The U.S. economy has remarkably sustained an unemployment rate below 4% for nearly two years. However, this isn't solely due to the remnants of pandemic-induced disruptions, as economists and business leaders point out. It's a crisis that has been brewing for decades, culminating in recent worker strikes within industries like automakers and airlines. These escalating labor shortages pose a long-term crisis, potentially driving both wages and prices upward.
Worker’s Choice – changing the game
Experts have consistently raised concerns, attributing the issue to a mix of factors: baby boomer retirements, falling birthrates, immigration policy shifts, and changing worker preferences. These factors have created a shortage of workers for U.S. employers. Unfortunately, despite a softening labor market, these factors are expected to persist. While prime-age workers (ages 25 to 54) are showing signs of recovery, overall workforce participation hasn't fully bounced back from pandemic setbacks. It's projected to drop to 60.4% in 2032 due to baby boomer retirements. The 'talent supply chain' now has options, with workers increasingly choosing part-time, flexible, or remote work. Employers vying for this talent are compelled to adapt to these evolving preferences.
Wages reflect supply and demand. They shot up during the pandemic recovery and have recently outpaced inflation. Long-term labor shortages could lead to a faster pace of wage growth in 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.”
Tap the Gap – Bring Boomers Back into your Talent Pool
The baby boomer generation, comprised of 76 million Americans born between 1946 and 1964, is aging, with the youngest among them nearing the average retirement age of around 64 by the end of 2028. Millennials, the next largest generation, with 62 million births in the U.S. from 1981 to 1996, have grown in size due to immigration. However, Baby boomers, who had been on a steady trend of working more years, pulled back during the pandemic. Many retired and haven’t returned. Tapping into this pool of seasoned talent in the Trade’s space benefits both sides – retirees regain purpose and additional financial resources in a high inflation economy and businesses gain access to experienced talent.
Immigration: A Bitter Pill or a Sweet Solution to Labor Woes
Offshoring, a prevalent choice 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 – regardless of the stance, it's a potential resource under careful consideration by businesses to fill the workforce shortfall. 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,” said John Fish, chairman and CEO of construction contractor Suffolk.
Plugging the Leaks
Tackling labor shortages necessitates the implementation and coordination of multiple strategic approaches, including workforce expansion, adoption of technology that provides accessibility to new resource pools (ie. language translation in workflows, etc.), enhanced productivity through automation, training, and business process refinement.
Register now for the webinar on November 16th to hear more about how to best position your company to address this workforce shortfall.
Sources:
America's Labor Shortage is Most Severe in These 13 States (newsweek.com)
Millennials outnumbered Boomers in 2019 | Pew Research Center
Why America Has a Long-Term Labor Crisis, in Six Charts - WSJ
Labor shortages hit schools, air-traffic control, police, child care (axios.com)
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