A worker shortage. As recently as early 2003, over two million workers had lost their jobs since the start of the recession in 2001. At 6.2 percent, the national unemployment rate hovered at the highest level it had been in nine years, and the number of new jobless claims lingered above 400,000 for 20 straight weeks. People were screaming about offshoring, downsizing, and a lack of jobs. Little did they realize that they were at the beginning of a new era when skilled workers would be in very short supply and companies would be begging for workers.
According to Business 2.0, executives at Cigna, Intel, SAS, Sprint, Whirlpool, and Adecco ? which is the world’s largest placement firm ? worry that the supply of labor is about to fall seriously short of demand.
Recently, the National Association of Manufacturers released a white paper that forecast a “skilled worker gap” that will start to appear the year after next and grow to 5.3 million workers by 2010. By 2020, the gap will become even wider, creating a demand for 14 million workers.
The study is based on research by labor economist Anthony Carnevale, former chairman of President Clinton’s National Commission for Employment Policy. This will occur, he adds, without any unusually heroic growth rates or bubble-like economic anomalies; all it will take is a return to the economy’s long-term growth rate of 3 to 3.5 percent a year.
The cause of the labor squeeze is simple: Unless something extraordinary happens, the baby boom generation will retire during this decade and the next. The largest generation in American history now constitutes about 60 percent of the prime-age workforce ? that is, workers between the ages of 25 and 54. The generations that follow are just too small to take the boomers’ place. The shortage will be most acute among two key groups: managers, who tend to be older and closer to retirement, and skilled workers in high-demand, high-tech jobs.
For example, at Sprint, half of the 6,000 field and network technicians are over the age of 50. At Cigna Systems, about a quarter of the 3,400 IT workers will pass 55 this decade. And at software maker SAS, more than a quarter of the staff will be eligible to retire by this decade’s end. The company’s VP for human resources, Jeff Chambers, says this group is filled with veteran designers and engineers, many of them architects of the company’s most successful products. “It doesn’t take a rocket scientist to see what’s going on,” he warns. “Existing staff are going to start getting out soon, and the feeder pool just isn’t coming up. If you’re responsible for the workforce, you’d better ask yourself what you are going to do.”
What employers will have to do, according to Business 2.0, is to attack the problem in every way they can. They’ll need to bid up wages, raid competitors for employees, convince older workers to stay on the job, outsource whatever work they can, and encourage the government to increase the quota for skilled immigrants.
“People think we’re going to have plentiful workers forever, but that’s not so,” explains David Ellwood, a Harvard University professor who recently led an Aspen Institute study of the problem. “If you want to hire somebody who has traditionally been the bread and butter of the labor force, you’re soon going to have to hire them away from somebody else.”
Up to this point in U.S. history, each generation to enter the workforce has been larger and better-educated than its predecessor. This time, however, neither will be true. The number of workers in the prime-age category ? the years when skilled, educated workers are at their peak productivity ? will hardly budge during the next two decades. At the same time, the percentage of the prime-age labor force that has had some college education will flat-line at about 60 percent. In fact, enrollments in engineering and computer science have been dropping.
This amounts to a shortage of skilled workers for the jobs that need to be filled in order for the economy to keep growing. According to Bureau of Labor Statistics, the seven fastest-growing occupations this decade will all involve technology. For example, by 2010, companies will need twice as many applications software engineers and tech support specialists as they do now.
Even the occupation that is seventh on the list, database administrator, will grow by a whopping 66 percent. The employers in technology industries will be the first to suffer from unfilled positions. As soon as next year, Carnevale says, “We’ll start to see spot shortages all over the place.” He predicts that some companies will be so short of workers that they’ll hire unqualified people for high-tech jobs. By 2010, as most baby boomers retire to focus on their golf games and their grandchildren, most corporations will be so desperate for help that they’ll accept anyone who meets the most minimal of standards for a job.
Of course, it’s entirely possible that the shortage of skilled tech workers might be the result of technology itself. Many software products are designed to automate today’s jobs, such as database managers, so they are chasing people with IT skills out the door.
However, let’s not forget the historical pattern that shows that as new technologies eliminate less sophisticated jobs, they create higher-level positions elsewhere. Cathleen Barton, U.S. education manager at Intel, points out that in 21 years of steady improvements in equipment and processes, Intel’s workforce has only grown. “There’s always the argument that the more technology you put in, the fewer and less-skilled workers you will need,” she says. “But that’s just not the case.”
In 1982, for example, Intel’s workforce consisted of 20,000 U.S. employees, and an entry-level plant operator needed only a high-school education. That worker’s skills would be obsolete today. But in its current 49,000-person U.S. workforce, Intel employs far more plant technicians than it did two decades ago. The difference is that entry-level applicants now need at least a two-year degree in applied science to handle the job.
