The workforce research of the Hudson Institute has consistently emphasized the role of “shaping forces.” The research took its most influential form in the organization’s high-selling volumes Workforce 2000, published in 1987, and Workforce 2020, published in 1997. In the Hudson Institute’s treatment, their shaping forces determined the trends and challenges that would affect human resources planning and workforce development in the years ahead. Critically, the forces described in the research have had a futurist component, giving corporations and policymakers a measure of long-term perspective for their human resources and workforce development planning.
The shaping forces most frequently stressed in Hudson’s research have been technological change and demographic transformation. The former has typically been less detailed and of less impact. Workforce 2020, written in 1995 and 1996, largely disregarded or failed to predict the key technological changes that came in so many ways to define workforce change over the 1990s, for example.
The demographic analysis within the research received widespread attention, however, and continues to be quoted extensively despite the time since the last book’s publication. The first volume focused heavily on the future of racial and ethnic diversification. Workforce 2020 updated these projections and extended them, while adding a stronger focus on population and labor force aging.
As 2005 approached, Hudson Institute again decided to renew its workforce research. This included updating the trends in racial and ethnic diversification and aging covered by its earlier work. In addition, just as Workforce 2020 had done relative to Workforce 2000, the research added new points of emphasis to account for the changes occurring in the world of work. Out of this has grown the concept of the global workforce.
The Global Workforce
As the 1990s drew to a close, the importance of immigrant labor to U.S. population and workforce growth had become obvious. U.S. universities and “knowledge industries” rely heavily on skilled or educated immigrants to compensate for shortfalls in the native population. Hispanic immigrant populations of varying skill and knowledge levels had spilled out of their traditional geographic targets in the East Coast and the West and Southwest and had come to drive significant shares of population growth in the South, Midwest, and Plains states. Moreover, rapid growth in these regions’ Hispanic populations occurred in both urban and rural areas.
The strong labor markets of the mid- and late- 1990s quelled much of the popular disaffection with high immigration levels that had surfaced in the 1992 elections. This somewhat marginalized immigration as a core explanation for change. Globalization, on the other hand, remained a central narrative. The role of globalization in job loss was, again, a focus of the 1992 election. This role received less attention as unemployment rates fell, but international trade and the dynamics of global financial markets seemed to become more frequent topics of media and popular discussion as both the United States and global economies continued to grow.
Yet labor markets are in truth found in the bedrock of even these changes to the global economy. The 1990s thus saw a rapid expansion of two workforce trends: increasing numbers of workers (immigrants) coming to the United States and increasing numbers of new jobs going to foreign locales, particularly in the less developed world. This two-way labor market exchange—increasing numbers of less developed world workers coming to the United States and increasing numbers of jobs going to the less developed world workers—is the expression of the global workforce. It has its roots in two shaping forces. The first is technological change that facilitates the international consumption and production of goods and information. The second is the accelerating collapse of the developed world as a contributor to global population and labor force growth.
Technological Change as a Shaping Force
Workforce 2020, like much of the contemporary technological discussion, highlighted the geometric growth of microchip power or speed in its analysis of technological change and the effect on computer pricing. Moore’s Law and the increase in optical storage density have certainly been important. When Workforce 2020 was published, Intel’s new Pentium promised clock speeds of 200 MHz. By mid-2004, the Pentium 4 offered clock speeds as high as 3,400 MHz. In the five years between 1997 and 2002, the number of personal computers in the United States had nearly doubled, from around 110 million to almost 200 million.
The manner in which these additional, more powerful computers communicate with each other turned out to have been the more important evolution, however. The ability of computers to exchange data has obviously changed the U.S. economy and culture. It has also created entirely new possibilities for the global organization of work.
The effect of technological change is best understood in terms of the growth of less developed world labor markets. However, it is not an unimportant aspect of immigration. The improving ability of migrants to communicate with the social networks they have left behind has reduced the opportunity cost of emigration. The role of information technology in expediting remittances, or the transfer of earned money to migrants’ home countries, which totals over $60 billion worldwide, cannot be denied.
Still, the effect of information technology on foreign workforces is larger than its role in migration. Far-flung multinationals can now organize global production far more effectively and cheaply as a result of the Internet. Businesses can coordinate the exchange of goods with lower transactions costs. Information itself has become an easily tradable commodity across national borders.
