BCG: Labour mismatch risks 10 trillion of unrealised GDP

08 September 2014

The mismatch of labour in the world’s wealthiest countries will, in the coming decades, cost the society dearly. If countries such as the US, UK, Germany and Brazil do not manage to close the demand and supply gap, up to $10 trillion of unrealised gross domestic product could be the result, warns a new report from The Boston Consulting Group.

In the report ‘The Global Workforce Crisis: $10 Trillion at Risk’, The Boston Consulting Group (BCG) analysed the current and future state of the labour market in 25 countries. To forecast future scenarios, the strategy consultants developed a demand and supply model to predict the state of labour markets in 2020 and 2030. BCG concludes that labour markets will in the coming 15 years undergo massive change.

An overview of the labour market developments for the U.S and European countries:

Labor Shortages and Surpluses

By 2020 the majority of countries will still experience a labour surplus, yet by 2030 many will face a (massive) shortfall of labour. Both scenarios cause different problems. With labour shortage positions cannot be filled. This fuels wage inflation and undermines productivity, and hence economic growth. Countries with a labour surplus also face difficulties though. A workforce surplus can lead to unacceptable high rates of unemployment, and eventually to the attrition of skills and a reduced competitiveness of a country. In addition, a high unemployment rate will lead to significant fiscal and social problems as unemployed workers will seek social assistance from governments.

BCG highlights that either way, whether there is a surplus or a shortfall, a mismatch of labour demand and supply is destructive for the worldwide economy. Calculations from the consultants reveal that if not addressed properly, the worldwide mismatch could threaten a staggering $10 trillion of GDP, which is more than 10% of the world GDP, in the coming two decades.

Labor Supply Versus Demand - Germany vs US

US, UK, Brazil and Germany
When highlighting some of the countries surveyed, it can be concluded that the US will face persistent worker surpluses. In 2020, some 17 to 22 million working-age adults will be without jobs, translating into an unemployment rate of 10% to 13%. This surplus will decline over the following decade, coming to a minimum of 7.4 million by 2030. The story is reversed in Germany, where a shortage of up to 2.4 million workers is expected by 2020, and the shortage will grow to 10 million by 2030, which comes down to 23% of its labour supply.

The UK shows a single digit surplus in 2020 of between 6% and 8%, and a labour force that balances between a slight surplus and a slight shortage by 2030. The most extreme case of the 25 countries studied is Brazil, where the 2020 shortage of around 8.5 million workers (7%) is expected to nearly fivefold to 40.9 million people, representing roughly 33% of its labour supply.

Labor Supply Versus Demand - UK vs Brazil

Based on the analysis, BCG urges governments to understand the dynamics of their labour market, keep a close eye on its development and where required introduce correcting mechanisms. “The consequences for many nations’ growth and competitiveness are serious. Governments, companies, and other institutions must begin to take action now if they hope to avert the potentially long-lasting damage to national and regional economies, as well as to the global economy,” says Rainer Strack, Senior Partner at BCG and a co-author of the study.

The consultants would not be real consultants if they had not put some strategic thinking around recommendations, yet the bad news is that they see no single solution to solve the labour mismatch challenge. “Every situation calls for its own set of custom-made set of interventions,” writes BCG, although they do outline a basic set of key levers and interventions that governments can use to mitigate imbalances. Labour shortage can be mitigated by boosting productivity through capital investment, increasing the participation rate, increasing immigration and mobility, and by encouraging higher birth rates. Vocational training and job qualification programs, education programs and reducing shadow employment can be used to minimise a labour surplus.


Project management industry adds £156 billion of value to UK economy

15 April 2019

Project management has grown into one of UK’s largest areas of business over the past decade, amid the increasing ‘projectification’ of work. With the gross value added to the UK economy by project management estimated to be £156 billion, this trend is likely to continue in the coming era.

Despite the huge success of project management in recent years, until now there has been relatively little data available on the size of project activity. As a result, there has been a great deal of debate on things like the number of people involved in the sector, the number of projects, and how it contributes to economic output. Due to this need for clarity, APM, the UK’s professional body for project management (the largest organisation of its kind in Europe, with 28,000 individual members) commissioned economists from PwC to shed light on the industry's economic impact.

