Demand for foreign workers in advanced economies presents a significant opportunity for Egyptians seeking employment abroad. “Many countries are seeking to attract Egyptian workers, especially skilled workers,” Heba Ahmed, director of the operations department at the Ministry of Labor, told the media in June, Statistics from the Ministry of Immigration reveal a massive increase in the number of Egyptians abroad, skyrocketing from 2.7 million in 2013 to 14 million in 2023, with more than 50% of them working in the GCC.
More Egyptian workers going to advanced economies could significantly boost remittances. Malek Adly, head of the Egyptian Centre for Economic and Social Rights (ECESR), told Equal Times, a publication, in February, “Egypt has become heavily dependent on remittances from Egyptians abroad and is seeking to increase their numbers to increase remittances.”
Remittances are currently Egypt’s largest source of foreign currency, five times more than revenue from the Suez Canal, according to a 2022 working paper by the Economic Research Forum.
Central Bank of Egypt (CBE) data indicates remittances grew by 73.8% year-on-year in May to reach $2.7 billion and 66% to $2.6 billion in June.
Shrinking labor supply
The lack of labor supply in advanced economies has been a pressing issue disrupting supply chains and hindering economic growth. In June, Ekkehard Ernst and Lisa Feistin, in Intereconomics, Review of European Economic Policy journal, wrote that “supply bottlenecks due to labor shortages are likely to slow global growth and trade while also inducing higher global inflation.”
According to a June report by McKinsey Global Institute, the estimated GDP in 2023 could have been 0.5% to 1.5% higher across these economies if employers had filled the available job vacancies.
A May report by the European Labor Authority (ELA) echoed the same concern, showing that labor shortages are associated with increased production costs and constrained order reservation. In addition, labor shortages can result in increased workloads and longer working hours for those employed.
Aging workforces and increased labor demand further exacerbate the issue. The McKinsey report showed that labor markets in advanced economies, with a particular focus on France, Germany, Italy, Japan, the United Kingdom, Australia, Canada, and the United States, today are among the tightest in two decades. The report highlighted that the number of job vacancies per unemployed person in designated economies increased by more than four times on average between 2010 and 2023 and by almost seven times in the United States.
The report added this is “not merely a pandemic-induced blip, but rather a long-term trend that may continue as workforces age.” According to the OECD Library, The working-age population is defined as those aged 15 to 64.
Dorina Georgieva, an economist at the World Bank Group, wrote in April, “Among high-income economies, the aging population has become increasingly evident.” She added that in 2022, almost 20% of the population in Europe and North America was 65 and older.
Georgieva noted this will increase the cost of labor as fewer people will be available to work. According to Global Labor Market Outlook (GLMO) in July, “The shrinking working-age share of the population may cut an average of 0.4 percentage points from global growth each year over the next decade.”
S&P Global noted in February that by 2050, countries will lose 92 million working-age individuals while gaining over 100 million elderly people, according to research from the Center for Global Development. Without migration, the 38 OECD countries, which together account for over 40% of global GDP, will need an additional 15 million workers annually beyond what domestic growth can supply.
The GLMO showed that participation in the youth labor force is also declining in many economies. This could be due to more young people seeking higher education or, that youth may be overqualified or underskilled for the jobs available or simply not interested in traditional manufacturing and trades occupations.
This underscores the necessity of enhancing workforce participation and attracting more immigrants. As the GLMO states, “Immigration and greater labor force participation among the domestic population are critical to solving labor shortages in many economies.”
The Outlook emphasized that immigrants tend to be of working age and are more likely to possess the necessary skills for industries facing significant labor shortages. This is particularly evident in “low-skill jobs requiring in-person work, such as basic manufacturing, construction, trades, leisure and hospitality, and healthcare.”
Sectors most affected
Labor-hungry sectors in advanced economies include construction and healthcare. “Workers in these occupations mostly use physical and manual skills, which in many cases are challenging to automate,” the report said.
