global corporations, such than previous generations. The counter
that in the 21st century, labor and talent is as BNP Paribas and other businesses argument to this lack of loyalty displayed
increasingly able to flow seamlessly across interviewed, that have the capacity to by Generation Y has in fact been created
the globe. This concept of the propel them into a global career. This by the employers themselves. Businesses
free-flow of the elements of business means that skill shortages in one country at the top of the business cycle offer
was first put forward by US journalist and can be addressed by transferring talent employees opportunities and rewards
author Thomas Friedman in his 2005 book out of another country. On the other however as the market moves towards
The World is Flat. Friedman argued that the hand, it also means that a skills shortage the base of the cycle, employers tend to
dismantling of political barriers, evolution caused by a demographic faultline can eliminate surplus labor and cut retirement
of technology and the globalization of be exacerbated by the ‘flighty’ values of and other benefits.
business is leading to a ‘flat world’ where today’s 20-somethings.
capital, technology and information flow Interviewees also commented that
between markets. It can be argued that As part of this study interviews were Generation Y has an ‘expectation’ of
Friedman stopped one step short of a conducted with key personnel at global longevity and of having an international
logical extension to this argument. In a corporations who have, or have had, career. While interviewees were
truly ‘flat world’, labor and talent will also responsibility for managing a global concerned about the skills shortage,
flow from market to market. The free flow workforce. In many cases interview many believed they could manage the
of talent and labor is more feasible this subjects had more than 25 years situation by improving the retention of
century than it was last century due to experience. The interviews were older workers and by encouraging greater
political change and greater accessibility completed with executives based participation by women who may want
to cheap airfares, although it must be said in Australia, France, Germany, the to return to work after having children.
that the dynamics of mobility may change UK and the US. They were drawn Interviewees were especially challenged
as a result of rising energy costs. from global businesses in energy and by the difficulty in securing the right talent
natural resources, financial services, and inserting them into often isolated and
The newest arrivals into the global manufacturing, retail and technology. The difficult locations. This process required
professional workforce are same line of discussion was followed with leading edge remuneration packages and
Generation Y otherwise known as each interviewee. There was a surprising other support including language and
the children of the Baby Boomers. commonality to the responses. Three culture training. Several interviewees
Generation Y in the developed world, formal interviews were also conducted talked of the need to increasingly tailor
and even in China where they are often with representatives of KPMG’s IES career paths for staff.
referred to as ‘little emperors’, have practice to provide a broad overview of
generally been raised in an era industry trends over the last 25 years.
of prosperity.



• Manage the expectations of staff
before, but especially after completion
of an international assignment:
sometimes it can seem a bit
mundane returning to head office
after the excitement and exotica of an
international posting.

• Manage Generation Y’s expectations
and provide them with constant
feedback as they progress towards
career goals.

• Benchmark best practice in
remuneration and ensure that the most
effective tax arrangements are in place
for staff, for the corporation, and to
meet official requirements.

The Global Skills Convergence is a study
that was commissioned by KPMG’s
global IES practice. The research was
directed and authored by KPMG in
Australia Demographer, Bernard Salt
and Principal Researcher, Joel Bevin and
The interviews, combined with the • Ensure, as far as possible, that local supported by numerous staff. The study
demographic research, provide a unique staff manage the group’s operations in was completed over 7 months to
perspective on the current skills and labor each country. August 2008; it comprises both
shortage. It shows that there will be a demographic research as well as a
slow-down, if not a contraction, in the • Tailor career paths and remuneration series of interviews with the Heads of
pool from which the labor force will be packages and consider concepts Human Resources and Global Mobility at
drawn at the end of this decade in the including delayed bonuses and global businesses. The report is intended
US and by the middle of next decade in performance-based pay. to be distributed globally to KPMG’s
many other developed markets. Some • Understand the inter-relationships IES practice clients as part of the thought
of the key learnings that flow from the between business and politics, and leadership program. Soft copies of
interviews are as follows. the strength of familial relationships in the report can be downloaded from
some emerging markets. www.kpmg.com/globalskillsconvergence
• Establish a leadership group and invest
in that group’s development.