The networking of computers is the critical change to global work, but the growth in computers’ power should not be ignored. The radically improved ability to bundle different types of data—qualitative, quantitative, graphical, and aural—lessens the importance of distance in international coordination, particularly within the operation of a single corporation. The importance of language barriers can also be reduced to a degree, and in an occasionally controversial effect, the barrier itself is disappearing in many instances as English increasingly dominates electronic communication.
The rise of foreign labor forces is typically discussed in terms of international wage differentials. The lower wages found in the less developed world are an important consideration. Yet less developed workforces have always worked for lower wages than are found in the wealthy nations. The key driver of change has been information technology that allows foreign workforces and firms to be more closely and cost-effectively integrated into the global economy.
As policymakers and corporate planners look to the future effect of IT in integrating global workforces, the emergence of wireless communication is of prime importance. In middle- and low-income countries, the ability of wireless communication to circumvent problems of infrastructure has favored the rapid adoption of wireless devices. The rate of adoption has been especially fast in middle income countries, where there are now more cellular phone subscriptions than telephone main lines. This suggests an accelerated expansion of global workforce integration.
In addition, the introduction of wireless connectivity and digital processing capability into a host of “everyday” goods promises to inject a new source of relative value that has virtually no mass that would incur transportation costs. Coupled with information technology’s impact on trade in the form of miniaturization, improved logistics efficiency, and new categories of tradable economic goods such as information, the advantages of internationally dispersed work to the developed world should grow more rapidly in the future than they have even in the recent past.
Demographic Change as a Shaping Force
The effect of IT in realizing the potential of a global workforce comes at a historic turning point in global history. The present decades are witnessing the end of the developed world’s responsibility for driving global population growth. The speed with which this is occurring is stunning. Between 1950 and 1970, the world’s developed regions accounted for roughly one fifth of the world’s population increase. After 2020, the developed regions will effectively cease growing in population as a group and begin to decline.
The effect on the ratio between developed and less developed labor force growth follows the changes in population dynamics. Developed region labor force growth between 1980 and 1990 was approximately 9 percent. The forecast for the 2000 to 2010 period is 3 percent. As a result, the developed regions are projected to contribute just 4 percent of global labor force growth over this decade. The contribution will continue to drop as developed world population growth continues to decelerate or turn negative. The world’s “new” workers will increasingly come from its less developed areas. The adjustments this change will require will cement the concept of the global workforce.
While this general conclusion about the widening gap between the developed and less developed worlds in driving global population and labor force increase is critical, there are important distinctions that should be noted. The increasing responsibility of the less developed world for population growth does not mean that the less developed world itself is growing more rapidly. The rate of change in Latin America, for example, is becoming much smaller. However, growth in Africa and the Middle East will remain fairly strong through mid-century.
Within the developed world, most of its larger nations face an eventual period of absolute population decline. The United States, on the other hand, will experience healthy growth in comparison to most of its wealthy peers. The population of Eastern Europe is projected to decline from 2005 to 2020, while Western Europe’s is projected to increase by just 1 percent. U.S. population growth over the same time period is forecast to be 15 percent.
However, the relative strength of U.S. population growth is only that: relative. It will not escape the difficulties associated with a rapid slowdown in population and labor force growth. Moreover, projections of positive population growth are no sign that the United States will not be reliant on an infusion of immigrant labor to augment workforce rolls. Instead, they are a result of U.S. reliance on immigrant labor in the past decades and the present. Immigration in recent years may be as high as three times their 1980s’ levels. High immigration levels are a significant component of the comparably stronger U.S. outlook.
Absent even higher levels of immigration, there is no way to avoid a keen reduction in labor force growth. This is likely to become most noticeable as the present decade draws to a close, when baby boomers begin to retire in larger numbers. The problem will reach its nadir as the United States approaches 2020. The rate of labor force growth in the year 2000 was nearly as great as what is projected for the entire 10-year period between 2015 and 2025.
As stated, the historic U.S. response to tighter labor markets has been to tolerate increased immigration, both of the lower and higher skilled variety. The extent to which the United States dominates the global market for migrant labor is dramatic. Nearly half the annual flow of migrants from the less developed to developed regions is absorbed by the United States. The advantage appears to be even more pronounced among more educated migrant stocks. In a 1998 study of migration patterns to select OECD nations, the United States absorbed 57 percent of the total measured migration. It absorbed 76 percent of the migrants with tertiary education.
