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An Economy That WorksJob Creation and America’s Future
McKinsey Global Institute
August 18, 2011
CONFIDENTIAL AND PROPRIETARYAny use of this material without specific permission of McKinsey & Company is strictly prohibited
2011 WIB Symposium State College, Pennsylvania
McKinsey & Company 1|
-7
-6
-5
-4
-3
-2
-1
0
1
2
201020092008
Germany
U.K.
U.S.
2011
Gross Domestic ProductPercent decline, peak to trough1
SOURCE: United States Bureau of Economic Analysis; United Kingdom Office for National Statistics; Germany’s Statistisches Bundesamt Deutschland; ILO; OECD; McKinsey Global Institute
U.K. 6.4
Germany 6.1
U.S. 4.1
1 Peak quarter for United States was Q4 2007; peak quarter for Germany and United Kingdom was Q1 2008
EmploymentPercent change from January 2008
Other countries have not experienced the same employment decline as the U.S.
U.S.
Germany
U.K.
McKinsey & Company 2|
1 Calculated using U.S. Bureau of Labor Statistics Occupational Employment statistics data, which do not include farm, self-employed, or new entrants to the labor market
SOURCE: U.S. Bureau of Labor Statistics; McKinsey Global Institute analysis
Low-skill occupations had the highest job losses in all sectors Annual net employment change from 2007–20091
Thousands of jobs
>500,000 job loss
>100,000 job loss
10,000-100,000 job loss
1,000-10,000 job loss
Most significant source of occupational training
Health care
Government
Educational services
Accommodation & food services
Real estate
Wholesale
Business services
Transportation and warehousing
Finance and insurance
Construction
Retail
Administrative & support services
Manufacturing
Graduate degree
Bachelor’s plus work
experienceBachelor’s
degreeAssociate
degreeVocational
awardWork
experienceOn-the-job
training
Ind
ustr
y<1,000 job change
1,000-10,000 job gain
>10,000 job gain
McKinsey & Company 3|
1 Total employment equals the number all employed workers in the economy, including full-time, part-time, and self-employed 2 Net employment change as a share of total employment in the base year (e.g., 1990 for 1990s)
SOURCE: U.S. Bureau of Economic Analysis; U.S. Bureau of Labor Statistics; McKinsey Global Institute analysis
2.2
9.2
18.1
19.5
20.6
12.9
6.9
2000-10
2000-07
1990s
1980s
1970s
1960s
1950s
Job growth in the 2000s was half the rate of previous decades
Increase in total employment2
Percent
12
20
26
20
15
7
2
3.5
4.2
3.2
3.2
3.4
2.4
1.7
Net employment change
Total employment1
Millions
Real GDP compound
annual growth rate
Percent
McKinsey & Company 4|
Jobless recoveriesThe new normal?
McKinsey & Company 5|
The period between GDP recovery and employment recovery has been increasing
6
39
15
63
86676
20081
?
200119901981197319691960195719531948Year in which the recession began
“Jobless recoveries”
1 GDP returned to its pre-recession peak in December 2010
SOURCE: U.S. Bureau of Labor Statistics; U.S. Bureau of Economic Analysis; McKinsey Global Institute analysis
Gap between GDP returning to pre-recession peak and
employment returning to pre-recession peakMonths
McKinsey & Company 6|
The unemployment rate varies widely across the United States
SOURCE: U.S. Bureau of Labor Statistics; McKinsey Global Institute analysis
Unemployment rate, December 2010
% unemployed
>10%
9–10%
8–9%
7–8%
6–7%
5–6%
<5%
McKinsey & Company 7|
0
2
4
6
8
10
12
14
16
18
20
22
Long-runaverage =
18%
20092000199019801970119601950
Mobility in the United States has been declining since 1990 and is at a 50-year low
SOURCE: U.S. Bureau of Labor Statistics; McKinsey Global Institute analysis
1 Data from 1970–1981 are interpolated due to data constraints.
Annual domestic migration rate, 1948–2009% of residents who have changed addresses during the past year
. . . but that figure has now dropped to 1 in 10
In the 1950s and 1960s, 1 in 5 Americans changed residences every year . . .
McKinsey & Company 8|
The number of new businesses has declined dramatically in this recession
SOURCE: U.S. Bureau of Labor Statistics; McKinsey Global Institute analysis
550
634
99
610
98
610
97
615
96
588
95
584
1994 2010
505
09
548
08
627
07
656
06
667
05
633
04
603
03
609
02
612
01
631
2000
Change in number of private-sector establishments launched every year
March 1993 to March 20101, thousands
1 Calculated using U.S. Bureau of Labor Statistics Business Employment Dynamics data set. The annual number indicates the number of businesses less than 1 year old that were in existence in March of that year.