• Make sure they have exposure to “The international mobility of talent delivers
foreign markets and understand local
culture and sensitivities. diversity of viewpoint … our business, all
business, needs different viewpoints.”
Brian Ambrose, Global Mobility, KPMG



1 Introduction

This report presents original research on The proposition behind this study is that between countries, escalate the flow
the issue of the global skills convergence the rate of growth in the labor market of migrant workers to address labor and
as measured by migration and labor in much of the developed world will skills shortages.
mobility. It focuses specifically on the slow over the next decade as the Baby
management and policy issues associated Boomer generation exit the workforce. It But whereas the developed world is
with these trends for global businesses is argued that in many nations the supply entering a phase of diminished growth
and government. of new workers in Generation X and in the worker population, the developing
Generation Y is insufficient to offset the world is quite different. There was
The report was commissioned by KPMG scale of the exiting Baby Boomers. no baby boom in much of the Latino
International via its global IES practice Christian, African and Arab worlds where
which provides advice to global companies As a consequence it is argued that the the fertility rate* remained high for more
moving staff between countries. rate of workforce growth will decelerate or less the whole of the 20th century.
and in some nations actually decline over There is no imminent diminution in the
The study involves demographic research the next decade. At the very least, this supply of labor coming through the
accessing previously unpublished data ‘demographic faultline’ based on the workforce in these nations.
sourced (with approval) from the United baby boom generation moving beyond
Nations. It also draws on a number of the workforce will place downward
interviews with key executives who have pressure on labor force participation
each had in excess of 25 years experience rates and, again to varying degrees
in managing a global workforce including
members of the leadership team of
KPMG’s global IES practice.

* The fertility rate is the number of children that would be born per woman and is a better indicator of fertility than the birth rate, which measures births per 1,000 people, as it is not affected by the age
distribution of the population.



In addition, the advent of Generation Y It is argued that the stage is being set
into the developed world’s workforce is over the next decade for the flow of talent
prompting different behaviors with regard and labor between the developed and the
to career mobility. Today’s 20-somethings developing worlds. In some cases these
are generally far better educated and flows have already started and they are
‘connected’ into the global economy expected to escalate as growth in the
than any previous generation and as a pool of labor diminishes in the
consequence, they are predisposed to the developed world.
concept of an international career.
Migration flows will however be limited
This predisposition by educated elements by political barriers in some areas, but in
of Generation Y is being acknowledged by other places labor will be aggressively
global businesses that now actively pursue pursued and transacted between both
policies of global mobility. And not simply developed and developing countries.
for the purpose of holding on to ‘flighty’
Generation Y workers but because they see In an increasingly ‘flat world’, labor and
commercial benefits in the cross-fertilization talent will flow from where it is in excess,
of talent and labor on a global scale. to where it is required, as a result of both
push (domestic conflict forcing migrants
While Generation Y will be a key focus to flee) and pull (higher wages drawing
of businesses in the coming decades, migrants in) factors.
understanding the motivations of future
generations, the Millenniums (those born This study documents these flows and
after 1991), will be an important factor their impacts, and considers the response
going forward. Born into a technologically of global corporations to these shifts. It
integrated world, this generation will also articulates the way in which some
have the technical and conceptual skills aspects of the global workforce might
to adapt to occupations of the future. The unfold in the second and third decades
Millenniums are likely to demand a career of the 21st century.
that provides a flexible transition between
ideas and will expect location and
traditional working hours to be irrelevant
to their success. “I know it’s very popular to talk about the
And finally beyond the demographic,
generational and corporate policy factors
world being flat … but people aren’t flat.”
that seem to be driving trends in global Matt Burns, Lockheed Martin Corporation
workforce mobility, there is the impact of
recent geo-political shifts. Political change
at the highest global level is opening new
territories for western-styled development
which permits and even encourages an
associated inflow of workers and talent.



2 Labor market outlook for
selected countries

In the developed world generally around 65 to the US. But again, without a deep shift This analysis revealed a range of outlooks
percent of the population aged over 16 is in the way that a society reproduces and for the labor market population in both the
engaged within the labor force. In the US, cares for children, there is little scope for developed and the developing world.
the participation rate has increased from a further increase in the participation rate.
around 55 percent in the 1960s to around . Outlook for the US
the 65 percent over the last 20 years as This means that both the US and China and Figure 1a shows the results of this
women remained in or returned to the nations ranging between these extremes analysis for the US between 1950 and
workforce after having and raising children. will increasingly rely on population growth 2050. Over the 55 years to 2005 the
in the working-age group to support future number of people added to the pool
However, as the participation rate has expansion of the workforce. from which the US labor force is drawn
approached the mark of 65 percent, the hovered around the two million mark.
capacity for even further gains is limited As part of this study, data and forecasts
And the reason is that during this phase,
without a fundamental reorganization of have been accessed from the United
the number of people exiting the pool at
the method of family creation and gender Nations Population Division (the World
65 was always exceeded by the number
roles. This means that the outlook for labor Population Prospects are revised on a
entering at 15.
market growth in many developed nations biennial schedule) and other national
is largely dependent upon the inflow of a statistics bodies in order to examine net
migrant population in the working group. annual change in the population aged
15-64 year over a 100-year timeframe in
The participation rate in China, on the 195 countries.
other hand, has remained between 75
percent and 80 percent over the last two
decades reflecting a very different society



