Fighting the Demographic Drought

The current worker shortage isn’t a passing phase–it’s the new normal. So what can employers, educators, policymakers, and workers themselves do in response?

A central part of the solution will be drawing disengaged workers back into the labor force, according to Bridging the Gap in our Labor Force, the second in our series of Demographic Drought reports. This new research outlines the current challenges facing the US labor market and offers a way forward: re-envisioning the nature of work, addressing childcare challenges that workers face, engaging people who are opting out of work, and bringing awareness to the nation’s stalled immigration system.

The “demographic drought” refers to the combination of trends creating the unprecedented worker shortage in the US. The first report of the series demonstrated how population trends led millions of workers to go missing from the labor force, especially as a wave of baby boomers retire without enough new workers to replace them. 

This new report is a continuation of that series, but more than just explaining the problem, it brings a focus to potential solutions. 

Key takeaways:

• The labor force participation rate is down, canceling out growth in the working-age population.

• Recovering our workforce does not depend on the unemployed, but on the unengaged.

• The number of job openings has reached record highs, with over 11 million positions available as of January 2022.

• Workers can only come from two sources: the population we have and the population gained through immigration, and over the past several years, immigration has plummeted.

• The industries facing the worst shortage (service and production jobs) are those who rely most on young or foreign-born workers—two demographics among the least likely to be joining the labor force.

Addressing the labor shortage will involve both understanding the importance of immigration and creating a strategy to engage potential workers currently on the sidelines. To learn more, download The Demographic Drought: Bridging The Gap In Our Labor Force.

How did we get here?

The total working-age population is, technically, increasing, but that growth is misleading. The working-age population is defined as anyone aged 16-64, so it includes older adults who are either retired or getting close—including many who retired early in the wake of the pandemic. By 2030, the last baby boomers will have turned 65, and by 2034, older adults will outnumber children for the first time in US history. Demographic data show that well into the future, more people will exit the workforce than enter it, and that trend isn’t expected to reverse any time this century. 

Labor force participation, on the other hand, is on a significant decline. It stands at 62.1% currently, down from 63.4% in February 2020. To reach the same amount of workers in the labor force, we would need 875,000 people. That’s a big number, but it still wouldn’t meet our pre-pandemic trend line—to reach the same participation rate compared to the growing population, the workforce would need 3.2 million additional workers.

So what can we do?

Workers can only come from two places: the population we already have and the population we can gain through immigration. Drawing from both of these pools will be vital in relieving the pressure on the job market. To make this happen, employers need to:

Recruit From The Sidelines

Solving the labor shortage does not depend on recruiting the unemployed, but the unengaged.

An “unemployed” person, as defined by the Bureau of Labor Statistics, is to someone “jobless, actively seeking work, and available to take a job.” This definition does not include people sitting out the job hunt, so those living on their savings or staying home because of concerns about health or childcare don’t count as “unemployed.”

As of January 2022, there were 11 million job openings available in the US but just 6.5 million unemployed people to fill them—meaning if every unemployed person was hired tomorrow, over 4 million jobs would remain unfilled. To make up that difference, employers need to reach those who are not actively seeking a job.

So what can employers, educators, and communities do to engage people who are choosing to not work? 

Clarify the role and its benefits

Companies are being more transparent about pay, benefits, and other perks than ever before. The Emsi Burning Glass 2022 Talent Playbook shows that three times as many jobs advertise signing bonuses than they did in 2016. For potential employees to be confident about the organization they’re joining, employers need to be clear about what they need and what they’re offering in return.

Embrace job freedom

For many workers, especially those who enjoyed their newfound freedom after leaving 9-to-5 work in the pandemic, alternatives to a full-time job may be more appealing. Finding talent through remote, hybrid, or part-time work opens up new opportunities for employers struggling to find staff.

Remote work job postings have tripled compared to pre-pandemic levels. They now account for more than 10% of all job postings, according to Emsi Burning Glass data, and those rates continue to rise. The flexibility available through those jobs creates opportunities for those (like young parents or those with health concerns) who would face barriers to returning to a traditional workplace. 

Rethink recruiting

Employers should consider making job opportunities more accessible to nontraditional candidates, which could include dropping degree requirements or offering the training required for specific roles. Millions of workers are hidden from the traditional hiring process and programs employers use, so tapping into that candidate pool could be a huge advantage to employers who can see it.

As part of that recruiting push, employers should also consult skills and compensation data to make sure they’re reaching the exact type of candidates they need. Ultimately, employers have to get creative about recruiting strategies.

Match education and policy to workforce needs

Because there are so many unfilled job openings, workers have much more leverage in the marketplace. However, they still won’t advance if they don’t have the in-demand skills employers want. Policymakers and educators can coordinate with companies to see what skills and training are needed in the market. By constructing a strong pipeline of talent, they can put their regions in a position to succeed for generations to come.

Address Immigration

Because the US birth rate has fallen, leading to a smaller domestic workforce, foreign-born workers are key in making up that difference. Unfortunately, the annual number of immigrants entering the country has fallen sharply over the past several years. The report shows that many of the jobs and industries feeling the most pain from the worker shortage are those in which immigrant labor has played a significant part, like production and service jobs.

This trend is especially concerning in light of the fact that foreign-born workers have filled an increasing share of the U.S. labor force since 1980. 

Administrative difficulties have delayed even those who are ready to come to the US—a State Department backlog has prevented nearly 4 million potential immigrants from obtaining their work visas. Countless others have been delayed by factors including political decisions, global demographic and economic shifts, and recent Covid-related interruptions. 

Under these circumstances, facing a tight labor market is intimidating. But it isn’t impossible: every worker counts, which means that employers will need to up their game to prepare, recruit, and retain their talent.

To learn more and find out how, download The Demographic Drought: Bridging the Gap in our Labor Force.