White Paper

Conventional wisdom says that globalization has stalled. But although the global goods trade has flattened and cross-border capital flows have declined sharply since 2008, globalization is not heading into reverse. Rather, it is entering a new phase defined by soaring flows of data and information. Remarkably, digital flows—which were practically nonexistent just 15 years ago—now exert a larger impact on GDP growth than the centuries-old trade in goods, according to a new McKinsey Global Institute (MGI) report, Digital globalization: The new era of global flows. And although this shift makes it possible for companies to reach international markets with less capital-intensive business models, it poses new risks and policy challenges as well. The world is more connected than ever, but the nature of its connections has changed in a fundamental way. The amount of cross-border bandwidth that is used has grown 45 times larger since 2005. It is projected to increase by an additional nine times over the next five years as flows of information, searches, communication, video, transactions, and intracompany traffic continue to surge. In addition to transmitting valuable streams of information and ideas in their own right, data flows enable the movement of goods, services, finance, and people. Virtually every type of cross-border transaction now has a digital component.

Recoveries are increasingly becoming "jobless" due to firm restructuring, skill and geographic mismatches between workers and jobs, and sharp decline in new start-ups. The US needs to create 21 million new jobs by 2020 to regain full employment—and only achieves this in our most optimistic job-growth scenario. The US workforce will continue to grow until 2020, but under current trends, many workers will not have the right skills for the available jobs. Technology is changing the nature of work: Jobs are being disaggregated into tasks, work is becoming virtual, and firms are relying on flexible labor (temporary, contract workers). These trends offer new opportunities for creating jobs in the United States, a trend that some companies do not fully appreciate. Progress in four dimensions will be essential for reviving the US job-creation machine: Develop the US workforce-skill to better match what employers are looking for; expand US workers' share of global economic growth by attracting foreign investment and spurring exports; revive the nation's spark by supporting emerging industries, ensuring more of them scale up in the United States, and reviving new business start-ups; and speed up regulatory decision-making that blocks business expansion and new investment.

Some 40 million workers across advanced economies are unemployed. With many nations still facing weak demand - and the risk of renewed recession - hiring has been restrained. Yet there are also long-range forces at play that will make it more difficult for advanced economies to return to pre-recession levels of employment in the years to come. As a result, the current disequilibrium in many national labor markets will not be solved solely with measures that worked well in decades past. To help develop appropriate new responses, McKinsey Global Institute (MGI) examines five trends that are influencing employment levels and shaping how work is done and jobs are created.

Advances in robotics, artificial intelligence, and machine learning are ushering in a new age of automation, as machines match or outperform human performance in a range of work activities, including ones requiring cognitive capabilities. In this report, part of our ongoing research into the future of work, we analyze the automation potential of the global economy, the factors that will determine the pace and extent of workplace adoption, and the economic impact associated with its potential.

Advances in robotics, artificial intelligence, and machine learning are ushering in a new age of automation, as machines match or outperform human performance in a range of work activities, including ones requiring cognitive capabilities. In this report, part of the McKinsey Global Institute's ongoing research into the future of work, the authors analyze the automation potential of the global economy, the factors that will determine the pace and extent of workplace adoption, and the economic impact associated with its potential. The five factors affecting pace and extent of adoption are technical feasibility, cost of developing and deploying solutions, labour market dynamics, economic benefits, and regulatory and social acceptance.

The relentless parade of new technologies is unfolding on many fronts. Almost every advance is billed as a breakthrough, and the list of “next big things” grows ever longer. Not every emerging technology will alter the business or social landscape—but some truly do have the potential to disrupt the status quo, alter the way people live and work, and rearrange value pools. It is therefore critical that business and policy leaders understand which technologies will matter to them and prepare accordingly. Disruptive technologies: Advances that will transform life, business, and the global economy, a report from the McKinsey Global Institute, cuts through the noise and identifies 12 technologies that could drive truly massive economic transformations and disruptions in the coming years. The report also looks at exactly how these technologies could change our world, as well as their benefits and challenges, and offers guidelines to help leaders from businesses and other institutions respond. We estimate that, together, applications of the 12 technologies discussed in the report could have a potential economic impact between $14 trillion and $33 trillion a year in 2025. This estimate is neither predictive nor comprehensive. It is based on an in-depth analysis of key potential applications and the value they could create in a number of ways, including the consumer surplus that arises from better products, lower prices, a cleaner environment, and better health.

Informality” is a term used to describe the collection of firms, workers, and activities that operate outside the legal and regulatory systems. It is widespread in the majority of developing countries—in a typical developing economy, the informal sector produces about 35 percent of gross domestic product and employs 70 percent of the labor force. This paper studies informality in the context of economic development by presenting a model and projections that link informality, regulations, migration, and economic growth. This analytical framework highlights the trade-offs between formality and informality, the relationship between the different types of informality, and the connection between them and the forces of labor, capital, and productivity growth. The paper models the behavior of the informal sector based on the following fundamental asymmetry: formal firms confront higher labor costs while informal firms face higher capital costs and lower productivity. Using mandated minimum wages as the policy-induced distortion, the model first studies the static allocation of formal and informal capital and labor in a modern economy. Second, it opens the possibility of labor migration from a rudimentary economy with an ample supply of labor (rural areas or less advanced neighboring countries). Third, the model analyzes the dynamic behavior of the formal and informal sectors, considering how they affect and are affected by economic growth and labor migration. Then, the paper presents projections for the size of labor informality, in the modern and rudimentary economies, in the next two decades for a large group of countries representing all regions of the world. The projections are based on the calibration and simulation of the model and serve to discuss its usefulness and limitations.

The ManpowerGroup Employment Outlook Survey is conducted quarterly to measure employers’ intentions to increase or decrease the number of employees in their workforces during the next quarter. ManpowerGroup’s comprehensive forecast of employer hiring plans has been running for more than 55 years and is one of the most trusted surveys of employment activity in the world. Various factors underpin the success of the ManpowerGroup Employment Outlook Survey.

Labor market predictions talk of extremes over the long-term: technology eating our jobs, robots replacing drivers, even the threat of a world without work. In the near-term we are seeing new jobs and new skills. For the second year, eighty-six percent of employers globally say their headcount will remain the same or increase in the next two to three years as a result of automation. And, as skills needs are changing faster, employers do not always know which skills they will need even eighteen months from now. This report provides a real-time view of the impact of automation on the workforce in the digital age – not five or ten years out, but now and in the near-term. It shows which functions within companies are set to grow or contract. And it provides insight on the value of soft skills – or human strengths – that are most in-demand by employers and which they have the greatest challenge finding. As world of work experts, we find work for 3 million people annually and have nearly 30,000 employees advising 400,000 companies on hiring decisions and skills development every year. We are well-placed to share human solutions for the Skills Revolution.