There are a variety of factors that account for U.S. immigration levels relative to their developed world peers, but it must be noted that these factors are by no means immutable. As other developed nations have begun to confront the demographic fate that awaits them, many have aggressively targeted immigration to meet the challenge. This is especially true of the more highly educated and skilled members of the global workforce. In addition, there are signs that changes to some aspects of U.S. policy vis-a-vis temporary immigrant status, as well as improving opportunities in less developed nations, are putting pressure on U.S. success in attracting the world’s best and brightest. The data on these points are not yet conclusive, however. Increasing educational attainment could also potentially offset a lower propensity to migrate among less developed world populations.
The trends that make such issues critical— decreases in native population growth only partially offset by high levels of immigration—will create a rapidly diversifying U.S. population and labor force. The White non-Hispanic share of the labor force will drop by 11 percentage points between 2005 and 2020. The Hispanic share will climb to 17 percent. By 2050, White non-Hispanics will comprise just 50 percent of the labor force, non-Hispanics of other races 25 percent, and Hispanics 25 percent. Hispanics will drive more than two-thirds of overall labor force growth between 2020 and 2050.
As the composition of the workforce changes, ensuring that it remains capable of responding to the need for greater skills, education becomes a major policy priority. There are wide gaps among races and ethnicities in both high school diploma and college degree attainment. Improving attainment and lifelong learning opportunities for groups that lag behind will be the only way for the United States to meet the historical superiority of its workforce relative to skills and education.
In both the public policy and corporate realms, this clearly brings up the role of diversity management and practice. Its scope and the rationale behind diversity policy will necessarily evolve in response to the far tighter labor markets now forecast. Diversity strategies that target only race and ethnicity will be insufficient. Notions of fairness will be coupled with the need to attract as wide a spectrum of the U.S. labor force as possible to survive in the face of a population that is changing in its growth rate and its composition.
Race and ethnicity will obviously remain important components of diversity policy in the years ahead. So will cultural background or preferences and nationality in the era of a global workforce that constantly transfers workers and jobs across national borders. So, very critically, will age be a factor in diversity.
A population that is growing more slowly is almost always one that is aging. The outlook in the developed world is stunning. Again, the United States will not bear the worst brunt of this change. Among the most challenging situations will be Japan’s. By 2050, one in two members of its population will be over 50, one in three will be over 65, and one in six will be over 80. In the United States, only about one-third of the 2050 population will be over 50.
The relative growth of various U.S. age cohorts has important implications for work, however. Between 2000 and 2020, the population aged 50-74 will swell by 34 million. The population aged 25-49 will grow by roughly 1 million over that time period. The challenges that will confront policymakers and corporate HR departments from these trends will be enormous. The population that has traditionally been the bedrock of the workforce will barely change in size. The population that has traditionally had a high propensity to retire will explode. Developing strategies to integrate these older workers into a work environment that is increasingly international in its concern and decreasingly tolerant of obsolete skills may well be the most important diversity challenge that lay ahead. The success or failure of these strategies will be an inescapable determinant of corporate and national prosperity.
- Heet, J. A. 2003. “The Coming (and Present) International Market for Labor.” White Paper, Hudson Institute, Indianapolis, IN.
- Johnston, W. B. and Packer, A. H. 1987. Workforce 2000:Work and Workers for the 21st Century. Indianapolis, IN: Hudson Institute.
- Judy, R. W. and D’Amico, C. 1997. Workforce 2020:Work and Workers for the 21st Century. Indianapolis, IN: Hudson Institute.
- Organisation for Economic Co-operation and Development. n.d. Various data. Paris: Author. Retrieved from (http://www.oecd.org/).
- United Nations Population Information Network. n.d. Various data. New York: Author. Retrieved from (http://www.un.org/popin/).
- U.S. Bureau of the Census. n.d. Various data. Washington, DC: Author. Retrieved from (http://www.census.gov/).
- U.S. Bureau of Labor. n.d. Various data. Washington, DC: U.S. Bureau of Labor. Retrieved from (http://www.bls.gov/).