Rajiv Gupta (3:15)

We do not know if he's using our report, but yes, the number he uses does match the number that we have in our report.

Tim Harford (3:22)

Okay, let's get into it. How did Rajiv work out that there would be a shortage of 50 million workers by 2030?

Rajiv Gupta (3:30)

Like most estimations, it is a gap between what we project as the demand for jobs and the supply for jobs.

Tim Harford (3:39)

Simple. First up, estimate the demand for jobs.

Rajiv Gupta (3:42)

On the demand side. What we have done is we have taken the current employment data accurate as of 2024, plus all the open job postings.

Tim Harford (3:52)

Using data from sites such as LinkedIn, Rajeev and his team worked out how many unfilled job vacancies there were in the whole world as of 2024. He reckons there are currently 10 million. Now, this figure is obviously a little ballparky already as not all jobs are advertised this way.

Rajiv Gupta (4:12)

We then forecasted the GDP growth of different countries, adjusted it for labor productivity, and adjusted it for any impact of AI and technology to come out with an estimated employment growth rate.

Tim Harford (4:29)

Not so simple. These extrapolations hinge on predictions about the future of AI. But no one really knows what's going to happen. With some tech soothsayers predicting unimaginable transformations over the next five years and some others suggesting it won't make much difference. Rajiv's analysis takes a middle way. He decided to treat AI like any other tech disruption, like the Internet, for example. And he went through different types of jobs, projecting the likely disruption for each.

Rajiv Gupta (4:58)

Area and in some kind of industry. Across skills, the impact is as high as 50ish percent. In some, it is as low as 2 to 3%. So based on which industry, what type of work, we have estimated what kind of impact that can have.

Tim Harford (5:13)

Some types of work are going to be hit hard by AI, such as software development and testing, some not so much, such as construction. And there'll be some new types of jobs too, for example AI prompt engineers.

Rajiv Gupta (5:27)

So overall we have a point of view that the worker skills will change dramatically because of AI, but net it's going to create many more new jobs than it's necessarily going to take away.

Tim Harford (5:42)

Okay, back to the 50 million. That's the first step. Done a necessarily massively simplified analysis of five years of economic growth and disruption. That gives you one plausible projection of the likely employment demand in 2030. Then you have to work out how many workers there'll actually be.

Rajiv Gupta (6:01)

We took the labor flow rate data so different countries have different labor flow for women, for people of different ages and so on. And we adjusted it for both retirement and new entrants. To calculate the supply side of labor based on skills, they looked at the.

Tim Harford (6:21)

Demographics of all the countries in the world and and the likely flow of new workers entering the system and older workers leaving it. Some countries have aging populations and declining workforce trends, some don't. They worked out three scenarios, conservative to aggressive, and came out with three estimates.

Rajiv Gupta (6:40)

The numbers were close to 30 million, 40 million, 50 million.

Tim Harford (6:47)

But what does Rajiv actually mean by a shortage of workers? Is he predicting an end to unemployment? That everybody will have a job and the world will still need 30 to 50 million more workers?

Rajiv Gupta (6:59)

Well, no, we are not going down and looking at what will it do to the unemployment rate. We are just looking at the skills for open roles that have not been felt.

Tim Harford (7:08)

So there could indeed be very high unemployment in some places and in some countries alongside a worker shortage. And this is where AI comes in again, because the worker shortfall is biggest in areas where AI is going to find it hardest to reach.

Rajiv Gupta (7:23)

60% of the shortages comes from what we called blue collar industrial workers. So manufacturing, mining, cleaning, private security, then in sales professionals, retail store managers and so on. Then healthcare and education was another 12 to 15%, office administration was 10% and white collar workers, technology and so on was another 10%.

Tim Harford (7:48)

And why are these sectors going to be short of workers?

Rajiv Gupta (7:52)

It is the preference of workers in different countries and what they want to go into. So while we talk about labor shortage, there are areas white collar, highly skilled being one where there is likely to be a surplus of labor as well. But it is driven by the growth in some of these industries, let's say construction, manufacturing and so on, not being filled by individuals who necessarily want to get into that area.

Tim Harford (8:19)

And to be clear, the worker shortfall isn't everywhere on the planet. It's concentrated in specific rich economies.

Rajiv Gupta (8:26)

So 90% of the labor shortfall comes from 20 countries out of the 200 plus. Obviously, just given the size of the economy, USA is one large such country after us. UK, Germany, South Korea, Russia are the next and Poland, Hungary, Czech Republic put together. These are the next four or five countries regions and then followed by Japan, Australia, Canada.

Tim Harford (8:56)

The bottom line is that Rajiv obviously doesn't have a crystal ball that's telling him how the global economy is going to shift and change over the coming years, but he was able to roughly trace out what happens if take the current trends and spool them forward a few years under a set of assumptions.

Rajiv Gupta (9:12)

See, most estimates and extrapolations do turn out to be wrong, and I'd be humble enough to accept that. However, what this provides is a framework to think in what industry, in which country, what skills are likely to have a gap so that organizations and countries and workers can start thinking about it and maybe geared up towards it.

Tim Harford (9:37)

One part of that might be that people are paid more to do the jobs not enough people want to do, although Nvidia boss Jensen Huang thinks a pay rise won't solve the problem and so we're going to need robots to do those jobs. But there are other options too. Higher levels of immigration could be used to fill these jobs, but that comes with all sorts of practical and political challenges.

Rajiv Gupta (10:00)

A forecast of 45 to 50 million cap in labor is assuming no significant interventions, but actually the report then goes on to recommend interventions. So I do hope and pray that by 2030 the number is proven wrong and those interventions have actually happened.

Tim Harford (10:18)

Our thanks to Rajiv Gupta from Boston Consulting Group and that's all we have time for this week, but if you see any suspicious stats, please let us know at more or lessbc.co.uk. we will be back next week and until then, goodbye.

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