The ELA report showed that employment in the construction sector tends to experience sharper twists and turns than the economy as a whole. Reflecting this trend, Turner & Townsend, a multinational services company, noted in June that 79% of international real estate markets report skills shortages, while fresh investment drives up activity after economic difficulty.
These shortages could reduce economic returns. An August article by McKinsey & Company highlighted that labor shortages and productivity challenges in the construction sector could result in a shortfall of up to $40 trillion in construction output.
The global healthcare sector also is experiencing a remarkable transformation. According to Deloitte’s 2024 Global Healthcare Sector Outlook, it “faces a severe shortage of workers, with projections indicating a shortfall of 10 million by 2030.”
The Outlook underscored that the demand for healthcare workers is projected to increase by 29% over the next decade.
While filling jobs in sectors requiring physical and manual skills is challenging, the McKinsey report indicates that the most significant shortage remains in technological skills.
The report showed occupations relying on these skills, like software developers and other IT-related jobs, have been the hardest to fill since 2015, although the advent of generative AI may restore some balance. According to a May article by Pearson’s Faethm, a Software company in Australia, “The tech skills gap threatens business growth and could stifle innovation and cut into company competitiveness.”
The article noted that by 2030, the world could see a shortfall of 4.3 million tech workers, resulting in $449.7 billion in unrealized output.
Upskilling Labor
Egypt has become more keen on developing its labor base. According to Labor Minister Mohamed Gobran in August, “Our goal is to develop the necessary skills for current jobs and to anticipate future job requirements. He added that the ministry is intensifying efforts to provide skilled labor with internationally recognized certifications.
In May, Minister of Emigration and Expatriate Affairs Soha Gendi announced the Egyptian and Italian governments are collaborating to establish a center for employment and legal migration. She said the center’s mission will be to train and qualify Egyptians for work abroad while also familiarizing them with the laws and culture of their destination country.
In addition, Gobran stressed the ministry’s efforts to develop the country’s vocational training system in cooperation with private-sector development partners in September.
In a meeting with Abdulrahman Al Awar, Minister of Human Resources and Emiratisation of the United Arab Emirates, he underscored his ministry’s commitment to providing skilled labor to the UAE market and working closely with local employers.
Gobran highlighted the importance of the ministry’s “pre-departure orientation unit,” which educates Egyptians seeking employment abroad about their rights and responsibilities, as well as the labor laws and systems in their destination countries.
Another notable initiative was the establishment of the Mehany 2030 project by the Ministry of Labor in January. The project aims to train a million individuals to meet local and global labor demands. It also seeks to implement long-term training programs, ranging from three months to a year.
Recommendations for tight labor markets
According to Kweilin Ellingrud, McKinsey Global Institute director and senior partner, in August, “To address this issue, policymakers must prioritize policies that encourage labor force participation and skills development.”
Businesses can broaden hiring pools by seeking to attract immigrants. The Global Labor Market Outlook showed that increasing the number of foreign workers and providing pathways to permanent residence is necessary to bridge the labor supply gap.
However, given the political controversies, immigration remains insufficient to address labor shortages. Also, many economies cannot admit enough foreign workers to replace missing workers, the Outlook noted.
Increasing the number of women in the workforce also could help address shortages and improve productivity. According to the IMF Library in June, “In advanced and emerging markets, increasing female labor force participation to levels in the best-performing peers could, in most cases, more than offset GDP losses resulting from a shrinking labor force in the next few decades.”
To encourage women’s participation in economies and bridge the gender gap, the McKinsey report suggests implementing flexible work arrangements and access to care support. Such incentives “could increase the contribution of women to labor supply growth and reduce tightness in the labor market,” the report noted.
Deploying and adopting technologies is also an effective approach for businesses to power productivity growth. The McKinsey report underscored that technologies such as artificial intelligence could significantly boost productivity, enabling advanced economies to continue growing despite the decline in labor supply.
This article first appeared in November’s print edition of Business Monthly.
