As the new administration shifts into high gear, policymakers may find themselves dealing with tight labor markets—a long-term structural trend in many advanced economies. McKinsey estimates that GDP in 2023 could have been 0.5 to 1.5 percent higher across these economies if employers had been able to fill their excess job vacancies. America is punching below its weight on potential labor productivity—the value added per hour worked—and sectors such as healthcare, construction, and small businesses are especially affected. Consequently, workforce shortages remain a reality in many parts of the economy and can only intensify as demographic shifts gather pace. Falling fertility rates, higher life expectancies, and declines in working-age populations will have profound effects on the global workforce (Exhibit 1).
