Furthermore, in some regions the Covid pandemic has had a notable impact on the number of people willing or able to work. Meanwhile, a new and potentially greater influence on the workforce has arrived – artificial intelligence (AI) – which is likely to have a profound impact on services sectors in particular.
All these changes to the supply, age and cost of labour are likely to heavily affect the assets we invest in.
Population dynamics
The changing size of working-age populations can have a significant impact on profitability and capital markets. We have studied these trends for many years, and they help inform our opinion about future economic growth and the flow of capital. The cost and availability of labour can affect companies’ ability to grow. In the shorter term these demographic trends have been disturbed by changing wealth patterns and the pandemic. These trends will continue to evolve and influence the price of labour.
Technology changes
For some economies, globalisation caused a fundamental downward shift in the cost of labour, which fell significantly for companies in comparison to the cost of capital. This trend has since reversed dramatically owing to influences such as the Covid pandemic and growing competition between the world’s great powers. The natural response from companies has been to focus capital spending on technology, an approach which has been boosted by the additional opportunity to invest in AI systems.
