opening plenary, job creation and america's future (presentation) - dr. susan lund

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An Economy That Works Job Creation and America’s Future McKinsey Global Institute August 18, 2011 CONFIDENTIAL AND PROPRIETARY Any use of this material without specific permission of McKinsey & Company is strictly prohibited 2011 WIB Symposium State College, Pennsylvania

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Page 1: Opening Plenary, Job Creation and America's Future (Presentation) - Dr. Susan Lund

An Economy That WorksJob Creation and America’s Future

McKinsey Global Institute

August 18, 2011

CONFIDENTIAL AND PROPRIETARYAny use of this material without specific permission of McKinsey & Company is strictly prohibited

2011 WIB Symposium State College, Pennsylvania

Page 2: Opening Plenary, Job Creation and America's Future (Presentation) - Dr. Susan Lund

McKinsey & Company 1|

-7

-6

-5

-4

-3

-2

-1

0

1

2

201020092008

Germany

U.K.

U.S.

2011

Gross Domestic ProductPercent decline, peak to trough1

SOURCE: United States Bureau of Economic Analysis; United Kingdom Office for National Statistics; Germany’s Statistisches Bundesamt Deutschland; ILO; OECD; McKinsey Global Institute

U.K. 6.4

Germany 6.1

U.S. 4.1

1 Peak quarter for United States was Q4 2007; peak quarter for Germany and United Kingdom was Q1 2008

EmploymentPercent change from January 2008

Other countries have not experienced the same employment decline as the U.S.

U.S.

Germany

U.K.

Page 3: Opening Plenary, Job Creation and America's Future (Presentation) - Dr. Susan Lund

McKinsey & Company 2|

1 Calculated using U.S. Bureau of Labor Statistics Occupational Employment statistics data, which do not include farm, self-employed, or new entrants to the labor market

SOURCE: U.S. Bureau of Labor Statistics; McKinsey Global Institute analysis

Low-skill occupations had the highest job losses in all sectors Annual net employment change from 2007–20091

Thousands of jobs

>500,000 job loss

>100,000 job loss

10,000-100,000 job loss

1,000-10,000 job loss

Most significant source of occupational training

Health care

Government

Educational services

Accommodation & food services

Real estate

Wholesale

Business services

Transportation and warehousing

Finance and insurance

Construction

Retail

Administrative & support services

Manufacturing

Graduate degree

Bachelor’s plus work

experienceBachelor’s

degreeAssociate

degreeVocational

awardWork

experienceOn-the-job

training

Ind

ustr

y<1,000 job change

1,000-10,000 job gain

>10,000 job gain

Page 4: Opening Plenary, Job Creation and America's Future (Presentation) - Dr. Susan Lund

McKinsey & Company 3|

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

2.2

9.2

18.1

19.5

20.6

12.9

6.9

2000-10

2000-07

1990s

1980s

1970s

1960s

1950s

Job growth in the 2000s was half the rate of previous decades

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 rate

Percent

Page 5: Opening Plenary, Job Creation and America's Future (Presentation) - Dr. Susan Lund

McKinsey & Company 4|

Jobless recoveriesThe new normal?

Page 6: Opening Plenary, Job Creation and America's Future (Presentation) - Dr. Susan Lund

McKinsey & Company 5|

The period between GDP recovery and employment recovery has been increasing

6

39

15

63

86676

20081

?

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

Page 7: Opening Plenary, Job Creation and America's Future (Presentation) - Dr. Susan Lund

McKinsey & Company 6|

The unemployment rate varies widely across the United States

SOURCE: U.S. Bureau of Labor Statistics; McKinsey Global Institute analysis

Unemployment rate, December 2010

% unemployed

>10%

9–10%

8–9%

7–8%

6–7%

5–6%

<5%

Page 8: Opening Plenary, Job Creation and America's Future (Presentation) - Dr. Susan Lund

McKinsey & Company 7|

0

2

4

6

8

10

12

14

16

18

20

22

Long-runaverage =

18%

20092000199019801970119601950

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 . . .

Page 9: Opening Plenary, Job Creation and America's Future (Presentation) - Dr. Susan Lund

McKinsey & Company 8|

The number of new businesses has declined dramatically in this recession

SOURCE: U.S. Bureau of Labor Statistics; McKinsey Global Institute analysis

550

634

99

610

98

610

97

615

96

588

95

584

1994 2010

505

09

548

08

627

07

656

06

667

05

633

04

603

03

609

02

612

01

631

2000

Change in number of private-sector establishments launched every year

March 1993 to March 20101, thousands

1 Calculated using U.S. 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.

Page 10: Opening Plenary, Job Creation and America's Future (Presentation) - Dr. Susan Lund

McKinsey & Company 9|

Page 11: Opening Plenary, Job Creation and America's Future (Presentation) - Dr. Susan Lund

McKinsey & Company 10|SOURCE: Moody’s Analytics; McKinsey Global Institute analysis

The high job-growth scenario is the only one that returns the United States to 5 percent unemployment by 2020

Employment demand scenarios

Millions of net new jobs, 2010 - 202022.5

17.4

9.3

HighMiddleLow

77 145 187Average net new jobs per month

Thousands of jobs

Need 21 million

new jobs to

return to 5%

unemployment

in 2020

Page 12: Opening Plenary, Job Creation and America's Future (Presentation) - Dr. Susan Lund

McKinsey & Company 11|

Retail -0.8-1.2

Manufacturing -2.3 to 0

Construction 0.9–1.8

Leisure and hospitality 2.1–3.3

Business services 2.4–5.7

Health care 2.8–5.2

Other2 1.0–1.3

Education1 0.5

Other services1 0.4–0.8

Financial services1 0.7–0.9

Government1 1.6-1.7

1 Job growth projections from Moody’s Analytics.2 Other includes mining, utilities, wholesale trade, transportation and warehousing, information, self-employed, and agriculture.

