Shrinking workforces

A bit of musing this week and looking at the dynamics of the global population demographics, the war for talent, the ease with which governments are allowing people to enter countries to work and how that impacts global sourcing...

Perhaps I'm showing my age, but if we think back a number of years, there were some well-respected consulting companies (many no longer in existence) that were considered as the places to work, i.e. people wanted that company name or experience on their CV but many of those same people also left after a few years.

Are we creating a similar situation on a larger global scale today between countries I wonder? Let's take a hypothetical example of country A which today has a significant labor arbitrage advantage.

As a result, ITO or BPO work may flow into that country to leverage the labor arbitrage. For the people working in that country, more jobs are available, they build up skills, either themselves or through company training and generally this is positive.

Over time, some of those people will discover that if they were prepared to relocate to another country, they might be able to earn a much higher income. Some will do that continuing to work for the same company (i.e. overseas postings) but others will branch out on their own. This creates a lot of stress on family life but if you can earn three to 10 times the income, that's enough to get some people to take the plunge. If that works for them, their friends find out and you get a sustained pool of supply looking to work in other countries.

At the same time, governments facing aging population problems are often very willing to allow people to relocate into their country for a few years to supplement the workforce. Not only does it help with taxes but it also provides a counter-balance to the "offshoring trend". So you get a demand to draw the supply.

This is all great for those country A's that have sufficient population to keep producing the new entrants, countries such as India and China. If, however, you're a company working in a country A that does not have such a large young population, you suddenly find yourself confronted with scarcity of resources and increasing costs. In other words, you're a victim of your country's success.

While I can likely argue that this is likely only a short- to medium-term issue as these people will return home, it doesn't offer much solace for those companies in the interim nor does it look that great for their cost structure when they do return home.

I wonder if this is one of the dynamics that we're going to have deal with in the future?

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Michael Rehkopf

Michael has more than 20 years of experience in operations, strategy and sourcing covering all major parts of the globe. He has also worked for Australian, Canadian, German and Japanese companies in both business process outsourcing and IT outsourcing.
Michael's industry experience includes the financial services, manufacturing, telecommunications and travel sectors. He leverages this diverse industry experience and his university background in accounting, IT and his Master of Dispute Resolution, to assist clients in the development of business strategies and the implementation of sourcing strategies. These include the associated evaluation, negotiation and organizational change.
Michael is currently a partner at TPI, the world's oldest and largest sourcing advisory firm. Prior to joining TPI, Michael held leadership positions with Siemens Business Services, OpenPlus International, Mitsubishi Electric and Netron.