McKinsey & Company 9|
McKinsey & Company 10|SOURCE: Moody’s Analytics; McKinsey Global Institute analysis
The high job-growth scenario is the only one that returns the United States to 5 percent unemployment by 2020
Employment demand scenarios
Millions of net new jobs, 2010 - 202022.5
17.4
9.3
HighMiddleLow
77 145 187Average net new jobs per month
Thousands of jobs
Need 21 million
new jobs to
return to 5%
unemployment
in 2020
McKinsey & Company 11|
Retail -0.8-1.2
Manufacturing -2.3 to 0
Construction 0.9–1.8
Leisure and hospitality 2.1–3.3
Business services 2.4–5.7
Health care 2.8–5.2
Other2 1.0–1.3
Education1 0.5
Other services1 0.4–0.8
Financial services1 0.7–0.9
Government1 1.6-1.7
1 Job growth projections from Moody’s Analytics.2 Other includes mining, utilities, wholesale trade, transportation and warehousing, information, self-employed, and agriculture.
Job growth potential varies by sector
SOURCE: Moody’s Analytics; Global Insight; U.S. Bureau of Labor Statistics; McKinsey Global Institute analysis
Low scenario
Middle scenario
High scenarioJobs created by 2020Millions
MGI focus
McKinsey & Company 12|
In the high job-growth scenario, we project 1.5 million too few college graduates in 2020
Demand1
163.3
58.0
17.7
30.7
43.3
13.6
Bachelor’s degreeor higher
Associate degree
Some college, no degree
High school graduate
No high school diploma
Supply
168.9
56.5
19.6
29.1
44.1
19.5
SOURCE: U.S. Bureau of Labor Statistics; McKinsey Global Institute analysis
Demand vs. supply – 2020 projectionsMillions
1 Labor demand from MGI high job-growth scenario
Difference
+5.9
+0.8
-1.6
1.9
-1.5
McKinsey & Company 13|
Anytime, anywhereThe changing nature of work
McKinsey & Company 14|
The nature of work is changing
SOURCE: McKinsey Global Institute analysis
Disaggregation of jobs
“As work gets more complex, we’re seeing that jobs are getting disaggregated into many functions… it’s no longer one person doing ten things; instead it’s ten people working on one thing.”
– Head of HR in high-tech and software industry
Virtualization of work
“The virtual work model can be more productive than other setups… it contributes to higher employee satisfaction and lower turnover.”
– HR Director in business services industry
More part-time and temporary work
“We expect to increase our headcount in the future, but our FTEs will remain flat… we will have more part-time and contingent.”
– Senior Vice-President of HR in health care industry
McKinsey & Company 15|
10.4
15.6
19.9
25.5
34.3
36.5
More offshoring
More outsourcing
More older workers (aged 55+)
More telecommuting
More temporary or contract workers
More part-time workers
Our business survey reveals that employers foresee a more flexible labor force
SOURCE: McKinsey Global Institute U.S. Jobs Survey, 2011; McKinsey Global Institute analysis
1 Survey of 2,000 U.S. businesses
In what ways do you foresee the workforce at your company changing over the next 5 years?1
Select all that apply
McKinsey & Company 16|
0.76
0.69
0.53
0.42
1.00
0.66US low cost
Eastern Europe
Brazil
Argentina
India
US high cost
Some business support services in the U.S. can be cost-competitive with offshoring destinations
SOURCE: McKinsey & Company; McKinsey Global Institute analysis
Several large U.S.
companies – including Delta, United Airlines
and AT&T – have recently repatriated
call centers to the U.S.
Cost by location for delivering higher-level IT support services Index U.S. high cost = 1.00
McKinsey & Company 17|
Many cities have abundant supplies of low-cost IT talent
Source: 2009 Bureau of Labor statistics, McKinsey Global Institute analysis
Median wage for IT jobs in MSAs
≥$60,000
$55,000 - $60,000
Metropolitan Statistical Area (MSA)
Any central community with population of 50,000+ citizens and adjacent communities of 10,000 in which at least 25% commute to central community
AL
ARAZ
CACO
CT
FL
GA
IA
ID
IL INKS
KY
LA
MA
ME
MI
MN
MO
MS
MT
NC
ND
NE
NH
NM
NV
NY
OH
OK
OR
PA
SC
SD
TN
TX
UTVA
VT
WA
WI
WV
WY
DCDEMD
NJ
RI
HI PR
AK
< $50,000
McKinsey & Company 18|
Toward a
U.S. jobs agenda
McKinsey & Company 19|
To revive job creation, the U.S. must make progress on four dimensions
SOURCE: McKinsey Global Institute
Encourage innovation, new company creation, and the scaling up of new industries in the U.S.
High spark
Ensure Americans acquire the skills that match employer needs
High skill
Harness globalization to create more U.S. jobs
High share
Remove impediments to investment and job creation
High speed
McKinsey & Company 20|
The full report can be downloaded at:
McKinsey Global Institutewww.mckinsey.com/mgi
Thank you