Broadleaf recently hosted a webinar featuring Emsi Burning Glass’ Senior Labor Economist and Director of Staffing Products and Data—Ron Hetrick. The author of the report titled The Demographic Drought, Hetrick discussed the current labor crisis, where we’re headed in the future, and the new paradigm organizations must adopt to successfully attract and retain talent.
The pre-covid labor situation
It was always assumed there would be a strong and competitive job market. From 1975-1995—boomers generated massive household wealth gains—and the median household income increased $42 million. Women doubled in the labor force from 1948 (31 percent) to 1996 (60 percent) and drove it forward. Boomers—born from approximately 1946 to 1964—went to college and encouraged their children to do the same.
Around 2002, boomers exploded into retirement age. As the number of people over 55 was growing, the number of people over 55 that wanted to work was decreasing and exiting the labor force. In 2016, millennials became the largest segment of the workforce and now dominate the labor market. So as millennials—who have been found to have less propensity to want to work—entered the labor force, boomers exited, and the labor force participation rate dropped.
From 2014-2019, the number of people in the labor force working part-time soared while those who had to work part-time for economic reasons dropped by 50 percent. One group sharply trending to part-time by choice was prime-age men. Industrial workers were changing jobs to work in the retail industry. But retail workers were not leaving to move to the manufacturing industry.
In February 2020—right before the pandemic—the U.S. recorded the lowest unemployment rate in history at 3.5 percent and was utilizing all of its available labor. For each job opening, there were only two potential workers and one of them couldn’t work.
The current labor crisis
The labor force participation rate has not moved in over a year! Demand for labor is at a record high but very few people are returning to work. There is a workforce gap of about 5.9 million workers compared to pre-Covid. The alarming issue is that around 3.4 million that have left the workforce are 55 years or older. Therefore, they are not coming back!
The U.S. is currently experiencing a 43 percent job opening increase. Pre-Covid there were 7 million job openings and now there are 11 million.
Why are we not recovering faster? Hetrick pointed out the key factors contributing to our current labor crisis.
- Massive retirements: Labor force participation of workers aged 55 and over is not recovering and keeps hitting new lows each month. Boomers retired at a dangerous speed in 2020. If not for the pandemic, the 2 million retirements the U.S. experienced in just one year would have been spread out over 4 to 5 years.
- Misalignment: We are a highly educated nation with a service-based economy. The population of the U.S. looking for work is highly educated. 96 million people in the current labor force have a college degree compared to 44 million that don’t have a college education. However, roughly 6.5 million of the 11 million open jobs in America need to be filled by people without a college degree.
At the same time, the younger working population is drying up. Many positions that pay below $20/hour are filled by workers in their early 20s and the population of 20-24-year-olds is decreasing. In 2015, we had three times as many unemployed lower-skilled workers per job opening as we currently have in today’s labor market.
- Very low immigration: The immigration labor force participation rate is going down. Immigration was nearly non-existent in 2020. In the second quarter of 2021, the immigration rate was down 64 percent from the second quarter of 2020.
- Temporary pandemic shutdowns that contributed to accumulated wealth: Government assistance funds—in the form of stimulus checks, tax deferrals, an expansion of unemployment benefits, and rent deferrals—were received by both furloughed and active employees as personal income. The U.S. lost 21 million total private jobs during the pandemic with 80 percent being temporary furloughs. The labor force has regained 86 percent of this total loss. The workers that have not yet returned to the workforce appear to be living off the wealth they accumulated from this government assistance.
- Opioids and overdoses: An estimated 800 thousand prime-age men are out of the labor force due to opioid overdose or addiction. Drug overdose deaths in 2020 hit the highest number ever recorded and 2021 was on pace to surpass this number.
- Self-employment increase: More people are choosing to work for themselves. 43 percent of people who are planning to quit their jobs intend to go into entrepreneurship.
The future labor crisis
Unfortunately, the labor crisis is only going to continue to get worse. Every year we bring fewer people into the workforce while boomers are existing. Take a look at the following statistics.
- From 2011 to 2021, the vast majority of the U.S. saw its working-age population shrink. Only 60 percent of the total population will be of working age (aged 15-64) by the year 2100.
- We’re living below the 2.1 birth replacement rate and can’t employ what we don’t have. From 2009 to 2019, birth rates plunged across the U.S. In 2020, the U.S. had its lowest birth rate in history. Each generation of women is having fewer children than the generation before.
- Immigration will become less reliable because most developed nations are below replacement birth rate levels and are experiencing the same problem as the U.S.— therefore we can’t look to them for relief.
The new paradigm
Moving forward, organizations need to employ a new paradigm. In the past, the screening process was designed to limit how many job applicants made it before the hiring manager. Today’s labor market dictates that companies ensure that as many candidates as possible make it before the hiring manager.
For future success, organizations must recognize that people matter. Stop selling jobs and start selling corporate values and culture. Look for great, driven candidates that can be trained and mentored. Then, work to retain them!
Below are short and long-term strategies that Hetrick suggests your organization employ to attract and retain workers.
- Go to where potential workers are to attract talent
- Onboard and train quickly
- Retain your employees by staging your rewards, raising wages, and offering non-wage incentives
- Make workforce planning an executive-level conversation—not just HR level
- Re-invest in industrial engineering: How can you combine jobs or get rid of wasteful steps?
- Look for hidden workers with untapped talent and build programs that you can sustain across your organization. Partner with prisons, colleges, high schools, and trade schools.
- Identify your best workers quickly and have career paths in place for them
This blog was written by Broadleaf’s Director of Business Development Gregory Gary.