Businesses that once were open late now close early because they can’t find enough workers.
At other places, we have to wait in line longer to get checked out because there aren’t enough workers to serve customers.
At still others, we see businesses that once never had to advertise for help now posting their hourly wages on their signs – and those wages are higher than they once were. Not surprisingly, those businesses have now jacked up their prices since they have to pay more for help. Or, in one case that I know of, a business faced with having to pay more for workers simply closed because it couldn’t afford the added expense.
It’s in our nature to want to find someone to blame. So who will it be? Is this President Joe Biden’s fault for mismanaging the economy? Is this still former President Donald Trump’s fault for not taking COVID seriously enough and letting the pandemic get so out of hand that it fouled up supply chains around the world? Is this the fault of all those entitled millennials because, as we all know, people today just don’t want to work?
I hate to deprive anyone of their favorite talking points but all of those are wrong. Instead, two reports from the labor market analytics firm Emsi Burning Glass – one last year, one this year – point to a more complex series of drivers that are shaping the economy. I realize it’s much more emotionally satisfying to blame your least-favorite politician, or some social ill, but these reports (both titled “The Demographic Drought”) say that these labor shortages aren’t the result of any politician at all – and that we’ll keep seeing them for years to come no matter which party is in power, so we’d better get used to it.
Why is this? Short answer: demographics. A slightly longer answer: demographics compounded by human behavior. An even longer answer: See below.
Here’s the one big fact that Emsi Burning Glass says we need to understand: The baby boom generation was the biggest in American history, but baby boomers had birth rates that were lower than the so-called “replacement rate,” so the generations that follow them will be smaller. Meanwhile, those baby boomers are now moving into retirement, and simple math suggests that not all the jobs they’re leaving can be filled. Further, the pandemic accelerated the early retirement of many boomers, creating even more job openings. The problem isn’t lazy millennials or Gen Xers or any other younger generational cohorts, these reports say, it’s those darned boomers.
Here’s the math: When the pandemic hit, there were 164.5 million American workers – with a labor force participation rate of 64.4%. (The labor force participation rate measures the number of people 16 and older who are employed or actively seeking employment.) As of January, the nation’s labor pool still needed 875,000 more people back in the workforce just to pull even with where we were pre-pandemic. And, because our population is still growing (although at a much slower rate than in the past), we still need 3.2 million more people in the workforce to get back to that pre-pandemic labor force participation rate of 64.4%.
“The fact that the LFPR [labor force participation rate] has stayed essentially flat for almost two years, has meant that many workers that dropped out during the pandemic are not returning,” Emsi Burning Glass says. “In other words, we have enough people in our population, but not enough who are either willing or able to enter the labor force. This has led to a record number of job openings, topping 11 million.”
So who are these “missing” workers?
More than half are 55 or older, this report says. That cohort left the labor force at a higher rate than others during the pandemic and has been the most reluctant to return.
Why? Big picture: The boomers are the wealthiest generation in American history. Not every boomer is rich, of course, but generally speaking, many are affluent enough that they decided they could afford to retire early. In that respect, the pandemic accelerated a trend that was going to happen anyway. The labor shortages we’re seeing now, these reports say, are simply the future arriving early.
It was always going to be this way – no politician is to blame, and no politician can fix this either.
That’s not what the talking heads on cable television want to hear, of course, but they’re probably not spending their off-hours studying reports like this, either. Human resource directors across the country, though, are – or should be. Their job is about to get a whole lot harder.
There are some other reasons for this labor shortage besides boomers pulling a Johnny Paycheck and saying take this job and shove it. (David Allen Coe wrote the song, by the way, but Paycheck’s cover made it famous.)
If you want to blame millennials, here’s your chance. The first report says that generation has a different view of work than their parents and that’s unlikely to change. Indeed, it may become more pronounced. “Millennials are expected to inherit an estimated $68 trillion from their boomer parents by 2030, making them the wealthiest generation in history,” the report says. “The wealth created by boomers in general has made millennials less motivated to seek careers of their own.”
Who has opted out of the workforce most? Men. “In 2014, for the first time since 1880, more men 25-34 years old were living with their parents than with a spouse,” the report says. “Males increasingly prefer part-time over full-time work. The number of prime-age men willingly opting for a part-time job jumped from 6 million in 2007 to nearly 8 million in 2019.” And note that those figures are pre-pandemic.