Figure a – Net annual change in the population of the US aged -, 90-00
Baby Boomers enter Generation X enter Generation Y enter Millenium generation
the workforce the workforce the workforce enters the workforce
3,000,000
2,500,000
United States

2,000,000
1,500,000
1,000,000
500,000
0
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
Source: KPMG International 2008, US Census Bureau

However, between 2012 and 2026 the and unskilled labor into the labor market The reverse might apply to generations
annual rate of growth is expected to places upward pressure on the rate of (such as Generation Y and possibly the
contract by half, which will result in less remuneration and migrant workers are Millenniums) where because of a shift in
than one million being added to the labor increasingly drawn to the higher wages the underlying demographics, they are
force each year. offered in the US. confident their skills and labor will always
be in demand. Generation Y is unfazed by,
The issue here, is that over the last 40 Superimposed over the 100-year and even challenging of, authority at an
years, the US economy has become labor force population growth charts is age when most Baby Boomers and many
accustomed to accessing a labor force the era in which each of the four ‘working Generation X would have accepted the
from a population pool that has expanded generations’ entered the labor market. status quo.
at a predictable rate of two million per
year. But by the end of this decade, the Baby Boomers in the US (and elsewhere) The other issue is that in today’s global
transitioning of the Baby Boomers beyond entered the workforce in the late 1960s labor market both skilled and unskilled labor
the workforce results in a diminution in and 1970s during a period of rising with the means and ambition, can flow
this pool’s rate of expansion. population growth. Generation X entered from one country to another. And especially
the workforce in the 1980s and early 1990s if there have been recent changes to
All of a sudden the economy must adjust when the rate of growth in the working-age geo-political barriers. The rapid globalization
to accessing labor from a pool that is population had flattened out. Generation Y of business, combined with a predisposition
expanding at a much-reduced rate. This on the other hand, entered the workforce by educated under-35s to think globally,
is the so-called ‘demographic faultline’ in the late 1990s and in the current decade and regional variation in the value of labor,
caused by more people exiting than which has been an era of falling rates of is leading to the evolution of a global
entering the labor force. growth in the working-age population. workforce. Managing that workforce and
The initial response to this situation In broad terms, this demographic context the expectations of its participants is now a
is likely to be a tightening of the suggests that generations entering the major issue for global businesses.
unemployment rate although many workforce in an era of a rising labor The demographic context in which
of the skills required may not be in supply (such as Baby Boomers and some workers, and indeed generations enter the
sufficient supply domestically. A skills Generation X) regard the balance of power workforce, can have a profound impact on
shortage therefore ensues and, as a in the workplace as remaining with the employee values.
consequence, there are heightened calls employer. Indeed, this experience might
for an expansion of the migration program. be expressed as a deep respect for (and
The slowdown in the supply of skilled possibly even fear of) authority.