Despite the double-digit growth in outsourcing of service jobs to low-wage countries, particularly India, economists doubt that India, China, the Philippines, and other newly industrialized countries have enough capacity to prevent the U.S. labor squeeze, especially in IT.
India’s IT industry, after all, produces about $14 billion a year, versus the U.S. sector’s $813 billion. Likewise, India’s 150,000 tech workers represent less than 2 percent of America’s domestic IT labor force. Martin Kenney, a professor at the University of California at Davis who has just released a study on outsourcing in India, expects that that most of the outsourced jobs will fall into lower-skilled categories like call centers.
In the meantime, immigrants are helping the labor shortage. For example, in the period from 2000 to 2003, Latinos have constituted 53 percent to 63 percent of labor force growth, according to the U.S. Census Bureau. Much of this comes from continued Mexican immigration into a population that has swelled to about 40 million.
Additionally, a Pew Foundation report asserts that the birth rate will reverse the dominance of immigrants in the Hispanic population. By 2020, children of immigrants will outnumber their parents by 21.7 million to 20.6 million.
These children of immigrants are growing up in households where most of their parents did not finish high school and many work at low-skilled jobs, such as in construction or janitorial services. Most immigrant children, given better opportunities, will surpass their parents in education and earnings. Daughters are more likely to hold paying jobs than their mothers.
Now let’s look at the situation from the other side: From a worker’s perspective, the job shortage will create plenty of opportunities. Americans will find the hottest job growth this decade in Southern and Western metro areas fed by expanding service industries and by a resurgence in the tech and defense sectors. Cities such as Las Vegas, Orlando, West Palm Beach, Fort Lauderdale, Phoenix, Raleigh-Durham, Riverside (California), and Charlotte are already seeing a substantial increase in new jobs.
Workforce flexibility is critical to job growth and lowering unemployment, according to a wide array of economists. Moreover, surveys show employment flexibility ? such as temporary staffing, independent contracting, independent professionals, and consultants ? is becoming increasingly important to this nation’s workforce.
The “free agent” workforce has increased 37 percent since 1998, according to a series of surveys conducted for Kelly Services. It made up 22 percent of the full-time U.S. workforce in 1998. In 2000, it jumped to 26 percent. Now it has increased to 28 percent, representing at least 30 million workers. The trend is up, whether the economy is strong or weak.
Looking ahead, the Trends editors want to focus your attention on five significant predictions that could have significant ramifications for your business and career in the coming decade:
There will be a powerful shift to a sellers’ market in labor. Employers will face the most severe shortage of skilled labor in history. The biggest problem will tend to be in the skilled trades and para-professional ranks.
Traditional retirement will increasingly become a thing of the past. Retirees will continue in the workforce, and industries of all sorts will welcome their skill sets and their maturity. Right now, your company should begin to plan for employing a “mature” workforce. For most companies, this will require a different menu of benefits geared to the priorities of older workers. It will also demand a different approach to training and development. The most important dimension will be a focus on retention. Your company’s most valuable older workers tomorrow are probably your own middle-aged workers of today. Begin working with those employees to plan for their future and yours.
Training and education will drive the new job surge. The U.S. trains most of the world’s top scientists, engineers and physicians, regardless of where they are born. We’re confident that U.S.-based multi-nationals will provide the necessary incentives to keep these people here, and that many of them will take advantage of our unique entrepreneurial culture to start and build new businesses here. Similarly, unskilled labor from Mexico and elsewhere will remain plentiful. However, the middle ranks of those who require skills and knowledge, but not graduate degrees, will grow the most in terms of absolute numbers. Through in-house training programs and community colleges, American business and government will have to work together to upgrade the skills of the younger workers and renew the skills of the older ones. The most successful companies will be those that underwrite programs to keep their employees up-to-date and ready to face the challenges of a faster-moving world.
Flexible employment will take up some of the slack caused by the job shortage. A big part of enticing older workers to stay, and today’s homemakers to enter the workforce, will be accommodating their personal needs. People will increasingly work from home, and use technology to work for employers in any location.
Workers will become even more independent. The coming “seller’s market” for skills will make freelancing increasingly attractive to skilled personnel. More people will sell their services on a project, contract, or set-term basis. This will give rise to specialized staffing firms and electronic communities to connect workers with employers.
References List : 1. Business 2.0, September 2003, "The Coming Job Boom," By Paul Kaihla. ⓒ Copyright 2003 by Business 2.0 Media, Inc. All rights reserved.2. ibid.3. Dallas Morning News, February 8, 2004, "Hispanics Driving Workforce Growth," by Dianne Solis. ⓒ Copyright 2004 by Dallas Morning News. All rights reserved.4. Staffing Success, May-June 2003, "The Flexibility Factor," By Steven P. Berchem. ⓒ Copyright 2003 by the American Staffing Association. All rights reserved.
