Where has all the talent gone? U.S. demographic shifts and post-pandemic woes are downsizing and reshaping the workforce.
The U.S. added more jobs than expected last month, causing elation for many. But that job growth is masking a trend that’s stressing employers and the economy: the shrinking labor force. For three straight months, the number of people who are working or looking for a job declined, according to the U.S. Labor Department. The decrease represents a loss of about 2.8 million workers. It’s a precarious moment because the Federal Reserve wants to cool the labor market yet employers are pulling out all the stops to find qualified workers.
Here are six trends that are transforming, reshaping, and downsizing the American workforce.
1. Retirement is accelerating.
A key issue facing the labor force is the wave of retirements from Baby Boomers and Gen Xers. Approximately 10,000 workers in this segment of the population reach retirement age each day. Retirements among U.S. adults aged 55 and older surged during the initial months of the pandemic and have continued at an increased rate in 2022. In a recent Pew Research survey of Americans who retired during the pandemic, 37% reported retiring two to three years early.
2. The number of younger workers is declining.
The labor force participation rate for U.S. adults of prime working age—25-54 years old—remains below pre-pandemic levels. At the same time, enrollment in full-time, four-year universities has increased significantly since 2000. Just 62% of students complete their degree program in six years or less. These trends have contributed to a lower labor force participation rate among younger adults, especially as the percentage of jobs requiring at least a four-year degree has far outpaced the percentage of U.S. adults who have earned a degree over the past three decades.
3. Immigration has plummeted.
In the middle of the last decade, the U.S. was adding about a million immigrants a year. But those numbers slowed down during the Trump administration and hit a veritable brick wall when COVID-19 erupted in 2020. In addition, these issues caused some recent immigrants to return to their native countries. In 2020, immigration fell to half of its 2016 level. Last year, it fell to just over a quarter. That gap is particularly painful in low-paying industries like hospitality, food services, retail, and health care, which are especially reliant on immigrant workers. Furthermore, scholars attest that half of all immigrants to the U.S. would have been college-educated. For this reason, the immigrant shortage is also a huge loss in terms of skilled labor, which, in turn, represents a significant loss for the long-term growth of the U.S. economy. And because immigrants also tend to be active in starting their own businesses, the decline will ultimately be felt in other sectors of the economy.
4. Birthrates are declining.
Major employment firms predict that the global baby shortfall will create a labor shortage that will last for years. The demographic forces leading to a worldwide population drop have been at work in major economies for a long time. Year after year, the birth rates of wealthy and middle-income countries have fallen below the “replacement level” — the level at which people have enough children to maintain current population levels. A society needs 2.1 children per woman for the population to remain stable. Soon, almost every country in the world will fall below this threshold. While a global population drop is good news for the planet, it presents a huge challenge for economic and social systems. Fewer people means less work can get done. America is already experiencing a serious labor shortage in industries such as airlines, day cares, and the military. In the coming years, many more sectors will be affected and companies will produce or perform less. And as the population drops, the amount of money being spent at these businesses will also shrink. Less consumption leads to fewer sales, which leads to lower profits and, ultimately, economic decline.
5. Childcare is hard to come by.
Working parents continue to struggle with childcare issues, ranging from the availability of quality care to its soaring cost. Since the start of the pandemic, almost 90,000 child care workers have left the industry, or about 8% of its workforce, according to the Center for American Progress.
6. Sickness continues to hold people back.
Even though the COVID-19 pandemic has eased, more Americans are currently unable to work due to illness than they were at this time last year. Workers in the U.S. are being impacted by the “tripledemic”, a triple whammy of cases of COVID-19, the flu, and a virus called respiratory syncytial virus (RSV) all surging at the same time. In addition to their own illnesses, many workers are being forced to miss work to care for sick children. While these setbacks are likely temporary, they are wreaking havoc on businesses that are already short-staffed.
The reshaping of the workforce in America is just beginning. As labor force participation continues to decline, businesses will need to revisit their compensation and hiring strategies. At the same time, employee retention is already a crucial focus area for employers and will only grow in importance over the coming months and years. It is essential for companies to take an honest account of their successes and failures, and take actionable steps to create an attractive work environment.
By embracing employee development and skills enhancement, staffing shortages can be addressed long before the situation becomes critical. For 25 years, The HR Team has been helping companies take a strategic approach to reaching their full potential. Please contact us to learn more.
About The HR Team: Founded in 1996, The HR Team is a Maryland-based human resources outsourcing firm committed to developing strategic, customized solutions that respond to the unique needs and cultures of organizations of all types and sizes. Available as a one-source alternative to an in-house HR department or on an à la carte project basis, the company’s flexible service models address the full spectrum of HR needs that many organizations struggle to address. The HR Team helps clients achieve their highest level of success by providing value-driven human resources services that leave them time to focus on what they do best: directing business growth and profitability. Headquartered in Columbia, Maryland, the firm serves all of Maryland, Washington, DC, and Virginia. To learn more about The HR Team, call 410.381.9700 or visit https://www.thehrteam.com/.