It has been known for quite some time by most statisticians, but The U.S. labor market is heading toward a significant shift that will impact businesses, job seekers, and the overall economy. I was made aware of this statistical fact when our CEO roundtable hired Ron Hetrick to present to our board. He assured us that the United States has been living beneath the birth replacement rate since 1973. And if you think about it, it makes sense why. During the late 70’s and early 80’s, there was a movement where many women began entering the workforce whereas in the past, they would traditionally stay home and with children and be housewives. When this happened, the United States birthing statistics showed a decline in US births. Now, fast forward to today in 2024, our economy still needs skilled labor, but baby boomers are now leaving the workforce and as a nation, we did not birth enough people to replace them. With insights from experts like Ron Hetrick from Lightcast, it’s becoming increasingly clear that the labor shortages we are experiencing now are only the beginning of what Hetrick calls a “Demographic Drought.”
Why is this happening?
As described briefly above, the U.S. labor force is shrinking due to these key demographic trends:
- Aging Population: As baby boomers retire, there are fewer workers entering the labor force to replace them. According to Hetrick, by 2034, older adults will outnumber children for the first time in U.S. history. This creates a significant gap as more people leave the workforce than enter it.
- Declining Birth Rates: The birth rate in the U.S. has been on a steady decline, exacerbated by the 2020 “baby bust.” With fewer young workers entering the job market, there simply aren’t enough people to fill the growing number of job openings.
- Immigration Delays: Immigration has traditionally been a key driver of workforce growth. However, as of recent reports, around 4 million immigration visas remain stuck in processing, creating further strain on the labor pool.
The Immediate Impact on Employers
It has been reported consistently starting in 2020; the labor shortage is already creating challenges for businesses trying to hire, especially for roles that require specific skill sets like healthcare, skilled trades, and STEM fields. When Ron Hetrick joined our CEO roundtable he made this one statement that really gained all of our attention. He said: “You need to understand that it a statistical guarantee that you will never see another employers market in your lifetime” Hetrick then began to highlight that the gap between available workers and open positions is growing, with over 11 million job openings in the U.S. at present. This shortage means employers will need to rethink how they attract and retain talent. Ron presented this to us first in 2021 and at the time this shocked us all.
What Does This Mean for Employers?
Employers must adopt new strategies to remain competitive in this evolving labor market. Some key takeaways include:
- Invest in Automation: One suggestion Ron Hetrick suggests, companies should explore less labor-intensive models and leverage technology such as artificial intelligence and robotics. Automation can help offset labor shortages by making processes more efficient.
- Engage Unengaged Workers: Isn’t it amazing that in 2020 we had a remarkable number of people permanently disengage from the workforce? They left and they did not come back. Well, there are still an estimated 6 million people who are “unengaged” from the labor market—those who are neither working nor actively seeking work. Employers should find creative ways to engage this segment of the population, offering flexible work arrangements or re-skilling opportunities.
- Focus on Workforce Development: Adjustments need to be made. Employers should look at long-term solutions, including partnerships with educational institutions to build a pipeline of future workers, particularly in industries where skilled trades and STEM graduates are in short supply.
- Embrace Remote Work: This is something that has been especially hard for me personally to wrap my head around. But regardless of my personal thoughts, Hetrick notes that Gen Z places high importance on flexibility and work-life balance, including the ability to work remotely. Companies that can offer these benefits will have a competitive edge in attracting younger talent.
What Should Job Seekers Know?
For some job seekers, particularly younger generations, this demographic shift presents significant opportunities. With businesses increasingly desperate to fill roles, job seekers can leverage their position by seeking higher wages, better benefits, and more flexible working conditions. Furthermore, industries that have traditionally been overlooked, such as the skilled trades, are seeing renewed demand, making them a lucrative option for those entering the workforce. The best advice that I can offer the younger workforce is to develop consistent and strong work habits. One thing that employers across the nation are experiencing is unreliable and unpredictable employees. If you go against the grain and develop habits of being on time, working hard and diligently, being positive, learning leadership skills, developing and valuing interpersonal skills; you will be far ahead of the curve. This simple effort that should not be too difficult to execute will put you in the top 80% of desired employees. I also think it will align you with a guaranteed raise.
By addressing these challenges head-on, both employers and employees can navigate the upcoming labor market shifts more effectively.