The Global Skills Convergence 9

For example, the Baby Boomers might in the 1950s and 1960s, household . Outlook for other nations
have been born in the 1950s but they formation in the 1970s and 1980s, and The 100-year perspective on the labor
entered the labor market in the 1970s peak consumerism in the 1990s and in market pool for the US is repeated in
when it was rising. This led to a set of this decade, will also underpin a labor and other developed nations such as Australia
behaviors in the workplace where if that skills shortage next decade. (see Figure 1b) and Canada (Figure 1c)
Baby Boomer did not perform as required, where there is also a projected diminution
then ‘dump them’, reach into the labor This is not to say that the US labor market
in the rate of growth in the labor
pool ‘bucket’ and recruit another worker. will contract. Rather, it is to say that the
market population.
economy must adapt quickly to a labor
Generation X entered the labor market market that is increasingly constrained by However, in other developed nations the
in the late 1980s and early 1990s when a reduced number of people entering the immediate outlook is for the labor market
the rate of growth in the labor pool had 15-64 age group. population to transition from recent
reached a plateau. growth to contraction as early as next
The long-term outlook for the labor force
decade. Indeed in Japan the labor market
Generation Y, on the other hand, began to population shows a recovery in the 2030s,
population has been in decline since the
enter the labor market early this decade and which has been labelled the ‘Latino Lift’.
mid-1990s (see Figure 1d).
in a different paradigm altogether. Yes, the This results from differential fertility
labor market is expanding but it is expanding rates in the US. The Latino fertility rate in Over the 40 years to 1990, the number of
at a reducing rate: if that Generation Y does the US is almost three times the white people aged 15-64 in Japan had increased
not perform as required, then you can’t fertility rate. This shift is already impacting every year by between 500,000 and one
reach into the ‘bucket’ and recruit another, consumer trends and is especially evident million underpinning a rising workforce
because the ‘bucket’ is shallower. in the youth market: the world is likely and consumer base. This was good news
to see less ‘white kids frolicking on the for the Japanese economy: not only does
This demographic shift transfers the beach in Coca Cola advertisements’ an increase in 15-64 year olds contribute
balance of power in the workplace from the and more hip-hop, street and grunge to depth in the workforce, and to the tax
employer (up to the 1990s) to the employee influences coming out of urban and base, but it also supports a rising demand
(from the current decade onwards). Hispanic environments in the future. for consumer goods and services.
The US is entering a phase over the next
decade that is quite unlike any period in
the late 20th century. The baby boom that
underpinned the rise of the youth-market

Figure b – Net annual change in the population of Australia aged -, 90-00
250,000

200,000
Australia

150,000

100,000

50,000

0
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
Source: KPMG International 2008, Australian Bureau of Statistics


0 The Global Skills Convergence

“Globalization is forcing us to invest in emerging markets and ‘skill up’ the
populations of developing countries who will be our future labor force.”
Rodney Scaife, AOL

Figure c – Net annual change in the population of Canada aged -, 90-00
400,000
350,000
300,000
250,000
Canada

200,000
150,000
100,000
50,000
0
-50,000
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
Source: KPMG International 2008, Statistics Canada

Figure d – Net annual change in the population of Japan aged -, 90-00
2,000,000
1,500,000
1,000,000
Japan

500,000
0
-500,000
-1,000,000
-1,500,000
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
Source: KPMG International 2008, Statistics Bureau of Japan

Figure e – Net annual change in the population of China aged -, 90-00
20,000,000
15,000,000
10,000,000
China

5,000,000
0
-5,000,000
-10,000,000
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
Source: KPMG International 2008, UN Statistics Division



However, from 1994 onwards the number Japan might increase its workforce In the two key developing nations, China
of people aged 15-64 in Japan began participation rate, but this figure currently and India, population growth trends differ
to contract. All of a sudden, there were stands at 60 percent, compared to a markedly. In China (see Figure 1e), the
more people exiting the labor market participation rate in the US of 66 percent. rate of growth is expected to slow as the
pool at the age of 65 than entering at 15. effects of the one-child policy are realized.
There are now fewer consumers, and In order for Japan to lift its participation From 2016 onwards, the number of
therefore taxpayers, in Japan today than rate 6 percentage points to a level that people aged 15-64 will actually contract.
there were in 1994. But this is only part of is commensurate with the US and other
the problem. Japan must now support a developed nations, there would have Meanwhile, in India (see Figure 1f)
greater population base aged 65 years and to be a fundamental change in the growth in the working-age population is
over from a diminishing pool of workers engagement of (married) women in expected to remain elevated over the
aged 15-64. the workforce. next 40 years as a result of less restrained
population strategies and improved
Japan does not have a culture of In other words, cultural constraints limit economic growth that has supported
immigration and so any diminution in the Japan’s response to its demographic larger families.
scale of the worker base is unlikely to problems. In Japan, the labor force
be offset by an increase in the migrant participation rate for males is close to In the developed nations of western
worker intake. 85 percent while it remains at around 60 Europe such as Germany (Figure 1g), the
percent for females. UK (Figure 1h), France (Figure 1i), and

Figure f – Net annual change in the population of India aged -, 90-00
16,000,000
14,000,000
12,000,000
10,000,000
8,000,000
India

6,000,000
4,000,000
2,000,000
0
-2,000,000
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
Source: KPMG International 2008, UN Statistics Division

