America has Labor Crisis with Few takers for Jobs
While the hot pandemic-era job
market is cooling, it is set to remain tight for years
·
By
the end of 2028, even the youngest living baby boomers will have reached the
average retirement age of approximately 64.
·
Millennials,
numbered 62 million births in the U.S. from 1981 to 1996
·
The
U.S. birthrate—the number of births per 1,000
people—has been falling for decades, declining by about half since the 1960s.
·
Growth
for prime-age workers—those between ages 25 and 54. The overall participation
rate is expected to drop to 60.4% in 2032
·
A
carpenter now is making 20% to 25% more than they did 24 months ago
·
Productivity
growth has been mostly lackluster, rising about 1.4%
a year over the past decade
·
Offshoring,
the scourge of the U.S. manufacturing workforce in the last decades of the 20th
century, has lost favor with some business leaders
after the pandemic highlighted the vulnerabilities of a global supply chain.
Reshoring—bringing manufacturing back to the U.S.—is gathering momentum, backed
by billions of dollars in government subsidies.
The
U.S. economy has been running, improbably, with an unemployment rate under 4% for
nearly two years.
That
isn’t just a holdover from pandemic bottlenecks, when employers let millions of
people go and then struggled to find workers when demand roared back, economists
and business leaders say. It is a storm that has been brewing for decades, flaring
up most recently in the form of worker strikes at automakers and airlines. Labor shortages are turning into a long-term labor crisis that could push wages and turnover higher.
Work
experts have warned for years that the combination of baby boomer retirements, low
birthrates, shifting immigration policies and changing
worker preferences is leaving U.S. employers with too few workers to fill job openings.
While the labor market is softening, none of those factors
are expected to change dramatically in the coming years.
“It
is a talent supply chain and you have to think about it that way, except in this
case, talent has a choice,” said Teresa Carroll, chief executive of Magnit, a firm that manages temp, contract and freelance workers
for companies. Workers are choosing arrangements such as part-time, flexible or
remote work, prompting employers to adapt to fill roles.
Total
employment will grow about 0.3% a year until 2032, the Labor
Department recently projected, much slower than the 1.2% rate over the past decade,
largely because of population constraints. That will contribute to slower growth
in gross domestic product, the agency said.
The
baby boomers were the largest generation of Americans, with 76 million children
born between 1946 and 1964. They currently range in age from 58 to 77. By the end of 2028, even the youngest living baby boomers will
have reached the average retirement age of approximately 64.
The
next largest generation, millennials, numbered 62 million
births in the U.S. from 1981 to 1996, per the Pew Research Center, but has grown because of immigration.
Baby
boomers, who had been on a steady trend of working more years, pulled back during
the pandemic. Many retired and haven’t returned.
The U.S. birthrate—the
number of births per 1,000 people—has been falling for decades, declining by about
half since the 1960s.
The
share of people living in the U.S. who are in the labor
force peaked at 67.3% in the first three months of 2000, when the oldest baby boomers
were 54 years old and the youngest were 35. It helped that the U.S. was in the midst
of an economic expansion, the first dot-com boom.
Participation
hasn’t fully recovered from pandemic-era losses, though there have been signs
of growth for prime-age workers—those between ages 25 and
54. The overall participation rate is expected to drop to 60.4% in 2032, according
to the Labor Department, mainly because of baby boomer
retirements.
Wages
reflect supply and demand. They shot up during the pandemic recovery and have recently
outpaced inflation, which gives workers more spending power. Long-term labor shortages could lead to a faster pace of wage growth for
the foreseeable future.
John
Fish, chairman and CEO of construction contractor Suffolk, said an aging workforce
and fewer young people entering the industry are a combustible combination. “A carpenter now is making 20% to 25% more than they did 24
months ago, and that is not sustainable.”
Filling
the Void
Labor shortages can be eased by funneling more people into the labor
force or making the current workforce more productive. That can be done through
immigration; outsourcing more work overseas; tapping underutilized labor pools such as people with disabilities and the formerly
incarcerated; and improving productivity through automation, training and refining
business and production processes.
Companies
and countries have three options when it comes to managing a shortfall of workers,
said Magnit’s Carroll. “They can plan for it, they can
do nothing, or they can have hope. And to me, hope is not a strategy.”
As
a general rule, an economy is able to grow about as quickly as its workforce expands,
plus any gains in how productive the workforce is. Productivity is difficult to
measure, and in the past few years, the numbers have been muddled by shocks from
the pandemic. Overall, productivity growth has been
mostly lackluster, rising about 1.4% a year over the past decade.
Generative
AI tools such as ChatGPT could help, but the technology
is too new to know exactly where large language models can be reliably applied in
business or work settings.
Offshoring, the scourge of the U.S. manufacturing
workforce in the last decades of the 20th century, has lost favor with some business leaders after the pandemic
highlighted the vulnerabilities of a global supply chain. Reshoring—bringing
manufacturing back to the U.S.—is gathering momentum, backed by billions of dollars
in government subsidies.
That
leaves immigration. After falling during the pandemic because of Covid-related policies,
immigration has come back strongly. But it remains a divisive issue, and business
leaders say the lack of a coherent, stable policy is contributing to the labor problem.
“If
we don’t solve this with a thoughtful immigration program, we’re going to drive
wage rates through the roof in the next two to three years because of the systemic
shortfall of labor at the end of the day,” Fish said.