Demographic and social change is foundational, impacting all other trends. People’s relationship to society, community and government evolves at different rates and in different ways around the globe, but common trends still emerge. Cities continue to attract a larger percentage of the global population. “Work” is taking new forms and requiring new skill sets. The foundation is shifting.
From financial crisis to COVID-19. Recovery in youth unemployment has been weak following the financial crisis in 2008-2009. For two-thirds of G20 countries, youth unemployment worsened in the decade following the crisis, and most EU nations have not seen unemployment rates fall below pre-crisis levels.37 The global unemployment rate stood at 5.4% in 2019 and was projected to remain the same over the next two years, before the COVID-19 crisis hit. Effects of the COVID-19 shutdown on world economies has led to job losses and record unemployment claims and will certainly lead to more worker instability in the coming months.
Slowing wage growth. Global wage growth declined from 2.4% in 2016 to 1.8% in 2017, reaching its lowest growth rate since 2008. In advanced G20 countries, real wage growth slowed despite economic recovery and low unemployment. Asia and the Pacific have seen the highest real wage growth between 2006 and 2017, but it has also slowed. In high-income countries, labor productivity has increased more rapidly than real wages.38
Gig-economy opportunity and instability. Freelancing is not new, but there has been a global expansion of short-term contracts and freelance work in recent years, providing both additional flexible full- and part-time work opportunities as well as new ways to connect existing freelancers with work.173 In China, the gig economy accounted for about 15% of the entire labor force in 2018.174 When including side gigs, about 40% of the U.S. working population are considered contractors.175 While these jobs offer flexibility and supplementary income, contractors are typically not afforded protections and benefits such as health benefits, paid sick leave, pensions or other employer-sponsored retirement plans, and paid vacation time.
Testing social safety nets. Only 29% of the world’s population has adequate social security coverage for weathering labor market disruptions.39 Gaps are especially pronounced in low-income countries, but these gaps exist in middle- and high-income countries as well.40 Government social security systems are outdated, and employer-based systems are not well-suited for the future of work, where workers don’t stay with one employer for their career and contract work abounds. In European countries, public pension expenditures are expected to continue to grow from their current level of 28% of GDP (the U.S. is at 5%), while China’s Academy of Social Sciences projects shortfalls for its pension scheme by 2035.
Delayed, financially insecure retirement. Nearly 50% of workers and retirees surveyed across 15 countries in an Aegon survey believe that future generations of retirees will be worse off than those currently in retirement, compared with 18% who believe they will be better off. Increased life expectancy, reductions in government benefits, volatility in financial markets, increases in retirement age, changing labor markets, lack of access to and utilization of defined contribution retirement plans, and stagnant wage growth have all changed the retirement landscape.41 While working longer may benefit both economies and individuals, many are still not saving enough for eventual retirement, and some may never be able to retire at all.42 Notably, in India and China, the picture looks different – despite their own social safety net strains, about half of people believe that future generations of retirees will be better off than those currently in retirement.
Workers are likely to feel financial strains in the years to come, from both a continuation of preexisting trends and as repercussions of the COVID-19 crisis. Workers in countries with large youth bulges will continue to struggle to find and maintain quality employment. Workers in more developed, aging societies will face delayed pension income, stressed pension systems, and gaps between what workers currently save and what they need for retirement. In just eight countries – Australia, Canada, China, India, Japan, Netherlands, United Kingdom and United States – this retirement savings gap is expected to reach $400 trillion by 2050. China and the U.S. will account for $199 trillion and $137 trillion of that total, respectively.43 Around the globe, women will be hit harder by this gap, considering the savings balances of women in retirement are typically 30% to 40% lower than those of men.44 Older workers will not be the only ones struggling; in countries like the U.S., U.K. and Japan – which together account for approximately one-third of GDP – the generation of workers ages 22 to 38 are on track to be financially worse off than their parents, suffering from setbacks incurred through coming of age during the financial crisis, mounting student debt, housing affordability concerns and lack of quality employment opportunities.45
The gig economy is projected to grow, but a great deal of future expectations will be determined by the length and depth of the fallout from the COVID-19 crisis. The pandemic has further highlighted both the power and instability of the gig economy, with delivery services providing much-needed temporary jobs to unemployed workers, while gig contractors in transportation and hospitality industries are left with little or no safety net when work dries up. While some companies will develop funds to cover lost earnings, expect to see a push for increased government measures to protect gig-economy workers, such as the United States’ stimulus bill, which included provisions for gig-economy workers to file for unemployment benefits. However, these protections will not be afforded in all countries. Meanwhile, layoffs and lack of hiring in traditional employment may push more workers into the gig economy.