Job growth potential varies by sector

SOURCE: Moody’s Analytics; Global Insight; U.S. Bureau of Labor Statistics; McKinsey Global Institute analysis

Low scenario

Middle scenario

High scenarioJobs created by 2020Millions

MGI focus

Page 13: Opening Plenary, Job Creation and America's Future (Presentation) - Dr. Susan Lund

McKinsey & Company 12|

In the high job-growth scenario, we project 1.5 million too few college graduates in 2020

Demand1

163.3

58.0

17.7

30.7

43.3

13.6

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

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

Page 14: Opening Plenary, Job Creation and America's Future (Presentation) - Dr. Susan Lund

McKinsey & Company 13|

Anytime, anywhereThe changing nature of work

Page 15: Opening Plenary, Job Creation and America's Future (Presentation) - Dr. Susan Lund

McKinsey & Company 14|

The nature of work is changing

SOURCE: McKinsey Global Institute analysis

Disaggregation of jobs

“As work gets more complex, we’re seeing that jobs are getting disaggregated into many functions… it’s no longer one person doing ten things; instead it’s ten people working on one thing.”

– Head of HR in high-tech and software industry

Virtualization of work

“The virtual work model can be more productive than other setups… it contributes to higher employee satisfaction and lower turnover.”

– HR Director in business services industry

More part-time and temporary work

“We expect to increase our headcount in the future, but our FTEs will remain flat… we will have more part-time and contingent.”

– Senior Vice-President of HR in health care industry

Page 16: Opening Plenary, Job Creation and America's Future (Presentation) - Dr. Susan Lund

McKinsey & Company 15|

10.4

15.6

19.9

25.5

34.3

36.5

More offshoring

More outsourcing

More older workers (aged 55+)

More telecommuting

More temporary or contract workers

More part-time workers

Our business survey reveals that employers foresee a more flexible labor force

SOURCE: McKinsey Global Institute U.S. Jobs Survey, 2011; McKinsey Global Institute analysis

1 Survey of 2,000 U.S. businesses

In what ways do you foresee the workforce at your company changing over the next 5 years?1

Select all that apply

Page 17: Opening Plenary, Job Creation and America's Future (Presentation) - Dr. Susan Lund

McKinsey & Company 16|

0.76

0.69

0.53

0.42

1.00

0.66US low cost

Eastern Europe

Brazil

Argentina

India

US high cost

Some business support services in the U.S. can be cost-competitive with offshoring destinations

SOURCE: McKinsey & Company; McKinsey Global Institute analysis

Several large U.S.

companies – including Delta, United Airlines

and AT&T – have recently repatriated

call centers to the U.S.

Cost by location for delivering higher-level IT support services Index U.S. high cost = 1.00

Page 18: Opening Plenary, Job Creation and America's Future (Presentation) - Dr. Susan Lund

McKinsey & Company 17|

Many cities have abundant supplies of low-cost IT talent

Source: 2009 Bureau of Labor statistics, McKinsey Global Institute analysis

Median wage for IT jobs in MSAs

≥$60,000

$55,000 - $60,000

Metropolitan Statistical Area (MSA)

Any central community with population of 50,000+ citizens and adjacent communities of 10,000 in which at least 25% commute to central community

AL

ARAZ

CACO

CT

FL

GA

IA

ID

IL INKS

KY

LA

MA

ME

MI

MN

MO

MS

MT

NC

ND

NE

NH

NM

NV

NY

OH

OK

OR

PA

SC

SD

TN

TX

UTVA

VT

WA

WI

WV

WY

DCDEMD

NJ

RI

HI PR

AK

< $50,000

Page 19: Opening Plenary, Job Creation and America's Future (Presentation) - Dr. Susan Lund

McKinsey & Company 18|

Toward a

U.S. jobs agenda

Page 20: Opening Plenary, Job Creation and America's Future (Presentation) - Dr. Susan Lund

McKinsey & Company 19|

To revive job creation, the U.S. must make progress on four dimensions

SOURCE: McKinsey Global Institute

Encourage innovation, new company creation, and the scaling up of new industries in the U.S.

High spark

Ensure Americans acquire the skills that match employer needs

High skill

Harness globalization to create more U.S. jobs

High share

Remove impediments to investment and job creation

High speed

Page 21: Opening Plenary, Job Creation and America's Future (Presentation) - Dr. Susan Lund

McKinsey & Company 20|

The full report can be downloaded at:

McKinsey Global Institutewww.mckinsey.com/mgi

Thank you