Figure g – Net annual change in the population of Germany aged -, 90-00
800,000
600,000
400,000
Germany

200,000
0
-200,000
-400,000
-600,000
-800,000
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
Source: KPMG International 2008, Eurostat



the Netherlands (Figure 1j), the trend is In some countries this manifests as a upward pressure on labor costs and an
similar to Japan. Over the next decade slowdown in the rate of growth; in others acceleration in the demand for talent and
there will be a broad downturn in the it is apparent through a contraction in the labor. And in a globalized labor market,
rate of growth, of what can be broadly number of people in the productive age that talent and labor will increasingly flow
defined as the productive age group group. The speculation is that the impact into markets where skilled and unskilled
of the national population, in the majority on the economy, and on the labor market, workers are in highest demand.
of developed countries. will be the same: this will lead to

Figure h – Net annual change in the population of the UK aged -, 90-00
300,000
250,000
200,000
150,000
100,000
UK

50,000
0
-50,000
-100,000
-150,000
-200,000
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

Figure i – Net annual change in the population of France aged -, 90-00
600,000
500,000
400,000
300,000
France

200,000
100,000
0
-100,000
-200,000
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

Figure j – Net annual change in the population of the Netherlands aged -, 90-00
200,000
150,000
Netherlands

100,000
50,000
0
-50,000
-100,000
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050



3 Strategic and policy responses

The total number of international migrants But by the 1980s these flows in many, but The inclusion of a series of Eastern
has increased from close to 90 million in not all, destination countries were being European nations into the European
1975, to over 190 million 30 years later, filtered to focus on skilled migration. It is Union at the turn of the century,
in 2005. While global populations have after all, more efficient for a host nation resulted in Poles flowing to Ireland and
grown steadily, international migrants still to attract skilled young workers who can Lithuanians and Bulgarians to the UK.
account for an increasing proportion of easily and immediately enter the workforce British retirees and ‘lifestylers’ moved
the population, rising from 2 percent and begin making a contribution – by to the kinder climate of Spain. And with
in 1975, to 3 percent 30 years later. consuming, reproducing and paying tax. the demise of the Soviet Union at the end
(United Nations population division). of last century, Russians flowed out of
Responses to these flows have differed . The rise of skilled migration their homeland to opportunities in other
between countries based on geo-political Towards the end of the 20th century, European nations.
circumstances and cultural attitudes. new flows of immigration opened up.
Traditional flows such as from the UK to
In the later decades of the 20th century, Australia and from Mexico to the US were
there were shifts in attitudes towards augmented by new flows made possible
international migration flows. In the by geo-political as well as lifestyle shifts.
immediate post-war period, economic
migrants with few or no skills flowed
out of Europe into countries like the US,
Canada and Australia. “…at a global level the competition for
knowledge-based employees is intense.”
Rodney Scaife, AOL



“Corporations need to have the confidence to And there is something to be said for
this approach. After all, while the first
think the unthinkable: where are we going to generation of unskilled migrants may
struggle financially and even culturally,
be in a decade’s time, long after I am gone, and they inevitably work hard so as to propel
their children into the mainstream usually
what is necessary for us to get there? … this via the education system. Indeed many
will inevitably lead to the case for globalization of today’s most successful participants
in western business and society are the
and in that case, there is a need to start now to offspring, particularly the grandchildren, of
the unskilled migrants who arrived in the
set in place an international mindset.” first two decades of the 20th century. The
same success is becoming visible with
Ian Donald, Abbeywell Associates
the children of the migrants who arrived
after the end of World War II.
But there were also new flows at this Amid this multiplication of education, However, there are a number of countries
time out of Asia and especially from labor and lifestyle migrants, many favored that continue to limit to free flow of
Vietnam and China to the US and destination countries began to implement migrants of all abilities. Some western
Australia. Indians too began to move a points-based system which award points European countries including Germany
more freely away from the sub-continent for age, skills and language capabilities and France currently impose certain
at about this time. In the Middle East, in order to filter-in the most desirable requirements on potential immigrants
the rise of sovereign states such as the migrants. A threshold of points is required such as requiring immigrants receive a job
United Arab Emirates, Kuwait and Qatar in to achieve migrant status which allows offer before they can enter the country.
the late 1990s, and the early years of the the host nation to monitor and control
new century, attracted unskilled labor out inflow based on the skills required by the . The role of corporate
of Pakistan and the Philippines, as well local economy. expatriates
as highly skilled talent from across the But the flow of permanent migrants is just
English-speaking business world. Some nations have even introduced
part of the story of modern global labor
a ‘culture test’ for candidate migrants
mobility. Skilled non-permanent workers,
And from the early 1990s onwards, to ensure they appreciate the history,
more commonly known as corporate
there was also acceleration in the flow of geography and culture of the host nation.
expatriates, are playing an increasing role
international students from the developing The points-based approach to immigration
in the spread of global business. Especially
world largely to the west. Student flows has been adopted over the last two
so, as geo-political shifts ‘open up’ new
are not counted in permanent migration decades by countries such as Australia,
territories requiring the infrastructure, the
movements and so these are in addition the UK, Canada and New Zealand.
technology and the range of consumer
to the flow of skilled and unskilled labor.
The US on the other hand continues goods and services that are already well
Drawn by greater opportunities for a higher
to focus on ‘family’ rather than ‘skills’ established in the west.
level of education (and ultimately higher
wages) students in developing countries migration, although the focus is beginning
One role of the developed world is
are increasingly aiming for positions in to shift to place greater emphasis on the
to introduce the systems and the
prestigious tertiary institutions in the skilled component. The argument for
infrastructure necessary to elevate the
US and parts of Europe – and often more ‘family’ as opposed to a ‘skills’ migration
quality of life and the standard of living in
accessible institutions in countries such is often ideological in that a nation that
newly ‘opened’ countries. Not only does
as Australia, Canada and New Zealand. accepts unskilled migrants truly presents
this add to global political and economic
itself as a ‘land of opportunity’.
stability, but also opens up new markets



