The Emerging Global Labour Market

Opening my McKinseyQuarterly Newsletter today, I find an interesting link to the McKinsey Global Institute’s latest contribution (free, but registration required) to the question whether Globalization is actually civilizing, destructive, or feeble – as Wharton’s Mauro Guillen put it in this paper with reference to Albert Hirschman’s analysis of the shifting social value attributed to markets.

Actually, the analysis is not so much concerned with moral evaluations but – as one of the study’s authors, Diana Farrell, put it in the preface, with providing

“… a fact base to the public debate on offshoring and
the emerging global labor market to enable policy makers and business leaders
to make more informed and better decisions.”

Even if the study only projects trends up to 2008, it is still apparent that any conclusions drawn from an attempt to analyse something as vast and complicated as the global labour market will always depend on far too many assumptions that may or may not turn out to be true. After all, McKinsey also managed to present a model for rationlising stock market valuations for non-cash-flow-generating companies before and after the crash in 2000 – the variable that changed was… expectations.

Still, I think it is a valuable contribution to raise the quality of the public debate by actually attempting to quantify some variables determining demand and supply. While the study – as far as I can tell from looking at the executive summary – does not support the “feeble” view of globalization, when reading the results it is probably still helpful not to forget that McKinsey is unlikely to be interested in increasing their clients’ employees fear of being outsourced any further (the study deals only with white collar offshoring) –

  • Offshoring will probably continue to create a relatively small global labor market?one that threatens no sudden discontinuities in
    overall levels of employment and wages in developed countries.
  • Demand for offshore labor by companies in the developed world will increasingly push up wage rates for some occupations in low wage countries, but not as high as current wage levels for those occupations in developed ones.
  • Potential global supply and likely demand for offshore talent are matched inefficiently, with demand outstripping supply in some locations and supply outstripping demand in others.

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