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An Economy That Works: Job Creation and America's Future
1. An Economy That Works
Job Creation and America’s Future
McKinsey Global Institute
2011 WIB Symposium
State College, Pennsylvania
August 18, 2011
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2. Other countries have not experienced the same
employment decline as the U.S.
Gross Domestic Product Employment
Percent decline, peak to trough1 Percent change from January 2008
2
Germany
U.S. 1
U.S. 4.1
0
-1 U.K.
Germany -2
Germany 6.1
-3
-4
U.K. -5
U.S.
U.K. 6.4 -6
-7
2008 2009 2010 2011
1 Peak quarter for United States was Q4 2007; peak quarter for Germany and United Kingdom was Q1 2008
SOURCE: United States Bureau of Economic Analysis; United Kingdom Office for National Statistics; Germany’s
McKinsey & Company | 1
Statistisches Bundesamt Deutschland; ILO; OECD; McKinsey Global Institute
3. Low-skill occupations had the >500,000 job loss <1,000 job change
highest job losses in all sectors >100,000 job loss 1,000-10,000 job gain
Annual net employment change from 2007–20091 10,000-100,000 job loss >10,000 job gain
Thousands of jobs 1,000-10,000 job loss
Most significant source of occupational training
Bachelor’s
On-the-job Work Vocational Associate Bachelor’s plus work Graduate
training experience award degree degree experience degree
Manufacturing
Administrative & support services
Retail
Construction
Finance and insurance
Industry
Transportation and warehousing
Business services
Wholesale
Real estate
Accommodation & food services
Educational services
Government
Health care
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 McKinsey & Company | 2
4. Job growth in the 2000s was half the rate of previous decades
Real GDP
Net employment change compound
Increase in total annual
Total employment1 employment2 growth rate
Millions Percent Percent
1950s 6.9 12 3.5
1960s 12.9 20 4.2
1970s 20.6 26 3.2
1980s 19.5 20 3.2
1990s 18.1 15 3.4
2000-07 9.2 7 2.4
2000-10 2.2 2 1.7
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 McKinsey & Company | 3
6. The period between GDP recovery and employment recovery
has been increasing
Gap between GDP returning to pre-recession peak and
employment returning to pre-recession peak
Months
“Jobless recoveries”
?
39
15
7 8
6 6 6 6
3
6
Year in which the 1948 1953 1957 1960 1969 1973 1981 1990 2001 20081
recession began
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 McKinsey & Company | 5
7. The unemployment rate varies widely across the United States >10%
Unemployment rate, December 2010 9–10%
% unemployed 8–9%
7–8%
6–7%
5–6%
<5%
SOURCE: U.S. Bureau of Labor Statistics; McKinsey Global Institute analysis McKinsey & Company | 6
8. Mobility in the United States has been declining since 1990
and is at a 50-year low
Annual domestic migration rate, 1948–2009
% of residents who have changed addresses during the past year
22
20 Long-run
18 average =
16 18%
14 In the 1950s and 1960s,
1 in 5 Americans changed
12 residences every year . . . . . . but that figure
10 has now dropped
8 to 1 in 10
6
4
2
0
1950 1960 19701 1980 1990 2000 2009
1 Data from 1970–1981 are interpolated due to data constraints.
SOURCE: U.S. Bureau of Labor Statistics; McKinsey Global Institute analysis McKinsey & Company | 7
9. The number of new businesses has declined dramatically in this recession
Change in number of private-sector establishments launched every year
March 1993 to March 20101, thousands
667 656
615 610 610 634 631 612 609 603 633 627
584 588
550 548
505
1994 95 96 97 98 99 2000 01 02 03 04 05 06 07 08 09 2010
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.
