In 1997, McKinsey coined the term “war for talent”, outlining an increasingly competitive landscape for finding and retaining talented workers.

Just over 20 years later, that battle is still ongoing. And as digitisation, demographics and a variety of political and economic factors make their mark, it’s more intense than ever.

According to a survey by research firm Gartner at the end of 2018, talent shortage is the top emerging risk faced by businesses worldwide. ManpowerGroup, the international recruiter, puts talent shortage at a 12-year high, citing a strong hiring demand – thanks to global economic growth – and changing skills requirements as technologies like artificial intelligence (AI), robotics and big data transform the way we work.

$8 trillion in unrealised revenue by 2030

The effects could be substantial. Management consultancy Korn Ferry says that by 2030, demand for skilled workers could outstrip supply, resulting in a global talent shortage of 85.2 million people. Most industries will be affected, with knowledge-intensive sectors like financial and business services as well as technology companies and manufacturing most at risk.

That could lead to more than $8 trillion in unrealised revenue – comparable to the combined GDPs of Germany and Japan. “Technology cannot deliver the promised productivity gains if there are not enough human workers with the right skills”, the Korn Ferry report says.

Due to these trends, the relationship between companies and employees is changing. Employers used to be able to pick from a large pool of job applicants, but now it is often the other way around: Applicants can choose their employer. “The demand for skills in areas such as computer science, mathematics and legal professions is growing fast”, says Astrid Pohlmann, talent acquisition manager at HDI Service AG. “Despite many efforts to get more young people interested in these fields, there still aren’t enough university graduates.”

What can companies do?

One way to address this is for companies to make education and on-the-job training a priority. The World Economic Forum estimates that more than half of all employees will require significant reskilling in the next three years. “Many jobs are currently being transformed, for example by digitisation”, Pohlmann explains. “At the same time, the world around us is changing, too. That’s why it’s important to invest massively in continuous learning.”

Sending employees to the occasional week-long seminar is becoming insufficient, she says. Instead, learning has to be adapted more to individual needs and time requirements. Online courses will have to play a more significant role.

A focus on training also provides the opportunity to advance organisational development. “It’s not just about the transfer of knowledge”, emphasises Moritz Bäumlein, HR Business Partner at HDI Service AG. Just as important is the creation of an environment where employees can flourish. Especially managers need to embrace a situation where the attractiveness of a job is measured less by the size of the salary and more by soft factors such as appreciation, autonomy, meaningful work, and a constructive approach to mistakes and failures. An organisation’s culture also needs to adapt to the growing internationalisation of workforces as employers are increasingly looking for qualified applicants abroad.

Companies that lead with their values, emphasising social and environmental impact, as well as promoting diverse and inclusive work cultures, will also strengthen their appeal to jobseekers. The same goes for additional benefits such as occupational retirement and healthcare.

Overcoming political challenges

However, businesses in certain countries also face factors that lie largely outside their control. Political or economic circumstances can have a considerable impact on the qualifications available as an increasingly mobile workforce may take their skills elsewhere.

In the United Kingdom, for example, many businesses expect leaving the EU will have a major impact on recruitment. A 2018 survey by recruiting firm Adecco found that 71 per cent of companies think that Brexit will make it harder to acquire the skills they need because it will become more difficult for foreign workers to apply for jobs in the U.K.

In most other countries, immigration regulations are a key factor in meeting skills shortages, too. At the end of 2018, Germany moved to relax its laws to attract more foreign workers – an important step given that the German Economic Institute estimates there are more than 400,000 jobs that cannot be filled by German-based workers.

A similar issue faces the United States, where there are almost one million more job vacancies than people looking for work. Immigration could help, but the country is yet to follow Germany’s example.

While the Korn Ferry study predicts talent shortages across the globe in the next decade, it does name one exception: India is the only country projected to have a skilled-labour surplus by 2030, thanks mainly to its large number of working-age citizens and government programmes to boost skills.

Finding the right blend of skills

Workers must also accept their own responsibility when it comes to developing and maintaining the skills and characteristics that employers value. Expertise in digital areas like AI and robotics will continue to grow in importance, while areas such as engineering and skilled trades like electricians and plumbers remain highly valued.

It isn’t all about hard skills, though: soft skills such as problem-solving, collaboration, communication and creative thinking will remain fundamental. “No matter what your qualifications are, whether you’re an engineer, salesperson or marketer”, says Tomas Chamorro-Premuzic, Chief Talent Scientist at ManpowerGroup, “If you don’t have a foundation of soft skills, you will fail.”