The future for educated workers in the United States Economy
McKinsey & Company
July 12, 2012
CONFIDENTIAL AND PROPRIETARYAny use of this material without specific permission of McKinsey & Company is strictly prohibited
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The jobs challenge is bigger than people think
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The US has lost 3 to 5 times as many jobs as those lost in any other post-war recession
8.8
2.8
1.8
2001-20101981-821990-91
3X5X
Millions of jobs lost from peak prior to recession
SOURCE: U.S. Bureau of Economic Analysis; U.S. Bureau of Labor Statistics; McKinsey Global Institute analysis
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The US is a long way from recovering the lost jobsMillions of jobs
-6.7
2.1
-8.8
2007-2010 2010-2011 Net jobs lost
SOURCE: U.S. Bureau of Economic Analysis; U.S. Bureau of Labor Statistics; McKinsey Global Institute analysis
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1 Total employment equals the number all employed workers in the economy, including full-time, part-time, and self-employed 2 Net employment change as a share of total employment in the base year (e.g., 1990 for 1990s)
SOURCE: U.S. Bureau of Economic Analysis; U.S. Bureau of Labor Statistics; McKinsey Global Institute analysis
34.6
24.5
14.5
4.2
Young people without a high school diploma
Young high school graduates
Young college graduates
College graduates
Unemployment rates vary by degree level Percent
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In the long term, the cost of unemployment is in the trillions of dollarsUSD billions
UI pay-outs
Lost output due to unemployment
Lost lifetime income for today’s unemployed
400
2,500
4,500
SOURCE: U.S. Bureau of Economic Analysis; U.S. Bureau of Labor Statistics; McKinsey Global Institute analysis
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A quarter of Americans surveyed “feel the American dream is not really alive today”
27
15
11
1986 20112003
Percent of surveyed
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A new job market?
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The US is entering the third and likely longest “jobless recovery” of the last 20 years
39
15
63
86676
20081
?
15
200119901981197319691960195719531948Year in which the recession began
“Jobless recoveries”
1 GDP returned to its pre-recession peak in December 2010
SOURCE: U.S. Bureau of Labor Statistics; U.S. Bureau of Economic Analysis; McKinsey Global Institute analysis
Gap between GDP returning to pre-recession peak and employment returning to pre-recession peakMonths
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In recent recessions, employment has suffered disproportionately compared to productivity
SOURCE: U.S. Bureau of Labor Statistics; U.S. Bureau of Economic Analysis; McKinsey Global Institute analysis
How GDP decline is reflected in employment and productivity
1
68
49
25
Productivity loss
Employment loss
2007–09
2
98
2001
2
98
1990–91
75
1981–82
51
1973–75
32
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The US would have 2.4 million more jobs had the 2007 rate of start-ups continued
The number of new businesses has declined dramatically in this recession
SOURCE:US Bureau of Labor Statistics; McKinsey Global Institute analysis
Change in number of private-sector establishments launched every year March 1993 to March 2010,1 thousand
1 Calculated using US Bureau of Labor Statistics Business Employment Dynamics data set; the annual number indicates the number of businesses less than 1 year old that were in existence in March of that year
2000
634
505
-23%
201009
548
08
627
07
656
06
667
05
633
04
603
03
609
02
612
01
631
2
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Mismatch: Workers don’t have the skills to transition from lost jobs to new jobs in growing sectors
Healthcare
1.4
Construction
-2.2
Change in number of jobs by fieldMillions of jobs (2007 – 2011)
Change in number of jobs by education levelMillions of jobs (2007 – 2011)
College graduates
1.6
High school graduates
-3.1
High school dropouts
-2.2
SOURCE: U.S. Bureau of Labor Statistics
3
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Mismatch: The unemployment rate today varies widely across the United States…
Unemployment rate% unemployed
>10%
9–10%
8–9%
7–8%
6–7%
5–6%
<5%
SOURCE: U.S. Bureau of Labor Statistics; McKinsey Global Institute analysis
3
Virginia6.3%
South Carolina11.1%
Texas8.5%
California12.1%
Nevada13.4%
North Dakota3.5%
Michigan11.2%
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0
2
4
6
8
10
12
14
16
18
20
22
Long-runaverage =18%
20092000199019801970119601950
… but mobility in the United States has been declining since 1990 and is at a 50-year low
SOURCE: U.S. Bureau of Labor Statistics; McKinsey Global Institute analysis
1 Data from 1970–1981 are interpolated due to data constraints.
Annual domestic migration rate, 1948–2009% of residents who have changed addresses during the past year
. . . but that figure has now dropped to 1 in 10
In the 1950s and 1960s, 1 in 5 Americans changed residences every year . . .
