June 17, 2015

Monster.com, LinkedIn, Uber, Freelancing can help reduce global underemployment

McKinsey has an analysis of online talent platforms. Online talent platforms can ease a number of labor-market dysfunctions by more effectively connecting individuals with work opportunities. Such platforms include websites, like Monster.com and LinkedIn, that aggregate individual résumés with job postings from traditional employers, as well as the rapidly growing digital marketplaces of the new “gig economy,” such as Uber and Upwork. While hundreds of millions of people around the world already use these services, their capabilities and potential are still evolving.

NBF Notes - McKinsey's analysis indicates that this is part of the employment solution. It helps by about 10%. 850 million unemployed or part time workers. Say 720 million full time unemployed because of the part time workers. Fully leveraging online talent platforms is 72 million full time equivalents.

McKinsey Global Institute report, A labor market that works: Connecting talent with opportunity in the digital age, we examine the current state of employment and the impact these digital platforms could have:

* In countries around the world, 30 to 45 percent of the working-age population is unemployed, inactive in the workforce, or working only part time. In Brazil, China, Germany, India, Japan, the United Kingdom, and the United States, this adds up to 850 million people.

* As online talent platforms grow in scale, they will become faster and more effective clearinghouses that can inject new momentum and transparency into job markets while drawing in new participants. Our supply-side analysis shows that online talent platforms could add $2.7 trillion, or 2.0 percent, to global GDP by 2025, while increasing employment by 72 million full-time-equivalent positions.

* Up to 540 million people could benefit from online talent platforms by 2025. As many as 230 million could find new jobs more quickly, reducing the duration of unemployment, while 200 million who are inactive or employed part time could gain additional hours through freelance platforms. As many as 60 million people could find work that more closely suits their skills or preferences, while an additional 50 million could shift from informal to formal employment.

* Countries (such as Greece, Spain, and South Africa) with persistently high unemployment and low participation rates could benefit most. Among advanced economies, the United States stands to realize significant gains because of the relative fluidity of its job market. By contrast, the potential is lower in China and Japan as a result of their low unemployment and other barriers that limit adoption.

* Online talent platforms increase the transparency of the demand for skills, enabling young people to make better educational choices. As a result, more effective spending on tertiary education could reduce some of the $89 billion misallocation we find in Brazil, China, Germany, India, Japan, the United Kingdom, and the United States.

NBF notes that there is a massive global infrastructure shortage. The excess construction workers could be utilized for more infrastructure if the more projects could be funded. However, the problems of bad project management and excessive costs needs to be addressed.

SOURCE - McKinsey Global Insight

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