What: McKinsey encourages companies to review the way they assess their new talents’ value

Why it is important: In a world where flexibility is key, recruiters need to based their judgement on skills and ability to evolve, rather than labels or diplomas.

Labor markets in advanced economies have been tightening continuously since 2010, further exacerbated by demographic shifts like aging populations and decelerating birth rates. Despite some loosening from their 2022 peaks, these labor markets are tighter than any point in the last two decades, indicating a structural, rather than pandemic-induced, trend. As populations age and workforce growth slows, without substantial increases in labor productivity or workforce expansion through higher participation rates and immigration, these economies could struggle to achieve significant economic growth.

Job vacancies have increased particularly in sectors with traditionally low or stagnant productivity, such as healthcare, hospitality, and construction. This uneven distribution implies that without strategic interventions, labor shortages will persist in sectors unable to enhance productivity. The economic impact is considerable, with GDP potentially 0.5% to 1.5% higher in 2023 had labor demands been met. Strategies for addressing these challenges include enhancing productivity through technology, retraining workers, and expanding the labor pool through immigration and increased participation, especially among groups like women and older workers.

McKinsey: for your future hires, judge on skills, not diplomas