“Of course, men naturally made up a shrinking percentage of the total workforce as women flooded the ranks starting in the 1950s, but the trend we’re observing here isn’t a matter of men comprising a smaller slice of the pie,” the report says. “This is a matter of men opting out of the pie. Gen X, millennial, and Gen Z men increasingly don’t work, period. And yes, the decline of the overall number of males in the workforce since 1980 is somewhat due to the fact that male boomers have moved into the next age.”
So what are those men doing? This next finding plays into every stereotype you’ve had: They’re apparently playing video games. The study found that “the decrease in hours worked for men ages 21-30 exactly mirrored the increase in video game hours played. On average, males ages 21-30 worked over 200 fewer hours in 2015 than they did in 2000 (a 12% decline). They simultaneously upped their leisure hours, 75% of which were spent playing video and computer games.”
And then there’s the problem of opioids. “The opioid epidemic is a major culprit in siphoning prime-age men off the labor force,” the report says. “In 2015 alone, a staggering 860,000 prime-age men were absent from the labor force due to opioids.”
So what’s the bottom line here? A demographic changing of the guard is opening up a whole lot of jobs, but there are fewer people to take them to begin with – and then some of those people either don’t want to work (because they’re set financially) or can’t (because of opioids).
Now, it’s easy to get distracted by the video game statistic but even if there were no Grand Theft Auto, no Call of Duty, no Red Dead Redemption, no Fortnite, no Minecraft – and no opioids, either – we’d still have this demographic deficit, so let’s focus on that. Yes, that’s elevating the abstract over the sensational, but that’s why I’m here writing for a nonprofit news site and not shouting on cable news.
So what’s it mean if we have this ongoing labor shortage? You might think it means workers will get paid more – supply and demand, classic Adam Smith. A true workers’ paradise. Take that, Karl Marx!
Maybe, Emsi Burning Glass says. Or maybe not. These reports sketch out a grimmer future: “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. As a result, Stanford economics professor Charles Jones argues in a 2020 report, the standard of living will stagnate or decline.”
How can that be? The report points out that people spend 37% less in retirement (more on health care, certainly, but less overall) and we’re going to have a lot more people moving into their retirement years – or, in economic terms, into their low-spending years. And it’s consumer spending that drives the economy – our demographics alone are now going to throttle back the economy. Another important fact: “In less than 15 years, the number of adults aged 65+ is projected to surpass the number of children under 18 in the U.S.”
This will be the first time in American history that this has happened – and it’s going to change, well, maybe not everything, but a lot.
“Before this decade is over, the shortage of educated workers is projected to be extreme,” Emsi Burning Glass warns. The firm’s reports say: “The American labor market will face a deficit of 800,000 workers who have associates degrees or some college, and a colossal shortage of 8.5 million American workers with bachelor’s degrees or higher. What will these shortages cost us in terms of economic output? A projected $1.2 trillion. That is a 12-digit loss of economic output. And it’s not the result of a stock market crash or bad business deals or falling behind in technology, or even a pandemic.” It’s just demographics.
As Americans, we’re accustomed to expecting the future to be better than the past and when it’s not, we punish the nearest politicians we can find. Ronald Reagan used this to devastating effect on Jimmy Carter in 1980 by simply asking, “Are you better off now than you were four years ago?” These reports suggest it may be increasingly harder for future politicians, of either party, to rev up an economy that is being slowed down by such a big demographic anchor. Future politicians who promise prosperity may be promising something they can’t deliver, no matter which politics they pursue.
Our demographics are also going to cause some hard conversations about government benefits – something that our current political climate isn’t particularly good at. Woe be to the politician who starts talking about tinkering with Social Security. We tend to forget that Social Security is not a savings account – it’s a program where each generation pays for the one ahead of it. That worked just fine when we had big working generations paying for relatively small retired generations, but what happens when those numbers flip?
“What this means is that even if workforce participation reverts to our 20-year high, current demographic trends will leave almost two-thirds of the US population dependent for financial support on the remaining one-third by 2100,” Emsi Burning Glass says. “Given the steep cost of care for elderly dependents, the financial burden on the working-age population will be immense. Perhaps impossible.”
Separate from this, political analyst Ron Brownstein wrote several years ago in The Atlantic about the complicated racial dynamics involved here, long before we get to 2100. America is becoming more diverse. That means a generation of mostly white retirees is going to be dependent on the taxes generated by younger generations where whites will only be a plurality. Or, as Brownstein put it more eloquently, “The irony is that the gray need the brown more than they realize.”
