Labor Shortage Problems Stretch
Written By Rob Kirkbride, Write Office • September 6, 2022
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I was reading a story recently about why the labor market is in so much turmoil. There are two open positions for every worker looking and the Federal Reserve’s efforts to curb inflation has not tightened the labor market, as much as they hoped.
In fact, the labor shortage is a problem business owners are going to face for some time to come. According to Sergio Rebelo, the Portuguese economist who is a professor and chair of the Northwestern University Finance Department said employers should not view the current labor shortage as an aberration.
“It takes about 26 years to produce a 25-year-old worker,” he joked. “You can’t go back and undo those kinds of decisions.”
He’s talking about a decades-long trend of reduced birth rates in the U.S. and around the world, which has led to unemployment in the U.S. as low as it ever gets. Right now, unemployment in the U.S. sits at 3.5%. About 2% of the workforce is considered unemployable for a variety of reasons, which means our actual unemployment is around 1.5%.
The demographic outlook is stark. The number of U.S. workers most active in the labor market— those aged 25 to 54 — hit a plateau in 2000 after more than 40 years of steep growth. According to Pew Research Center, about 29 million Baby Boomers retired in 2020, a trend that accelerated since the start of the pandemic.
Researchers say 75 million Baby Boomers will retire by 2030, which means The Great Retirement is going to be a lot more painful than the Great Resignation that we’ve just gone through. It is estimated that one in four workers in the U.S. is a Boomer, or about 41 million employees.
Since a lot of these Boomers hold higher level management positions because of where they are in their careers, the competition for talent that everyone has suffered through in recent years is going to get a whole lot worse.
Regardless of where you fall politically when it comes to immigration, a significant reduction in net migration to the U.S. is compounding the labor shortage. About 1 million people per year came to the U.S. in 2016 and these immigrants helped the economy in two ways, says Rebelo: they filled jobs, and they had higher fertility rates. The flow of immigrants has dwindled to 200,000 per year, which you may or may not like, but it does adversely affect inflation and the labor shortage.
The staffing company Adecco offers three ways you can adapt to the changing economics of the workforce (and the first one has a lot to do with our industry): Offer flexibility in the workplace; close skills gaps with reskilling and upskilling; and mentor, don’t manage, your people.
I know space can help attract and retain workers. It’s not theoretical. It is a fact. The industry needs to do a better job explaining how these forces are driving the labor shortage and how the right workplace can make a real difference in keeping people in their jobs. So take a minute now to send this column to your customers. Let them know you are there to help. As their competitors watch their Baby Boomers head for the exits, you can help them attract the next generation of leaders.
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