are particularly strong among firms at the productivity frontier. On average, frontier firms have twice the share of high-skilled workers compared to laggard firms.18 However, their differentiation rests not only on workforce composition but on the depth and deployment of specific skills. For example, frontier firms exhibit almost twice the level of management and communication skills compared to laggards and more than double in ICT skills.19 Closing the skills gaps and enhancing the quality of education and job training could unlock significant productivity gains.20 Demographic trends are also reshaping productivity prospects, with the ratio of working-age individuals to those aged above 65 projected to shrink from 6.4 in 2024 to 3.9 by 2050.21 Migration is likely to play a pivotal role in mitigating these headwinds. Beyond addressing labour shortages, migration also drives knowledge diffusion and facilitates cross- border productivity spillovers. However, tightening labour markets and increasingly selective migration policies are likely to reshape the global talent landscape in the years ahead. Business environment The evolving business environment presents both opportunities and risks for productivity growth in the coming years. Industrial policies are increasingly being used to stimulate domestic industries, promote technological leadership and secure supply chains. However, their long-term implications for allocative efficiency, market dynamics, firm size and productivity are uncertain. At the start of 2024, the World Economic Forum’s Chief Economists Outlook flagged concerns about domestic market distortions and global supply chain redundancies arising from such interventions.22 For example, past misallocations of capital and labour have already caused a 0.6 percentage point drag on annual productivity growth, and it is estimated that TFP growth could have been 50% higher in recent years without these inefficiencies.23 Global economic fragmentation and financial constraints also pose a challenge to sustained productivity gains. By 2021, business investment in OECD countries had fallen by 40% from pre-GFC levels.24 This decline limits the ability of firms to adopt new technologies and scale productivity-enhancing innovations. The global fiscal environment, shaped by high levels of public and private debt, risks exacerbating this squeeze on productivity-enhancing investments, including public spending on critical areas such as workforce training, infrastructure and research and development. The geopolitically-driven reconfiguration of supply chains also risks reducing the economies of scale and cost advantages that underpin productivity growth. Global economic fragmentation and financial constraints also pose a challenge to sustained productivity gains. Global Economic Futures: Productivity in 2030 10

Global Economic Futures Productivity in 2030 2025