We have moved into an era where immigration is controversial, yet, mathematically, we need more people – specifically, more young people. If we’re not going to produce them naturally – birth rates have been falling for years – then the only other solution is immigration. We hold opinions that aren’t based on facts: “A recent Gallup poll shows a significant increase in the number of Americans who say they want fewer immigrants to the US,” Emsi Burning Glass says. “This perception nearly doubled over the past year — at the same time that actual immigration numbers had dropped to the lowest level in recent history.”
In 2013, former Florida Gov. Jeb Bush – then gearing up for a presidential run – spoke at Bluefield University (Bluefield College then). He talked about how America needed more immigration, not less, to “rebuild the demographic pyramid.” Politically, he was out of sync with the times. But mathematically, he was right.
These reports, though, say that immigration isn’t necessarily the solution, because birth rates are falling almost everywhere. “Regardless of changes in public opinion or policy, however, global demographic shifts are likely to start closing the window on population growth through immigration,” Emsi Burning Glass says. “Other countries increasingly need the people they have in order to meet labor demands as they desperately attempt to modernize their own economies. Mexico, where most U.S.-bound immigrants originate, currently has an unemployment rate lower than the U.S., and its labor force participation rate is just several percentage points lower. The days of attracting large numbers of foreign-born job seekers are likely nearing an end.” So why are we so worked up over immigration?
Increasing birth rates may be a long-term solution but isn’t a short-term one. “This indeed would have been the solution 20-40 years ago,” Emsi Burning Glass says. “But today this would require a solid two decades before the first of these new baby boomers would enter the labor force in the way the U.S. so urgently needs.”
So what, then, is the solution? After all, these reports say if we don’t do something – either increased birth rates or immigration – then our population will start shrinking by 2062. And we only need to look across much of Southwest and Southside Virginia to see what happens when populations shrink. Or Japan, for that matter: “After decades of low fertility, Japan has seen its population shrink, its schools close, its universities struggle to find students, its debt-to-GDP ratio climb, and its elderly people fend for themselves.”
Maybe robots will save us? After all, we’re already seeing lots of things automated – self check-out at stores, for instance. This report says don’t count on it. Automation will eliminate some jobs, but create others – just with different skills. “Technology almost always generates more jobs than it takes away,” the report says. “The World Economic Forum estimates that AI and robotics advancements will result in a net increase of 12 million jobs globally by 2025.”
So who’s going to fill all these jobs? That’s the challenge, isn’t it? And these were, after all, reports generated by a labor analytics firm. Emsi Burning Glass sees a future of “a growing number of companies depending on a shrinking number of workers.”
The analysis sees only bad news for any company that’s dependent on low-wage, low-skilled workers: “Given the lower-than-projected birth rates and the considerable loss of immigrant workers over the last few years, the labor shortage, especially for entry-level and lower-skill jobs, may be even worse than we thought.”
As for those high-skilled jobs, the challenge will be training people for those jobs who previously may not have been in the market for those jobs. Gov. Glenn Youngkin is wrestling with this now. He sees 300,000 jobs going unfilled in Virginia – and a declining community college enrollment – and rightly wonders why we can’t fix the former by fixing the latter. There may, indeed, be some programmatic things that can be done – enrollment in the fields covered by the free tuition program initiated by then-Gov. Ralph Northam is growing – so maybe Youngkin ought to focus on expanding that. The bigger problem, though, is simply demographic: The pool of college-age students is getting smaller, even for community colleges that typically attract older students. (I discussed this in more detail in an earlier column.)
Put another way, we need to get more people into higher education – be it two-year schools or four-year schools – who otherwise wouldn’t be there. (And then, presumably, let employers figure out something for the low-wage jobs that go unfilled.) Since that means a lot of people from less-affluent backgrounds, we’re going to need to set aside ideological objections and look at more free tuition programs. And we’re going to have to pay more to operate some programs. We need more nurses now and we’re going to need a lot more in the future as that boomer population ages. But Megan Schnabel reported that one big reason it’s hard to expand nursing programs isn’t lack of students, it’s lack of instructors – people can make more money as nurses than teaching nursing. Something’s gotta give.
Emsi Burning Glass comes up with this conclusion: “Companies can’t assume they’ll be able to find the right talent. Instead, they must build that talent base for themselves. By working with higher ed to build programs that meet the needs of the job market, offering upskilling or reskilling opportunities to current employees, and providing on-the-job training for new recruits, businesses can close or at least narrow their talent gaps.” That sounds a lot like what the community college system is all about.
Perhaps the governor – perhaps all our politicians – should read these two reports and think about what they mean.
As for me, I’m off to play some video games.