The research concluded that the profession makes a more significant contribution to the UK economy than the financial services sector. 2.13 million full-time equivalent workers (FTEs) were employed in the UK project management sector, generating £156.5 billion of annual gross value added (GVA). In comparison, the financial services sector contributes £115 billion, and the construction industry adds £113 billion.

Gross value added to UK economy

Commenting on the discovery, Debbie Dore, Chief Executive of APM said, “Project management runs as a ‘golden thread’ through businesses, helping to develop new services, driving strategic change and sector-wide reform.”

Who is a ‘project manager’?

To reach these estimates, PwC’s researchers used detailed models to map out the value of project management activity. They ultimately defined relevant ‘projects’ as “temporary, non-routine endeavours or rolling programmes of change designed to produce a distinct product, service or end result… [with] a defined beginning and end, a specific scope, a ring-fenced budget, [and] an identified and potentially dedicated team with a project manager in charge.”

Building on this, they then went on to define what the act of project management actually is. The job consists of applying “processes, methods, knowledge, skills and experience” so that clients can meet their objectives and bring about planned outputs or outcomes. The analysts added that this includes “initiating the project, planning, executing, controlling, quality assuring and closing the work of an identified and dedicated team according to a specified budget and timeframe.”

Importantly, it should be noted that the profession is not exclusive to only roles explicitly labelled as ‘project manager’, but to any role where specialist project management skills are used. This means that across sectors these roles can have very different titles, from the self-explanatory contract managers of procurement, or the campaign managers of advertising, to the likes of festival co-ordinators in the events sector, and many more. The roles in question also span all strategic levels of the profession, from strategic to tactical and operational positions.

Gross value added of project management profession

From a sector perspective, the financial and professional services, construction and healthcare industries make up almost two-thirds of the total project management GVA. At the same time, understandably, the UK Government has a huge project portfolio, which further drives the size of the GVA the sector contributes, thanks to megaprojects like HS2 and Crossrail.

Commenting on this to the report’s authors, Oliver Dowden, Minister for Implementation remarked, “Project delivery is at the heart of all Government activity, whether it’s building roads and rail, strengthening our armed forces, modernising IT or transforming the way government provides public services to citizens. Getting these projects right is essential if we are to ensure that we build a country that works for everyone.”

Throughout 2019, 26 major government projects were delivered, representing a fifth of the overall Government Major Projects Portfolio (GMPP) of 133 projects. According to the IPA annual report 2017-18, these represented a whole life cost of £423 billion. In addition to this were a plethora of smaller scale projects, and those in early development.

Elsewhere, with the increasing digitalisation of the economy impacting entities of all shapes and sizes, IT and digital transformations tended to dominate the projects of the UK scene alongside new product development projects, with a respective 55% and 46% of organisations in the research sample having undertaken these types of project in the past year. At the same time, this varied across sectors, and unsurprisingly, in the construction and local government sectors, fixed capital projects were the main project type undertaken.


Looking to the future, 40% of business leaders expect project management will grow in the coming years due to the increased use of projects – or the ‘projectification’ of the UK. In a trend that has been witnessed elsewhere, organisations have to rapidly and continuously change in the digital age of business, driving the need for project management.

Outlook for project management services

An increased focus on value over cost – especially in the construction sector – and a forecast increase in the number of international projects are predicted to be key drivers of growth, according to the expert contributors. However, this will not happen in the absence of challenges; more than half of organisations expressed concern over the perceived impact of political uncertainty in the UK. Skills and capability shortages were also cited as a potential barrier by a third of organisations.

With regard to budgets, meanwhile, a third of those surveyed by PwC said they expect the size of project budgets will increase in the coming three years, while 40% anticipate a growth in project size. As the profession continues to mature, and as the recognition of the importance of good project management grows, it is expected that a greater proportion of project work will gain more distinct attribution to the profession itself, giving more recognition and appreciation to the role of the project manager.

Speaking on the findings of the study, Sandie Grimshaw, a Partner at PwC, concluded, “The project management profession is relatively new compared to some other professions, such as lawyers, teachers and doctors. However, as project management is a core competence vital to organisations in the UK, the profession is critical and will continue to grow in stature.”