Home Seven BetsThe new social contract

The trend: Skills scarcity and demographic shifts are defining the new social contract

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As transformation accelerates—and the demand for digital skills skyrockets—leaders need to adapt to a changing workforce.

Few executives have figured out the next future of work, how to address the qualified skills shortage, and the best way to keep a talent pipeline filled with engaged, inspired (and inspiring) teams. Additionally, the next generation of both human workers and AI is changing the nature of jobs and the skills required, particularly in creative, service, and administrative jobs, with a magnitude of impact equivalent to what the Third Industrial Revolution meant to manufacturing.

$11.5 trillion

in lost cumulative GDP growth for G20 countries by 2028 if the digital skills gap goes unaddressed

$7.6 billion

growth expected in the global recruitment process outsourcing market by 2027

Our insights

The skills shortage will likely continue to strain organizations—even with recession and layoffs. In the US, there are twice as many job openings as unemployed workers to fill them. In 2021, almost two in three (64%) global IT professionals said talent availability was the largest challenge to emerging technology adoption—up from 14% in 2019. And experts estimate that G20 countries risk missing out on up to $11.5 trillion of cumulative gross domestic product (GDP) growth by 2028 if the digital skills gap is not addressed.

Generative AI will continue to change the kinds of specialized skills that will be required. By augmenting human workers with digital workers, enterprises can likely increase productivity. However, the rapid expansion of generative AI is also highlighting the need for humans with new skill sets for roles like prompt engineering and generative artists. With the new types of work AI will create, the digital skills gap will continue to widen if organizations don’t actively upskill and reskill the workforce.

As volatility shifts the HR function from hiring to reducing staff, skills shortages and economic uncertainty continue to put pressure on finding and attracting top talent. Many organizations are outsourcing talent acquisition to reduce the strain.

The global recruitment process outsourcing market is expected to expand 14% in 2023—and grow by $7.6 billion between 2023 and 2027. In addition to carrying some of the load, outsourcing agencies can often access talent pools faster and more efficiently than internal teams can do on their own.

The three most important factors for today’s employees are working conditions (77%), work-life balance and flexibility (76%), and competitive compensation and benefits (75%). They also say they want their work to align with their values. About two-thirds want their organization to promote social responsibility (68%), environmental sustainability (64%), and a culture of diversity and inclusion (61%).

In fact, many of these shifts correlate with the demographic changes in the workforce, which supports the differences identified in data across countries, regions and diversity segments.

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Meet the authors

John Granger, Senior Vice President, IBM Consulting

Jesus Mantas, Senior Managing Partner, IBM Consulting

Salima Lin, Managing Partner, Strategy, M&A, Transformation, and Thought Leadership, IBM Consulting

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Originally published 08 May 2023

The priorities

At the heart of the new way of working is a social contract that understands and adapts to people’s new priorities and the realities of a post-pandemic workplace. Leaders must adopt talent approaches that make employees feel like strategic business partners and enable them with productivity-enhancing technologies.

Employers that care as much about the experience of their diverse, empowered teams as they do about their customers see 32% higher revenues and deliver outcomes twice as fast as other enterprises. Why? Because they make people feel like they’re part of something larger than themselves—without asking them to sacrifice their well-being for the privilege.

They use data and AI, along with pulse surveys, to assess engagement and wellness of employees.

People-centered workplaces are hybrid. They also use AI to streamline people processes and provide personalized experiences to their employees. Ladders, a career site for positions that pay $100,000 or more, reports that 36% of all professional jobs are now remote. Prior to the pandemic, only about 4% of high-paying jobs were available remotely. Having a clear workforce location strategy that defines which job roles and responsibilities need to be done in person and which can be done remotely also removes unnecessary constraints from the talent search.

Middle managers serve as the glue connecting leadership to rising talent as the organization navigates constant change. The new middle manager must be a super coach, motivating, developing, and rewarding team members based on their individual wants and needs. With AI automating management tasks, middle managers become more like fleet trainers than an administrator. They need to build cohesive teams in a hybrid work environment, which can often feel fragmented. Given the increasing importance of this role, 65% of CEOs are investing to improve people manager skills today and 72% plan to increase their investment by 2025, according to research from the IBM Institute for Business Value.

Businesses should look for people with the right skills, rather than the right degrees, to increase their candidate pools. For instance, Salesforce recently awarded $5 million in grants to help people from underserved communities start successful careers in technology. And IBM announced the Skills Build program with a commitment to help 30 million people globally. These reskilling initiatives can help close the talent gap while creating new economic opportunities.

Companies should invest in new AI tools to augment their workforce productivity. For example, text tools like ChatGPT can help a non-artistic person generate prompts that can be used with graphics tools such as Midjourney or DALL-E. Leading companies will use AI guides for their employees for most of their activities.

Companies can also create internal marketplaces to help talent and jobs to find each other—and make the most of the talent they already have.

The bet

Embrace a new work-life continuum in a tech-enabled workplace

Actions to take

Catalog the skills required for each position, eliminate degree requirements for those where it is not needed, and hire people who can do the job, whether or not they meet traditional education requirements.

Look to your ecosystem to provide skills the organization doesn’t need at scale or that have a high degree of variability.

Enable inner-sourcing by building a marketplace where those with skills (or the interest in learning them) can be matched with opportunities.

Outsource employee services and talent acquisition to AI-enabled trusted partners who can operate these functions at scale, reducing the cost, volatility, and risk of these functions.

Join forces with your ecosystem partners to create larger pools of qualified and diverse candidates with the skills required to sustain growth.

Build digital skills academies that prioritize collaboration, communication, and empathy as part of the curriculum.

Give employees tools and resources to help them manage their lives, as well as their careers. Reevaluate benefits to align with the new workforce demographics.

Reconcile a sustainable hybrid work model for different jobs, reinstating expectations of physical presence in the workplace, aligned with each role.

Instrument near real-time views of employee engagement and wellness more frequently throughout the year.

See the bet in action

BuzzFeed uses AI to identify and recruit top talent

BuzzFeed reaches millions of people every day through its fun, engaging, and informative content—and every year, thousands of people apply for jobs in the company.

With application volumes increasing every year, BuzzFeed saw an opportunity to boost the efficiency of its recruitment processes.

“Some of our most sought-after roles attract hundreds of applications per day for several days after we post them—and with such large talent pipelines, pinpointing the top performers is often a tough challenge for our hiring managers,” says Dan Geiger, Former Recruiting Ops Manager and Lead Recruiter at BuzzFeed.

To streamline this process, BuzzFeed is using IBM Watson Candidate Assistant to engage candidates in personalized career discussions and recommend positions that fit them best.

Prospective applicants can type questions about working at BuzzFeed into the chat, and receive real-time answers in the form of text, videos, and links to open positions.

Eighty-seven percent of BuzzFeed applicants coming in through IBM Watson Candidate Assistant move through the process from phone screenings to face-to-face interviews, compared to only 53% of applicants from other sources.

“For us, there’s no better proof of the effectiveness of the pilot than the quality of the candidates that are coming through,” says Geiger. “And so far, the results are extremely encouraging.”