New Macro Report Highlights the Changing Nature of the Global Workforce Over the Next Decade

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:

• To read the latest Insights piece, click here.
• For an archive of previous publications, click here.

About Henry McVey

Henry H. McVey joined KKR in 2011 and is Head of the Global Macro, Balance Sheet and Risk team. Mr. McVey also serves as Chief Investment Officer for the Firm’s Balance Sheet, oversees Firmwide Market Risk at KKR, and co-heads KKR’s Strategic Partnership Initiative. As part of these roles, he sits on the Firm’s Investment Management & Distribution Committee and the Risk & Operations Committee. Prior to joining KKR, Mr. McVey was a Managing Director, Lead Portfolio Manager and Head of Global Macro and Asset Allocation at Morgan Stanley Investment Management (MSIM). Learn more about Mr. McVey here.

About KKR

KKR is a leading global investment firm that offers alternative asset management as well as capital markets and insurance solutions. KKR aims to generate attractive investment returns by following a patient and disciplined investment approach, employing world-class people, and supporting growth in its portfolio companies and communities. KKR sponsors investment funds that invest in private equity, credit and real assets and has strategic partners that manage hedge funds. KKR’s insurance subsidiaries offer retirement, life and reinsurance products under the management of Global Atlantic Financial Group. References to KKR’s investments may include the activities of its sponsored funds and insurance subsidiaries. For additional information about KKR & Co. Inc. (NYSE: KKR), please visit KKR’s website at www.kkr.com and on Twitter @KKR_Co.

The views expressed in the report and summarized herein are the personal views of Henry McVey of KKR and do not necessarily reflect the views of KKR or the strategies and products that KKR offers or invests. Nothing contained herein constitutes investment, legal, tax or other advice nor is it to be relied on in making an investment or other decision. This release is prepared solely for information purposes and should not be viewed as a current or past recommendation or a solicitation of an offer to buy or sell any securities or to adopt any investment strategy. This release contains projections or other forward-looking statements, which are based on beliefs, assumptions and expectations that may change as a result of many possible events or factors. If a change occurs, actual results may vary materially from those expressed in the forward-looking statements. All forward-looking statements speak only as of the date such statements are made, and neither KKR nor Mr. McVey assumes any duty to update such statements except as required by law.

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