News: KKR releases "Eye of the Tiger"
Press Release - KKR, a leading global investment firm, today announced the release of Eye of the Tiger by Henry McVey, CIO of KKR's Balance Sheet and Head of Global Macro and Asset Allocation (GMAA). In the latest Insights piece, McVey and his team argue that structural shifts, including generational demographics, weakening immigration and rapid technological change, will make labor the key focus for governments, employers, and investors over the next decade.
"Looking ahead, when it comes to the global workforce, we feel strongly that the next ten years will not look like the last ten years, as the developed world transitions from a post-GFC worker surplus to a post-pandemic worker shortage. No doubt, this will drive significant macroeconomic and societal challenges. However, tremendous opportunity for greater prosperity lies within those challenges," said Henry McVey.
McVey and the GMAA team explain the actions they believe governments and businesses will need to consider taking to address labor issues and navigate the confines of a structurally tighter labor market:
- Empower more women to join the workforce - while there has been significant progress made in narrowing the gap between male and female labor force participation, a disproportionate number of women remain out of the workforce due to family obligations. In the U.S., for example, equality in the participation rate between women and men would add almost eight million employees to the workforce. Importantly, experiences from Japan and Europe show that offering more flexibility in work-life balance and greater investment in family care can drive improvements in labor market equality and we believe there is still a lot more to be done on this front.
- Encourage more 65+ workers to join the workforce - In Europe, for example, the labor force participation rate for 65+ is just six percent. However, Europe is actually not an outlier, as fewer than 30% of workers over 65 in the markets we analyzed are working or looking for work at a time when most people are living much longer than they did in the past. We believe that it will become even more critical to bring older workers back into the economy as populations continue to age.
- Invest in worker retraining - governments and employers need to consider the workforce as a long-term relationship and invest more aggressively in skills training that builds on existing talents and is responsive to business demands. The opportunity set is particularly large in the U.S., which actually ranks just above Mexico in its public investment in worker retraining and invests just 1/10th to 1/20th the share of GDP that many of its European peers do.
- Create better alignment of management and labor - as workers become scarcer and competition for employees increases, companies will need to adopt new strategies for talent retention. We see opportunities for employers to better align their employees' incentives with their own, including by promoting employee ownership.
- Increase focus on automation - historically, worker shortages have led to rising wages and greater automation. Automation will need to be a significant area of focus across a variety of industries, including retail, hospitality and health care.
Against this backdrop, the GMAA team highlights the following takeaways for investors:
- The tighter labor market will pressure central banks to hold nominal interest rates higher in the near term. However, we are still likely to see lower real interest rates this cycle as supply side forces, including labor, keep inflation at a 'higher resting heart rate.'
- Defendable margins will become more important for the corporate sector as the ongoing worker shortage continues.
- Advancements in family care, including childcare, eldercare and fertility services present significant investment opportunities.
Links to access this report in full as well as an archive of Henry McVey's previous publications follow:
View source version on businesswire.com: https://www.businesswire.com/news/home/20230209005306/en/
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