Intro
Main business solutions
Example: Education Services
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Demographic changes are having significant impacts in the age composition and skills set of both the local and global workforce. This includes a lack of education and vocational training as well as an ageing workforce across industries, which is being compounded further by poor recruitment and employee retention policies or inadequate provision of training and employee development opportunities at company level. As a result, a number of industries are losing many of their skilled workers to retirement. For example,
in Canada an estimated 40% of the current mining workforce is expected to retire in the next 10 years while an extra 81,000 skilled people will be required to meet future workforce needs. This skill shortage has been aggravated by the lack of qualified new entrants into the labour market, both in developing and developed markets. It has been estimated that one in three Europeans of working age has few or no formal qualifications, making them 40% less likely to be employed than those with medium-level qualifications.1 The problem of labour shortages in Europe is compounded by low labour force participation rates, and this is set to become more acute in the future due to the ageing of populations. Between 2006 and 2020 CEDEFOP2 expects 85 million jobs to become available because of natural wastage, and projects that a further 20.3 million new jobs will be created in Europe.
3 In comparison, Eurostat projects that the EU's working-age population (consisting of those aged 15-64) will fall by 6 million over the same 2006-2020 period. CEDEFOP notes that the participation rate would need to rise from around 71% in 2006- 2008 to nearly 74% in 2020 in order to meet increased labour demand. Such an increase would still leave a labour shortage of 12 million workers owing to skill gaps and occupational mismatches.
In high growth markets such as China, India and parts of Latin America, talent shortages are as critical as, and in some cases more acute than in the rest of the world. This only further serves to exacerbate the chronic skills shortage problematic. According to PWC’s Annual Global CEO Survey the majority of business leaders say looming skills shortages is a big issue.4 Two-thirds say they face a ‘limited supply of candidates with the right skills’, and 54% cite ‘challenges in recruiting and retaining younger employees’. This skills shortage concern will inevitably have a negative financial impact on company operations – in terms of reduced employee productivity, higher hiring and training costs, notably due to turnover, project delays etc.
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Percentage of employers having difficulty filling jobs Due To Lack Of Available Talent (Focus EU)
(source: Manpower, 2010) and Projections of skills' requirement in the EU till 2020 (source: CEDEFOP, 2008)
While EU countries are not equal in terms of recruitment and job vacancy rates, forecasts focusing on future qualification needs highlight growing difficulties to come.
Main business solutions to the skills shortage issue:
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Education Services: companies providing educational material for educational systems with a significant client base in emerging and developing countries including those involved in adult education, languages as well as private higher education
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Employment & Outsourcing Services: companies providing employment and human resources consultancy services, facilities management companies and similar services
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Automation Services: companies that provide automation solutions that alleviate skills shortages in the workforce
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Business Solution Example: Education Services
In the context of emerging and developing economies, lack of education is a major obstacle to development as inequitable access to schooling perpetuates social and economic inequities. At country level, this impedes the development of industries as investors fear the imbalance between number of required skilled workers and local labour pools' capabilities. While private education institutions still remain unaffordable for the large majority, new technologies and increased access to Internet may help in offering a cheaper alternative, subsequently boosting demand. For developed economies, when considering the growing shortage of competences, labour opportunities will soar for multi-skilled workers (increased job mobility) as well as for workers able to adapt to new technical (e.g. more automated process) or cultural (e.g. migrant workers) environments.
Gross enrolment ratios by level of schooling, 1970-2007
(source: UN Human Development Report, 2010)
More children attend school, but there is room for improvement in secondary and higher education
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In developing economies, the demand and growth potential for education is substantial. In India for example, demographics, rising discretionary income and sustained government spending are clear key education consumption drivers in India. Annual student enrolments in higher education are expected to grow at a CAGR of nearly 8.7% during 2010/2011 to 2012/2013, while the market size of higher education will witness a CAGR of approximately 15% to pass USD 22 billion by 2013.5 India plans to raise its expenditure in the education to INR 520.6 billion (USD 11.5 billion) in the next financial year, reinforcing the company’s ambition to create a skilled workforce to keep with the country’s fast-paced growth. Education consumption is likely to reach USD 150 billion by 2025, making India one of the world’s largest education economies. Everonn Education is an Indian-based company which provides education and training and sales of related equipment in the Indian domestic market. Company revenues are mainly derived from implementation of computer education in government schools as well as the implementation of technology-enabled learning solutions in various private schools and colleges. Presently, Everonn has over 8,000 learning centres which encompass more then 3 million students across 27 Indian states. From a financial point of view, Everonn has reported high growth of 50-80% in revenues and profits in the last three years.
Another well-positioned company is Pearson, which is primarily an educational publisher and services provider with over 70% of revenues derived from education-related services. It provides test development, processing and scoring services, in addition to publishing curriculum material under a range of imprints. The company derives 21% of its revenues from Asia and other parts of the world, presenting it with strong opportunities to expand in unsaturated media markets. As a consequence, Pearson has accelerated international expansions, investing in operations in countries such as China, India, Southern Africa and Latin America. There is likely there will be further growth and market share gains to come with the steady shift to digital education programmes and to educational sales to households, particularly at a time when Pearson's competitors are negatively affected by capital constraints.
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1 EurActiv, February 2010, www.euractiv.com/en/enterprise-jobs/unemployment-soars-due-to-skills-shortage
2 European Centre for the Development of Vocational Training (CEDEFOP)
3 Economist Intelligence Unit – Country and Economic Research, November 2009, ‘Estimating potential labour shortage and supply in the European Economic Area – A report for the Home Office Migration Advisory Committee’
4 PWC, 2011, ‘14th Annual Global CEO Survey’, www.pwc.com/gx/en/ceo-survey/pdf/14th-annual-global-ceo-survey.pdf
5 PWC, 2011, ‘14th ReportLinker, October 2010, ‘Indian Education Services – A Hot Opportunity’