Fault Lines - Executive Summary

The global labor market is facing widespread disruption, but underneath the countless competing challenges are three main factors, or “fault lines” permanently reshaping the balance between labor supply and demand: geopolitics, artificial intelligence, and labor shortages. 

Existing talent strategies are not built to handle the change that these three fault lines are forcing upon the world economy. Without understanding how they intersect and reinforce one another, businesses, education institutions, and public sector leaders will find themselves building for a world that no longer exists, and unprepared for the one that does. 

Beginning with geopolitics, countries are seeking to improve their own labor market conditions, through factors such as talent availability and educational infrastructure, in order to derisk their dependency on others. As they play to their strengths in pursuit of these goals, they have fallen into two groups: “Advanced Knowledge Economies” in wealthier developed countries and “Industrial Scale Economies” in developing countries. Neither has a dominant advantage over the other. 

China and India have more undergraduate students than the rest of the world combined. One might think this would prompt established university systems in North America and Europe to bring in more students from abroad, particularly as domestic birth rates slow down, but for political and national security reasons, the opposite has happened. International undergrad enrollment in the US peaked in 2017 and is down by over 100,000 (22%) since.

Immigration slowdowns are projected worldwide (a decline of 20% over 20 years in North America, Europe, and Oceania), both because origin countries have fewer people to send, and because destination countries are accepting fewer of them. A shrinking global talent pool is being squeezed by labor shortages on one side and geopolitics on the other.

Into this already-complex environment, AI accelerates disruption. The sectors most in need of workers (like hospitality and healthcare) are those with the lowest rates of AI adoption. On the other end of the spectrum, the industries that have embraced AI most (like IT and marketing) are those where skill requirements were already changing fastest. And as AI spreads across the labor market—56% of AI jobs are outside IT—more jobs have become vulnerable to automation. At the high end, over 70% of the skills needed for many kinds of editing and administrative roles are skills AI could replace. 

AI also compounds geopolitical competition for talent. Within Lightcast data, 35% of AI workers live in the US, but only 24% were educated there. And data center employment has tripled: communities can attract huge investment if they can demonstrate they have the workforce and infrastructure to take advantage of it. 

Also because of AI, the connection between credentials and careers has been scrambled. Only 6% of AI workers have AI degrees, suggesting majors are ineffective predictors of careers. Out of the top 10 skills requested in AI jobs, only two are AI-related—the rest are human skills like communication and leadership. Since technical skill requirements are changing so quickly, and traditional career pathways are broken, the role of education in an AI world will be to teach baseline skills that will endure for a lifetime, supplemented by short-term technical credentials. 

This brings us back to labor shortages, because misaligned education requirements are a major factor: 66% of global job postings require a college degree, while only 31% of workers have them. Employers are putting up barriers to employment even though the world is running out of workers. The world population is aging: increased life expectancies has led to a larger elderly population, while fertility rates are declining worldwide. Add in the declining immigration rates discussed earlier, and now talent pipelines are being squeezed from three sides: fewer people being born, fewer people coming in, and obstacles to hiring the people already there.

Having identified the three fault lines that will reshape the global labor market in the years to come, organizations that invest in comprehensive labor market intelligence—organizational, skills, and workforce data working in concert—can anticipate change proactively, rather than catching up reactively. The immediate goal is for organizations and institutions to stop pretending like it’s business as usual, and prepare to change based on the new reality ahead.