Since the pandemic, US companies both large and small have been scrambling to find enough workers to maintain full staff. They’ve been forced to offer high salaries and generous perks, while employees were free to scour for better offers or simply quit their jobs and participate in large resignations. But now layoffs are on the rise and job openings are down. The economy is slowing and the Federal Reserve is raising interest rates at the fastest pace in decades. By objective measures, the balance of power in the job market should be tilting in favor of employers.
But strangely enough, it doesn’t. Ask most people doing recruiting these days and they’ll all say something interesting. Finding and hiring enough people for the roles they desperately want to fill remains incredibly difficult. Somehow, workers are still in power, and with the massive changes underway in the labor market, it could stay that way forever.
This change is ultimately due to demographics. Since the post-World War II baby boom, companies have had an endless supply of available talent. do you hate your job? got it. Instead of you, he will give you one out of 100 people who would be happy to do your part. Workers became cheap and disposable because they were plentiful.
But now that baby boomers are retiring in droves, companies suddenly find themselves running out of endless pools of available talent. “The current labor shortage we are facing is likely to continue and get worse,” said Jay Denton, chief analytics officer at LaborIQ, which provides payroll analytics to employers. I have a personality,” he says. “It will continue to be very difficult to attract people to new jobs.” We are entering a situation of what is becoming a permanent labor shortage.
While it may seem old-fashioned today, the post-World War II baby boom caused major changes in the U.S. labor market. As baby boomers came of age, the economy suddenly flooded with millions of new workers seeking jobs.of working age population It increased by 17% in the 1960s, and another 19% in the decade that followed. If you’re thinking of hiring, the times are good.
But unlike their parents, Boomers didn’t have many babies of their own. Because of the pill and the legalization of abortion, fertility rates soared from 3.7 babies per woman in 1960 to 1.8 a decade and a half later. Over the decades, the labor force continued to expand due to the influx of women and immigrants into the labor force. But she said that by 2000, the increasing supply of female workers had peaked. And after Donald Trump took office, immigration plummeted. This meant that there were no new workers left to hire at a time when the first baby boomers were beginning to retire.
After that, the labor shortage became even more serious due to the new coronavirus infection. Immigration stalled, the baby boomer retirement wave was in full swing, and millions of young baby boomers decided to ride the stock boom into early retirement. “The tailwinds were all blowing in the same direction, and then suddenly they stopped at the same time,” said Aaron Terrazas, chief economist at job search site Glassdoor. “The slow demographic tsunami is finally reaching its apex.”
In April, the unemployment rate fell to its lowest level since 1969. This means there are very few workers left for hire. Despite the buzz that “no one wants to work anymore”, in fact, the percentage of people aged 25 to 54 who have a job now is higher than before the pandemic. And the shortage is just beginning. The Congressional Budget Office projects that the potential workforce will expand by just 3.6% from 2022 to 2031, one-eighth the pace of the 1970s. Over the next decade, that growth rate is projected to slow further to 2.9%.That means employers face decades An essentially stagnant labor pool.
So what will perpetual labor shortages mean for workers in the years to come? First, you can expect salary increases. Average hourly wages increased 4.4% year-on-year in April. Labor analyst Denton expects wages to continue rising above the 2% annual rate seen in the decade before the pandemic.
To attract enough workers, employers will also be required to offer better benefits and working conditions. Terrazas points to a “huge mindset shift” taking place in the trucking industry. To attract more drivers, some companies have started splitting long-haul routes, allowing drivers to travel short distances at the cost of grueling cross-country work. “When you have a plentiful supply of labor, it becomes easier to do the best business practices for your business,” says Terrazas. “But when there is a labor shortage, companies need to be more willing to listen to what their employees want.”
Another effect of the labor shortage: Over the next few years, younger employees are expected to be promoted faster as older bosses retire. By one estimate, 29% of his managers and 40% of his CEOs were over the age of 55 last year. As those veterans start collecting gold watches and heading to Florida, the younger generation of workers will rise quickly. “There will be a lot of career advancement opportunities,” says Denton.
But perhaps the biggest changes caused by labor shortages are not: how Employer hires — will WHO they hire Faced with a limited supply of workers, companies will be forced to hire talent they have long avoided or ignored.the federal government is easing Drug test requirements For job seekers, more and more companies are hiring people with criminal records. Companies are also making hiring more flexible to attract mothers with young children and people with disabilities. In the perpetual shortage of manpower, all manpower will be required.
But in this new era of labor shortages, employers aren’t going to sit back and take the problem. Workers’ wages are getting higher due to labor shortages, which companies are not willing to pay. “Higher prices drive innovation that expands supply and ultimately drives prices down,” says Terrazas. “Some of these innovations are small, and some are very big.”
So what “innovations” will employers introduce? Some will resort to the proven strategy of offshoring. If they can’t find enough workers at home, they will look abroad. Denton expects many companies to say, “We just don’t have the people to do what we’re supposed to do here. Let’s find them where we can.” As he wrote last year, tech companies are already moving software engineering roles overseas, hiring programmers in Latin America and beyond.
Some companies will try to eliminate the need for employees entirely. Think leisure and hospitality. The sector is experiencing a steady influx of low-wage young workers. Restaurants have begun replacing servers with app-based ordering systems, and hotels have reduced the need for cleaning staff by eliminating daily room cleaning. These are changes companies could easily have made in the past, for example mobile apps have been around for more than a decade before a severe staffing shortage forced them to rethink how they operate. , did not consider it worth the investment. . The question here is, at what point does this need-based adaptation eventually eradicate entire occupations for future generations?
Permanent labor shortages mean continual warfare rather than lasting peace. Power can never be obtained without struggle. Millions of workers will benefit from new demographic shifts, but the greater the compensation for workers, the greater the backlash from employers. “There is a risk in this idea that the labor supply will remain permanently tight,” Terrazas said. “It is a mistake to think that the line is always going up and to the right. There will be blips along its path, possibly large blips.”
Aki Ito is a senior correspondent for Insider.