3
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1 Total employment, including self-employed and part-time workers2 New entrants include student inflows, net immigration inflows, return of discouraged workers, and exits of retirees
SOURCE: Bureau of Labor Statistics’ Current Population Survey; McKinsey Global Institute analysis
Full employment in 20201 160.4
Net new entrantsto workforce2 14.3
Replace lost jobs 7.1
EmploymentIn 20101 139.1
How many jobs does the US economy need to produce?
21 million
Employment needed to achieve 5% unemployment rate by 2020Millions
MCKINSEY CONFIDENTIAL AND PROPRIETARY
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1 Total employment equals the number all employed workers in the economy, including full-time, part-time, and self-employed 2 Net employment change as a share of total employment in the base year (e.g., 1990 for 1990s)
SOURCE: U.S. Bureau of Economic Analysis; U.S. Bureau of Labor Statistics; McKinsey Global Institute analysis
1970s 20.6
1980s 19.5
2000-10 2.2
2000-07 9.2
1990s 18.1
1960s 12.9
1950s 6.9
Is it possible to produce 21 million jobs?
Increase in total employment2
Percent
12
20
26
20
15
7
2
3.5
4.2
3.2
3.2
3.4
2.4
1.7
Net employment change
Total employment1
Millions
Real GDP compound annual growth ratePercent
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Skill
Speed
Share
Spark
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Ensure more Americans acquire the skills that match employers needs
Bachelor’s degreeor higher
Associate degree
Some college, no degree
High school graduate
No high school diploma
Supply
168.9
56.5
19.6
29.1
44.1
19.5
Demand1
163.3
58.0
17.7
30.7
43.3
13.6
SOURCE: U.S. Bureau of Labor Statistics; McKinsey Global Institute analysis
Demand vs. supply – 2020 projectionsMillions
1 Labor demand from MGI high job-growth scenario
Difference
+5.9
+0.8
-1.6
1.9
-1.5
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Help US workers to win market share
Number of overseas visitor arrivals in the United States, 2000-2009Million
28
14
18
20
21
24
26
31
33
55
Manufacturing
Professional services
Administrative support
Health care
Financial services
Arts and recreation
Other services
Transportation
Retail trade
Hospitality services 171
Other1
Estimated U.S. jobs lost due to shrinking market share in international travelThousand
SOURCE: U.S. Travel Association; Oxford Economics; McKinsey Global Institute analysis
5 5
77 9
1011
11
34
24
08
36
25
07
34
24
06
31
22
05
29
22
09
27
20
03
23
18
02
24
19
01
24
22
2
2000
26
26
0
04
Actual overseas visitors
Potential visitors lost
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Restore the new business growth engine
-7,000-6,000-5,000
-4,000-3,000-2,000-1,000
01,0002,0003,000
4,0005,000
09070503019997959391878583817977
SOURCE: BDS, Kauffman
1 Startups refer to new businesses, i.e. firms less than 1 year old
Entire economy
Entire economy without startups
Net job creation in US establishments
Thousands of employees
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Speed up processes
“The real threat to our industry is the slow, cumbersome, and out-of-date system that we use to manage our”
- Executive of Corporation
“It is much easier to site and build a factory in China than it is in the US. For a manufacturer, two year advantage in building a plant may be everything”
SOURCE: RFF “Reforming Permitting”; expert interviews
US has a lengthy and complicated set of regulatory/ permitting requirements
This lack of speed can act as a major competitive disadvantage
Other
A power plant built in Wisconsin required 46 environment approvals
EPA
US Army Corp of Engineers
FAA
FERC
Six state agencies
State historical society
City, country, and others
46 environ-mental reviews
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