SOURCE: U.S. Bureau of Labor Statistics; McKinsey Global Institute analysis McKinsey & Company | 8
11. 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 - 2020
22.5
Need 21 million
17.4 new jobs to
return to 5%
unemployment
in 2020
9.3
Low Middle High
Average net new 77 145 187
jobs per month
Thousands of jobs
SOURCE: Moody’s Analytics; McKinsey Global Institute analysis McKinsey & Company | 10
12. Job growth potential varies by sector Low scenario
Middle scenario
Jobs created by 2020 High scenario
Millions
Health care 2.8–5.2
Business services 2.4–5.7
Leisure and hospitality 2.1–3.3
Construction 0.9–1.8
Manufacturing -2.3 to 0
Retail -0.8-1.2 MGI focus
Government1 1.6-1.7
Financial services1 0.7–0.9
Other services1 0.4–0.8
Education1 0.5
Other2 1.0–1.3
1 Job growth projections from Moody’s Analytics.
2 Other includes mining, utilities, wholesale trade, transportation and warehousing, information, self-employed, and agriculture.
SOURCE: Moody’s Analytics; Global Insight; U.S. Bureau of Labor Statistics; McKinsey Global Institute analysis McKinsey & Company | 11
13. In the high job-growth scenario, we project 1.5 million too few college
graduates in 2020
Demand vs. supply – 2020 projections Difference
Millions
168.9
163.3
No high school diploma 13.6 19.5 +5.9
High school graduate 43.3 44.1 +0.8
Some college, no degree 30.7 29.1 -1.6
Associate degree 17.7 19.6 1.9
Bachelor’s degree
58.0 56.5 -1.5
or higher
Demand1 Supply
1 Labor demand from MGI high job-growth scenario
SOURCE: U.S. Bureau of Labor Statistics; McKinsey Global Institute analysis McKinsey & Company | 12
15. The nature of work is changing
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
SOURCE: McKinsey Global Institute analysis McKinsey & Company | 14
16. Our business survey reveals that employers foresee a
more flexible labor force
In what ways do you foresee the workforce at
your company changing over the next 5 years?1
Select all that apply
More part-time workers 36.5
More temporary or
34.3
contract workers
More telecommuting 25.5
More older workers
19.9
(aged 55+)
More outsourcing 15.6
More offshoring 10.4
1 Survey of 2,000 U.S. businesses
SOURCE: McKinsey Global Institute U.S. Jobs Survey, 2011; McKinsey Global Institute analysis McKinsey & Company | 15
17. Some business support services in the U.S. can be
cost-competitive with offshoring destinations
Cost by location for delivering higher-level IT support services
Index U.S. high cost = 1.00
US high cost 1.00
India 0.42
Several large U.S.
companies – including
Argentina 0.53 Delta, United Airlines
and AT&T – have
recently repatriated
Brazil 0.69
call centers to the U.S.
Eastern Europe 0.76
US low cost 0.66
SOURCE: McKinsey & Company; McKinsey Global Institute analysis McKinsey & Company | 16
18. Many cities have abundant supplies of low-cost IT talent
Median wage for IT jobs
in MSAs
< $50,000
$55,000 - $60,000
WA
ME
ND
≥$60,000
MT
MN
OR NH
VT
ID
SD WI MI MA
WY NY
IA
PA RI
NE CT
NJ
NV OH MD DE
WV DC
UT
CO KS IL IN VA
CA KY Metropolitan
MO NC
Statistical Area (MSA)
OK AR TN
AZ
SC
Any central community with
MS
NM population of 50,000+ citizens
LA GA and adjacent communities of
AL
10,000 in which at least 25%
TX commute to central community
AK
FL
HI PR
McKinsey & Company | 17
Source: 2009 Bureau of Labor statistics, McKinsey Global Institute analysis
20. To revive job creation, the U.S. must make progress on four dimensions
Ensure Americans acquire the
High skill
skills that match employer needs
Harness globalization to create
High share
more U.S. jobs
Encourage innovation, new company creation,
High spark
and the scaling up of new industries in the U.S.
Remove impediments to investment
High speed
and job creation
SOURCE: McKinsey Global Institute McKinsey & Company | 19
21. Thank you
The full report can be downloaded at:
McKinsey Global Institute
www.mckinsey.com/mgi
McKinsey & Company | 20
