New Research by BCG in Collaboration with IOM (UN Migration) Reveals Labor Shortages Cost Businesses More Than $1.3 Trillion, but Labor Migration Can Help
BOSTON—Affected by the ongoing pandemic, accelerating climate change, and geopolitical and economic destabilizers, millions of people have moved across borders since the start of 2022. While cross-border migration currently generates an annual economic output of around $9 trillion, this figure could more than double by 2050, to around $20 trillion a year, according to a report from Boston Consulting Group (BCG), in collaboration with the International Organization for Migration (IOM), released on 8th December 2022.
The report, titled Migration Matters: A Human Cause With a $20 Trillion Business Case, outlines the economic case for migration and highlights more than 20 actions across three key strategies that companies can deploy to employ, elevate, and embrace migrants in the workplace.
“A paradigm shift in attitudes toward migration is essential for businesses who want to gain a competitive advantage,” said Johann Harnoss, a partner and associate director for Innovation at BCG. “What’s an opportunity cost of more than $1 trillion today could grow into a $20 trillion opportunity by 2050. There’s certainly a business case for migration but allowing for safe and legal migration of people is also a matter of global justice.”
A Snapshot of Global Migration
More than 280 million people—3.6% of the global population—currently live in countries other than where they were born. For the past five decades, the US has been the primary destination for migrants. In 2020, it was home to more than 50 million immigrants, followed by Germany (16 million), and Saudi Arabia (13 million). That same year, approximately 169 million migrants were workers, 70 million of whom were women.
Migration as a Strategic Business Priority
A recent BCG survey of executives in ten countries revealed that CEOs support migration. Seventy-two percent of senior executives believe “migration is good for the development of the country” (vs. 41% of the general public in these countries). But while 95% of CEOs say they intend to create more globally diverse teams, and 80% take some action in this regard, only 5% do so in a manner that leads to lasting impact. Additionally, migration is not on the list of business leaders’ top five societal concerns (global poverty, climate and sustainability, geopolitical stability, education, and automation).
“Despite migrants’ undeniable contributions to global economies – according to BCG, cross-border migration currently generates an annual economic output of around $9 trillion – significant work still needs to be done to uphold migrant rights and capitalize on their full potential,” said Ugochi Daniels, IOM Deputy Director General for IOM. “Investing in safe, orderly and dignified migration is not only the right thing to do but also the smart thing to do for the private sector.”
Organizations with a high number of immigrants in their leadership team report around 15% higher profitability on average—2.2 percentage points, as measured by earnings before interest and taxes in terms of sales. They are 75% more likely to be world-class innovators. In 2020, 28% of the 2,000 largest publicly listed companies in the world disclosed the citizenship of their board members and executive leadership team. Among those companies, 26% of board-level executives were from a country other than that of the company’s corporate headquarters.
2022 Labor Shortages Cost Over $1.3 Trillion
The global shortage of workers reached an all-time high in the middle of 2022, with deficiencies most pronounced in the US, China, Germany, the UK, and Canada. When BCG examined the world’s 30 largest economies, it found 30 million open jobs. Across skill types, structural labor shortages are costing these countries more than $1.3 trillion a year. While higher wages, automation, education, and reskilling are all needed to fix this problem, businesses must also embrace migration.
The report estimates that if migration were to close as little as 20% of the projected gap between countries expecting population declines and those expecting growth, its economic value would rise to between $13 trillion and $25 trillion a year by the middle of the 21st century.
“Forward-thinking leaders will recognize that migration is more than a human cause,” said Janina Kugel, BCG senior advisor, non-executive board member, and former Chief Human Resources Officer at Siemens, “it is both a business and a societal opportunity that promotes economic welfare, innovation, and global competitiveness.”
Three Strategies to Get Started
While the economic and humanitarian cases for migration are clear, business has yet to act. The report offers three strategies:
- Develop a global talent strategy: Adopt new language norms, globalize hiring, use new recruitment platforms to discover overlooked talent, and allow more remote operations.
- Deploy a global innovation strategy: Harness the cognitive variety of globally diverse teams by creating migration networks, setting up externship programs, and championing differences.
- Stand for global human rights: Embrace and protect migrants’ rights before, during, and after migration, while ensuring business practices are aligned with international labor standards. Business engagement strengthens the governance structures that protect and safeguard the rights of migrants and is vital to develop more sustainable and legal migration pathways.
Download the publication here