for global business. Corporate expatriates
in finance, accounting, property, energy,
resources and manufacturing industries
often play a major role in this stabilizing
phase and facilitation of the free and
smooth flow of this talent is a key
challenge for global business.

Later in the study, there is a summary
of a series of interviews conducted
with experienced managers of human
resources for global corporations. One
constant theme evident during these
interviews was the need for global
businesses to introduce corporate
expatriates into developing countries for
a period of time (many said 3-5 years) to
manage and direct the introduction of new
services and in many cases, to identify
and nurture local talent.

The historical flow of labor became
more strategic in the period following
World War II. As companies began to
expand overseas, the movement of
corporate expatriates became more
pronounced. This was most evident
with companies based in the US who
sent employees on international
assignment overseas to manage
expansion and company subsidiaries.

It took another major geo-political event, the
break-up of the former USSR, to provide
further stimulation as skilled corporate
expatriates flowed into former Soviet
states in the 1990s, in order to assist those
nations in upgrading the local built-form
infrastructure and support services.

“Operating in the global market, we manage talent between regions
and across borders to enable effective knowledge transfer.”
Rodney Scaife, AOL



4 Migration in a flat and
creative world

The proposition being put forward by this . Reasons for globalization In addition to these political and economic
study is that demographic change in the of the labor market developments, there is also the argument
developed world will lead to a labor and Some events which facilitated these flows that today’s younger generation of
skills shortage next decade as the Baby include the dismantling of the former workers under the age of 30 – the
Boomers move beyond the workforce. USSR, the expansion of the European so-called Generation Y – are more likely
This shift is coupled with historically low Union membership base, the opening to be predisposed to a global career than
fertility rates in the late 1990s that will fail up of China and India and the rise of preceding generations. Part of this logic
to offset this phenomenon, at least in the sovereign states in the Middle East. is the expansion of global businesses
short term. providing more opportunities to think and
Even the late 2007 sub-prime crisis in work globally.
Coinciding with this ‘demographic the US, which has also affected the
faultline’ are a number of other factors economies of the UK and western But there is also the argument that this
leading to a heightened demand for, and Europe during 2008, is having the effect generation raised on the Internet is
incidence of, cross-border migration. of transferring surplus skills out of these simply better exposed to global issues
International migration trends reveal an markets into the still-booming markets than previous generations. In addition,
increasing number of labor migrants as of Hong Kong, Singapore and Shanghai. there has been a shift in the priorities
countries open up their borders to address This development has been confirmed of Generation Y away from finding a
looming labor and skill shortages. by discussions with multinational long-term partner, buying a house and
corporations who are constantly starting a family in their 20s. (These ‘life
monitoring both the geo-political and goals’ are typically postponed to the 30s
economic environment to ensure that by educated and skilled Generation Ys.)
global labor requirements are met. Instead, Generation Y seems to be living
a much less structured life where a sense


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