The US economy has been operating with an unemployment rate below 4% for the past two years, which is truly incredible.
Economists and business leaders say that this is not just a legacy effect of the pandemic bottleneck (employers have forced millions of employees to leave during the pandemic, and then find it difficult to recruit people when demand rebounds rapidly). This is a storm that has been brewing for decades and has recently erupted in the form of labor disputes between automakers and airlines. The shortage of labor is evolving into a long-term labor crisis, which may push up wages and personnel turnover rates.
For many years, labor experts have warned that the combination of factors such as the retirement of baby boomers, low birth rates, changes in immigration policies, and changes in worker preferences has resulted in very few American employers being able to find people to fill job vacancies. Although the tension in the labor market is easing, it is expected that the aforementioned factors will not undergo significant changes in the coming years.
This is a talent supply chain, and you have to think about it this way, but in this supply chain, talent has the right to choose, "said Teresa Carroll, Magnit's CEO. Magnit is a platform for managing contract workers, temporary workers, and freelancers for companies. Workers are choosing various job arrangements, such as part-time jobs, flexible time management, or remote work, prompting employers to make adjustments to fill job vacancies.
The Labor Department of the United States recently predicted that by 2032, total employment will increase by about 0.3% annually, much lower than the 1.2% annual growth rate of the past decade, mainly due to population restrictions. The institution stated that this will to some extent lead to a slowdown in GDP growth.
The baby boomers are the largest generation in the United States, with a population of 76 million born between 1946 and 1964. Their current age is between 58 and 77 years old. By the end of 2028, the youngest generation of baby boomers will reach an average retirement age of around 64 years old.
According to the Pew Research Center, the second largest group is the millennial generation, with a population of 62 million born between 1981 and 1996. However, due to the influx of immigrants, the number of millennials has increased.
The working years of the baby boomers have been steadily increasing, but this trend has regressed during the pandemic. Many people retired and did not return to work later.
The birth rate (number of births per thousand people) in the United States has been declining for decades and has now decreased by about half compared to the 1960s.
In the first three months of 2000, the proportion of the labor force to the total population in the United States reached a peak of 67.3%. At that time, the oldest group of baby boomers were 54 years old and the youngest were 35 years old. This helped the United States maintain its economic expansion and the first internet boom.
Although there are signs of growth in the labor participation rate of workers in the golden age group (between 25 and 54 years old), the overall participation rate has not yet fully recovered from the low level during the pandemic. According to the Ministry of Labor, the overall participation rate is expected to drop to 60.4% by 2032, mainly due to the retirement of the baby boom generation.
The salary level reflects the relationship between supply and demand. During the post pandemic economic recovery period, wage levels skyrocketed and recently exceeded inflation rates, giving workers stronger spending power. Long term labor shortages may lead to faster wage growth in the foreseeable future.
John Fish, chairman and CEO of construction contractor Suffolk, said that the combination of aging labor and a decrease in the number of young people entering the industry sends a dangerous signal. Nowadays, the income of carpenters has increased by 20% to 25% compared to 24 months ago, which is unsustainable
Fill vacancies
Incorporating more people into the workforce or increasing the productivity of existing labor can alleviate the problem of labor shortages. The methods to achieve these two goals include: introducing immigrants; Outsourcing more work overseas; Utilize labor that has not been fully utilized before, such as disabled individuals and those who have been released from prison; Improve productivity through automation, training, and improving business and production processes.
Magnit's Carol said that when it comes to addressing labor shortages, businesses and countries have three options. They can plan ahead, do nothing, or just hold onto hope. For me, hope is not a strategy
Generally speaking, the growth rate of an economy can be as fast as the sum of the speed of labor expansion and the increase in labor productivity. Productivity is difficult to measure, and in the past few years, relevant data has also been disrupted by the epidemic. Overall, the growth in productivity over the past decade has been largely lackluster, with an annual increase of approximately 1.4%.
Generative artificial intelligence tools such as ChatGPT may be helpful, but this technology is still too new to accurately determine which business or work areas large language models can be reliably applied to.
Offshore outsourcing was a disaster for American manufacturing workers in the last few decades of the 20th century, and after the pandemic highlighted the fragility of global supply chains, some business leaders no longer favored this approach. With the support of billions of dollars in government subsidies, the momentum of manufacturing returning to the United States is becoming stronger.
That leaves only the introduction of immigrants. After the decline of immigration due to the COVID-19 related policies during the epidemic, it has rebounded strongly. But this is still a controversial issue, with business leaders stating that the lack of coherent and stable immigration policies is also one of the reasons for the labor crisis.
If we don't develop a thoughtful immigration plan to address this issue, wage levels will skyrocket in the next two to three years, as there will eventually be a systemic shortage of labor, "Fish said
Although some economists are optimistic about the current recruitment boom in the United States, it is worth noting that the average weekly working hours of private sector employees are below the average level in 2019. Because a decrease in working hours is usually a reliable signal of impending layoffs and the looming economic recession. The Wall Street Journal combined historical data to explain the underlying correlation and analyzed the differences in the current round of shortened working hours.