BrazilSaudi Arabia facing steep wage hikes due to skilled talent shortage
Saudi Arabia is facing one of the steepest wage hikes worldwide in the coming years according to human capital firm Korn Ferry, with the global skilled talent shortage threatening to add a $33.6 billion premium to local payrolls by 2030.
In a series of recent reports examining the unfolding skilled talent crisis and the potential effects on the international and national economies of the studied markets, the global human capital consulting firm Korn Ferry has pegged the possible loss of productivity at a worth of nearly $8.5 trillion by 2030, with a wage premium of $2.5 trillion or more added to annual remuneration costs due to the chronic shortage of expertise – a projected talent deficit upwards of 85 million skilled workers.
The consulting firm's analysis zooms in on the talent pool of 20 major international economies, including Saudi Arabia and the UAE, with a focus on the knowledge-intensive sectors that act as critical economic drivers – namely financial and business services, manufacturing, and technology, media, and communications (TMT) – with these industries among those that will be most greatly impacted by digital automation and the technologies of Industry 4.0.
By 2020 alone, the unrealised economic output due to international skill shortages could amount to $2.1 trillion, with Saudi Arabia accounting for $25.80 billion of that sum, and the UAE chipping in for a further $14.46 billion worth of lost productivity. And these figures, by Korn Ferry projections, will for Saudi Arabia and the UAE blow out to more than $206.77 billion and $50.55 billion just a decade later if the issue is left unaddressed.
With respect to Saudi Arabia, the lost productivity cost is derived from an estimated labor deficit of some 660,000 skilled workers – translating in turn to a wage premium of $10,700 by 2030; that is, the average additional cost for employers added to the base salary per skilled worker above ordinary inflation-driven rises. The $33.6 billion total bottom line impact represents a 17 percent wage hike, with the Emirates in line for a 9 percent surge of its own.
As to the specific sectors of the study, the financial and business services industry – which is noted as one of the world’s most important sectors in terms of contribution to GDP – will be the one most impacted by acute talent shortages, with the Korn Ferry report projecting a shortfall of 10.7 million skilled industry professionals globally by 2030 and a potential wage premium of over $440 billion – more than double the other primary sectors examined in the report.
As a result of this dearth, Saudi Arabia stands to forfeit nearly $15 billion in lost finance and business sector output by 2030. Meanwhile, in terms of local wage premiums, the technology, media and telecom sector of Saudi Arabia will be the hardest hit, with a $2.4 billion bonus added to the pay packets of in demand workers by the end of next decade, followed by a $2.1 billion total premium forked out by organisations operating in the local manufacturing sector.
“The new era of work is one of scarcity in abundance: there are plenty of people, but not enough with the skills their organisations will need to survive,” Jonathan Holmes, Korn Ferry Managing Director for MENA, summarised. Harish Bhatia, MENA regional director for Korn Ferry Products adds; “In the private sector, business leaders need to reimagine all aspects of talent management, employee engagement and reward schemes to better position them to retain top talent at lower wage premiums to protect profitability and business models.”
