Using online talent platforms will ease current labour-market dysfunctions, making it easier to connect talent and jobs in the digital age, research by McKinsey & Company shows. According to the consulting firm, these platforms have the potential to add $2.7 trillion to the global GDP, benefit up to 540 million globally and improve average company profit margins with 275 basis points.
McKinsey & Company recently released its ‘A labour market that works: Connecting talent with opportunity in the digital age’ report, in which it examines the current state of global employment. The research shows that 30 to 45% of the working-age population is currently unemployed or inactive or works only part-time. Unemployment and inactivity is the highest in South Africa, at 58%, followed by India (47%) and the US (32%). The UK currently is experiencing an unemployment/inactivity rate of 28%.
While millions of people cannot find work, many employers cannot seem to fill their positions. According to the consulting firm, this highlights the current labour-market dysfunctions, which can be positively affected by online talent platforms, such as LinkedIn.
The platforms have the potential to connect individuals with work opportunities by linking their résumés with job postings from traditional employers and acting as digital marketplaces of the new ‘gig economy’. McKinsey’s research shows that online talent platforms have the potential to add $2.7 trillion, which is the equivalent to the UK GDP, while increasing global employment with 72 million full-time-equivalent positions by 2025. This will be the result of higher participation, reduced unemployment and higher productivity.
The platforms are expected to benefit up to 540 million people globally by 2025, with around 230 million finding a new job fairly easy and around 200 million working more as a result of freelance platforms. Sixty million are expected to secure work that better fits their skills or preferences and 50 million are likely to switch from informal to formal employment.
The number of beneficiaries is expected to be the highest in China at 92 million people, which is 9.1% of the working-age population, followed by India (77 million) and the US (41 million). In terms of percentage of the working-age population, the impact will be the highest in the US at 18.5%, followed by the UK at 16.1% and Brazil at 14.2%.
For companies, the use of online talent platforms can help them identify and recruit suitable candidates and to motivate the newly hired employees to improve their productivity once they start work. According to the research, the adoption of the platforms has the potential to increase the output of companies up to 9% globally by 2025, with the biggest increase foreseen in the professional services industry, followed by the technology sector (7%) and hospitals (4%). The biggest cost reduction (at 7%) is also foreseen for the professional services industry, with hospitals and banks coming in at second place (both expected to see cost reductions of 6%).
The average improvement in company profit margins as a result of the online talent platforms is expected to be 275 basis points (bps), with the professional services firms likely to see improvements of 540 bps and technology companies of 390 bps.
McKinsey concludes: “Online talent platforms show real promise for injecting more transparency and dynamism into job markets. As people come to connect with work opportunities more efficiently, even larger economic ripple effects could abound in the years ahead. To capture these benefits, regulatory frameworks, corporate practices, and individual mind-sets will have to change, along with technology. With the right investment, a thoughtful approach, and continued innovation from the private sector, the world could move closer to the goal of a labour market that works.”