October 6, 2022, 0 Comments
Is the Workforce Shrinking Before Our Eyes?
In the second part of this two-part series, we share research from Emsi, the leading provider of labor market data, on the vanishing workforce.
In the first part of this two-part series, we shared insights from the National Bureau of Economic Research (NBER) on why the economic and labor numbers are unfamiliar with the ongoing talent shortage. You can find that article here.
If you are in HR, a hiring manager, or running a business, you are not alone in your struggles to find workers. Wage inflation, the persistence of the Covid-19 pandemic, and workplace fatigue are all contributing to the challenge of hiring and retaining employees. In the past, when talent acquisition created anxiety among recruiters, we knew it was just a rough patch we’d all get through. Emsi’s research suggests that we’ve entered a “sansdemic” (without people), and the “hire more people” directive we’ve heard before isn’t going to help. Emsi reports the workforce is “vanishing” and will continue to disappear for decades to come. It’s not just a matter of a low labor force participation rate (LFPR), which measures people working or actively seeking work; it is a lack of available prime-age workers.
What’s Really Happening?
The last few years have been tumultuous with the pandemic. A February 2020 study by Manpower reported that a record 70% of US businesses reported a talent shortage – more than double the 32% who were having difficulty in 2015. With the Covid-19 shutdown, unemployment rates soared. In the past, when unemployment was high, talent was plentiful. But, in the frenzy of shutdowns and layoffs, and employees working from home, coupled with extended unemployment benefits and stimulus packages, workers didn’t jump back into the workforce pool. The result – millions of people not working and millions of open jobs unfilled. Esmi reports the LFPR has dropped to lows not seen since the recession of the mid-1970s.
Companies are trying to combat employee exoduses with strategies that include “internal mobility, reskilling and job redeployment…open to part-time workers, employees who live and work remotely, and workers who need training to perform…improving employee experiences with culture and wellbeing programs to make a company (and the job) more enjoyable and rewarding.”
But these tactics won’t be enough because there won’t be sufficient numbers of prime-age workers, and Covid-19 isn’t to blame. Emsi notes that this is “history catching up to us. We’ve been approaching this cliff for decades,” and there are a growing group of researchers and writers who are noticing this same trend.
In brief, Esmi reports that “there aren’t enough millennials and GenZers to fill baby boomers’ shoes”:
- The mass exodus of boomers (workforce past)…The largest generation in US history remains a powerful cohort of key workers that still hold millions of roles. Their sudden departure from the labor force will gut the economy of crucial positions and decades of experience that will be hard to fill en masse.
- Record-low labor force participation rate (LFPR) of prime-age workers (workforce present)…Thousands voluntarily opted out of looking for work. The children and grandchildren of baby boomers are not replacing the boomers who leave the workforce.
- The lowest birth rates in US history (workforce future)…The national birth rate, already in decline, hit a 35-year low in 2019, and the relative size of the working-age population has been shrinking since 2008.
Where did the Prime-Age Workforce Go?
It might be easy to understand that, according to Emsi, 2.4 million women left the workforce from February 2020 to February 2021. Many stayed at home as their children attended school remotely. But Emsi tells us that this fact was overshadowed by another mass exodus – men have been disappearing from the workforce since the 1980s. Here are some additional takeaways from what Esmi is calling an “erosion of the prime-age male workforce:”
- The prime-age male workforce (ages 25-54) plunged from 94% in 1980 to 89% in 2019. That five percentage-point drop represents over three million missing workers.
- Millennials are expected to inherit an estimated $68 trillion from their boomer parents by 2030, making them the new, wealthiest generation in history…making millennials less motivated to seek careers of their own.
- The opioid epidemic is a major culprit in siphoning prime-age men off the labor force.
- The number of prime-age men willingly opting for a part-time job jumped from six million to nearly eight million in 2019.
Valuing What You Have
With the impending shortfalls, both near-term and in future decades, Emsi tells us that:
- Education institutions and businesses will desperately compete for recruits who simply don’t exist.
- The US stands to lose $162 billion annually due to talent shortages.
We need people. We won’t be able to “technology” ourselves out of this jam but recruiting and retention strategies can help slow the impending worker drought.
Emsi summarizes it by saying – “The sansdemic is going to make a tough situation tougher still. Fewer people means fewer new ideas. Fewer students. Fewer people in research and innovation. Fewer skills in the job market. Fewer employees. Fewer products and fewer goods. Fewer opportunities for growth.” Every person is going to be of value and will need to feel valued.
If you would like to receive a copy of Emsi’s research, email us at email@example.com. Let us help you develop effective retention strategies.