Data Dome Resources – White Papers: Labor Shortage

middle curve

Labor shortage? Look to next decade

By the end of this decade, you're going to walk into your favorite store or call up your supplier and find you're dealing with someone who's older or far more ethnic than you remember. Or, you may find there's no one there at all.

Warnings of dramatic changes in the composition of the American work force have been sounded since the U.S. Bureau of Labor Statistics revealed a year ago that by 2010 the nation will face a potential labor shortage of more than 10 million skilled workers.

The government study projected the economy will produce approximately 168 million skilled jobs, but there will be no more than 158 million workers to fill those jobs. While recent layoffs, particularly in the IT field, have produced the highest levels of unemployment since the early '90s, a pickup in the economy may change that.

Baby-Boom Ripple

"A lot of that [prediction] is based on the exodus of skilled workers from the baby-boom generation moving into retirement," said John Lawrence, assistant director of work force analysis with the Georgia Department of Labor. It also assumes increased economic activity. Continued stagnant growth would reduce the number of jobs available, he said.

As baby boomers reach retirement age, the 20-to-35-year-old age group directly behind them is significantly smaller — about 16 percent fewer in number. However, the echo-boom echo, now in high school, is much closer in size to the baby boomers.

Fields such as health care, hospitals and other organizations are confronted with vacancies as high as 50 percent, according to some reports. For example, the U.S. Department of Health and Human Services reported that nursing homes currently need 181,000 to 310,000 nurse aides to reach full staff levels. In states such as Georgia that have an aging population, a lack of health-care personnel could present problems, Lawrence said.

"Even during a recession, people still get sick and need health care," he said. "With the population growing, we know the need for heath-care workers is going to continue to grow."

While predictions of a labor shortage have produced considerable hand-wringing in the press, experts say that business and industry, who now have their pick of workers for the first time in years, are doing nothing to prepare for a return to 1990s-style shortages.

"They can see the stats, but they don't realize the impact. And even if they are starting to consider it, they say, 'We can't worry about that now,' " said Art Schoeck , president of Data Dome Inc ., a work force evaluation and coaching firm. Many businesses, particularly publicly held companies, are focused on short-term profits and have largely avoided developing a recruiting policy that can attract workers in a tight labor market.

"Strategic planning used to be five and seven years, but now it's three years because of the rapidly changing work and business environment," said Emory Mulling, chairman of The Mulling Cos., a family of firms handling outplacement, leadership development and retained search.

A shortage of workers could have drastic consequences for businesses, including higher labor costs and unhappy customers. For marginal businesses, it could prove fatal, experts say.

"If we don't have available leadership talent, that can drastically affect the economy," Mulling said. "The economy cannot grow without qualified workers. There were some industries that experienced that in the dot-com era."

Changing Work Force

Whatever the exact employment figures turn out to be, HR professionals point out that the work force is changing. Businesses should recognize those changes and formulate recruiting strategies that will attract the best workers. One answer to a lack of younger skilled workers may be found in greater attention to older workers who may stay on the job longer.

"If you look at the population projections, you see that the biggest anticipated increase [in workers] over the next 15 years or so is that 55 to 65 age group," said Sara Rix, an analyst with AARP's Public Policy Institute.

Government studies show that the median age of the labor force in 2010 will rise to its highest level since 1962, almost 41 years. In addition, the percentage of people 55-64 will increase by more than 50 percent between 2000 and 2010, while the number of people 35-44 will decline by more than 10 percent. Other age groups will grow by a much smaller percentage.

With a much smaller pool of young workers to choose from, employers are likely to turn to older workers, Rix said. To attract and retain these older workers, employers are likely to begin offering part-time employment or even phased retirement, in which older employees work shorter hours or transition to a lower, less demanding position.

Studies show that older workers are very interested in continuing to labor past normal retirement age, either because they want to or because they're afraid they can't afford to retire.

"Boomers and retirees want to work indefinitely," said George P. Moschis, head of the Center for Mature Consumer Studies at Georgia State University. "Many have not saved enough for retirement."

Many older retirees, still healthy and active, simply want to continue working because they still have much to contribute.

These workers are likely to become increasingly attractive as more companies realize that, contrary to traditional thinking, they are not more expensive than younger workers. These older workers, already experienced and mature, don't require the same level of recruitment and training. Because they tend to be more loyal and committed to their community, they are less likely to change jobs.

Seniors Serving Seniors

"Now companies are finding it necessary to keep older workers because their customer base is also getting older," Moschis said. "The older customers don't want to interact so much with a younger work force. So we see a lot of companies now hiring older workers to work in positions that involve interaction with customers."

Lowering barriers to immigration and importing skills workers could also mitigate a shortage of workers. This solution, however, may present its own problems.

"That will have social consequences, since integrating a large number of people into the population could put a drain on government services," Mulling said.

Ultimately, the best means for ensuring the right number of skilled workers is closer collaboration between business and the educational system.

"There are two ways to train people: educate them going through high school and college, or retrain them [later]," Mulling said.

Ultimately, many believe that the economy will respond to a need for skilled workers by finding new ways to get them. That drive may lead to more jobs being produced in areas such as retraining and reeducation companies geared to the needs of business.

"In our free enterprise system, if there is a need, people will form companies to meet that need in order to make money," Mulling said.

Randy Southerland, "Labor shortage? Look to next decade, experts say ," Atlanta Business Journal, January 31, 2003.

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