Countries in Asia facing huge wage hikes due to coming talent shortage

As the talent crunch hits, countries in Asia can expect significant wage hikes in the coming years according to global human capital firm Korn Ferry, with workers in the consulting sector set for the biggest increases.

In its recent ‘Salary Surge’ report, the global human capital consultancy Korn Ferry has outlined the impact on wage bills for organisations operating in 20 major international economies as an effect of expected upcoming worldwide talent shortage, with a focus on the knowledge-intensive sectors that act as critical economic drivers in each market.

Building on its previous ‘Global Talent Crunch’ report, Korn Ferry predicts that organisations around the world could add a premium of as much as $2.5 trillion or greater to their annual remuneration bill by 2030 due to chronic shortages in highly-skilled labour, with world economies potentially further missing out on nearly $8.5 trillion in the same period as a result of the shortfall – twin pressures, the firm says, which could put business profitability at risk.

As digital automation continues to roll out across just about every sector worldwide, the balance between what will be a surplus of underskilled workers with lessened employment opportunities and the scarcity of their highly-skilled counterparts will see salaries sky-rocket for the latter category of employees, with a projected 16 percent global deficit in supply. Across the world’s major economies, this equates to a shortfall of some 85 million skilled employees.Referring to the amount which employers would have to spend above ordinary inflation-driven rises, the wage premium could by 2030 amount to more than $850 billion for just three countries in the Asia Pacific – China, Japan, and Australia – while Singapore, Hong Kong and Indonesia face a premium of nearing $120 billion by just 2025. Japan alone, in just two years from now, is looking at a staggering $300 billion-plus premium to attract and retain top talent.

Broken down further across the five-year milestones of the projection, from 2020 to 2030, the global economies with the greatest expected talent shortage as a percentage of demand include Hong Kong and Singapore – small economies with important financial centres – with Hong Kong at a deficit of 21 percent in 2020 stretching out to crippling 44 percent just the one decade later, and Singapore rising sharply from 13 percent in 2020 to 26 percent in 2025 before reaching 38 percent by 2030.

As such, with their especially limited and dwindling talent pools, Hong Kong and Singapore also sit at the top of the expected wage premium as a percentage per worker – with both forecasted to endure a wage premium equivalent to about 10% of their respective 2017 GDPs. As a monetary figure, this amounts to an average base salary hike of $44,500 by 2030 for high-skilled workers in Hong Kong, and over $20,000 in Singapore. Japanese skilled workers will see an $18,500 added to their standard annual pay-cheques.With respect to specific sectors, the financial and business services industry – which is projected to make up 17% of China’s economy by 2030 – will be the one most impacted by acute talent shortages, with the Korn Ferry report predicting a shortfall of 10.7 million skilled finance and business professionals across the world by the end of the next decade and a potential wage premium of over $440 billion – more than double the other primary sectors of manufacturing and technology, media, and communications (TMT) examined in the report. The business and finance bill for Japan could be $64 billion.

“The finance industry is built on skills and knowledge, meaning costs are heavily weighted towards talent. This is an industry where workers already command high salaries, so the additional pressure caused by shortfalls could push some organisations to the brink,” says Korn Ferry Senior Client Partner, Reward Consulting Mark Thompson in the report, adding that buying talent from the market will become too costly as a sustainable remedy. “Companies will need to focus on retaining and reskilling existing workers instead.”

Skills development 

Evidently aware of the situation ahead, the government in Singapore has in recent times committed to investing in its local professional services industry, earlier this year unveiling a detailed roadmap which aims to generate an additional 5,500 jobs in the sector per year to 2020. As part of the package of initiatives, the government will aid the development of skilled talent through a range of professional conversion programmes (PCPs) for identified areas of high future demand, with Deloitte in Singapore recently signing on to offer the first PCP focused directly on consulting.