Labor Shortage

With nearly 10 percent of the American labor force unemployed and another 7 percent so discouraged by their job prospects that they have either dropped out of the labor force altogether or are working at parttime jobs when they would prefer full-time employment, it may come as something of a surprise that within less than a decade, the United States may face exactly the opposite problem – not enough workers to fill expected job openings.
This remarkable turn of events is likely to occur as the baby boom generation reaches traditional retirement age. If this generation retires from the labor force at the same rate and age as current older workers, the baby bust generation that follows will likely be too small to fill many of the projected new jobs. Even when the “echo boomers” – the children of the boomers – hit the labor market, those 55 and older will still be the dominant age cohort.
Between 2015 and 2030, the U.S. Census Bureau projects a total increase in the U.S. population of 47 million. The increase in the number of individuals
55 and older will be more than double the increase of those ages 20 to 54 (an additional 25 million versus an additional 12 million). If this shift in the age distribution to older Americans contributes to substantially reduced labor force participation, longterm economic output and real household income could suffer as jobs go unfilled.
This analysis is based on official forecasts of population growth from the Census Bureau; official forecasts of job growth and labor force participation from the U.S. Bureau of Labor Statistics; and estimates of the number of jobs in specific occupations based on the Labor Market Assessment Tool developed jointly by the Dukakis Center for Urban and Regional Policy at Northeastern University and the Research Division of the Boston Redevelopment
Authority.
Historical Precedent
When the economy recovers from recession – and the economy has always recovered from past recessions – after some period of time, labor shortages typically follow. The best example, of course, is World War II.
The nation experienced high unemployment rates throughout the 1930s.
It was only after 1941 that war demands prompted tremendous labor shortages and millions of women were recruited into the labor force to meet the need. During the early 1960s there was high unemployment.
By the last four years of the decade, the unemployment rate was less than 4 percent each year, and the concern was about “structural unemployment,” or a continual shortage of trained employees to fill a large number of job openings.
Within less than a decade, the United States may not have enough workers to fill expected job openings.
After the Recovery: Help Needed 3
A similar pattern is likely to emerge in the next 10 years. When the nation comes out of the current jobs recession – and this may take two to three years – we will begin to see spot shortages in labor markets. If the economy continues to improve, the spot shortages will become more general, and we will experience the shortages our research projects.
The Numbers
By 2018, with no change in current labor force participation rates or immigration rates and an expected return to healthy economic growth, we will have more jobs than people to fill them. That’s true within the entire economy and particularly true of the fast-growing social sector.
In the economy overall, our research shows that:
• There could be 14.6 million new nonfarm payroll jobs created between
2008 and 2018 (and a total of 15.3 million including self-employed workers, family members working in family businesses and those in farming).
• Given projected population growth and current labor force participation rates, assuming no major change in immigration, there will only be about 9.1 million additional workers to fill all positions. Even taking into account multiple job holders, the total number of jobs that could be filled at current labor force participation rates is 9.6 million, leaving anywhere from 5.0 million to 5.7 million potential jobs vacant.
In the social sector – here defined as the set of industries covering health care and social assistance, educational services, nonprofit community and religious organizations, the performing arts, museums, libraries and government – our research shows that:
• Between now and 2018 there will be more than 5.2 million new jobs available across a range of private social sector industries with another
1.7 million jobs available in local, state and federal government agencies, a total of 6.9 million new social sector jobs overall. These new private and public social sector jobs represent 47 percent of total projected nonfarm payroll employment growth, with the social sector becoming an ever larger part of the national economy. Currently, social sector jobs account for 32 percent of all employment.
• If the expected additional labor force participants distribute themselves between the new social sector jobs and the rest of the economy in the same proportion as the number of projected new jobs, an estimated 4.3 million additional workers can be expected to fill these social sector positions. Taking into account multiple job holders, the number of jobs that could be filled at current labor force participation rates is 4.5 million, leaving anywhere from 2.4 to 2.6 million potential new jobs vacant in these social sector industries.
When the nation comes out of the current jobs recession, we will begin to see spot shortages in labor markets.
After the Recovery: Help Needed 4
The Impact
A labor shortage of this magnitude, leaving as many as 30 to 40 percent of all projected additional jobs in the social sector vacant, could have a significant impact on our economy and on the quality of life in our communities.
If the full employment gap is not filled, using Congressional Budget
Office data, we estimate the loss in total output could be as high as
$3 trillion across a five-year period beginning in 2018.
In addition, not filling millions of jobs in the social sector will mean having too few workers to meet critical needs in education, government, health care and social services.
A Part of the Solution
Encouraging people to work longer will go a long way toward preventing such a significant labor shortage.
Fortunately, boomers are not expected to retire at anywhere near the same rate as earlier cohorts of older workers. In fact, large increases in labor force participation are expected to occur among those aged 55 and older, with 55- to 64-year-olds increasing their participation rate from 64.5 to
68.1 percent between 2008 and 2018. Those aged 65 to 74 are expected to increase theirs from 25.1 to 30.5 percent. And those 75 and older are projected to increase their participation rate from 7.3 to 10.3 percent.
But these increases may still not be enough to avert a labor shortage.
Using official estimates of projected labor force participation rates, our research shows that there would still be 3.3 million to 4.0 million jobs that could go unfilled between now and 2018. More than 1.5 million of these unfilled jobs would be in the social sector.
Providing job opportunities for older adults to work in the types of jobs they really want to pursue will increase the likelihood that they will work past traditional retirement age. And previous research shows that about half of Americans age 44 to 70 want paid work improving the quality of life in their communities – or encore careers. Jobs in the social sector industries examined here, and others that also serve a social purpose but are beyond the scope of this analysis, fit the bill.
Among the close to 7 million jobs that could be added to the social sector industries examined here between now and 2018, the vast majority are well suited to encore career seekers. Our research shows that 3.5 million of these most promising encore career opportunities will be in health care and social assistance; 831,000 will be in local government; 750,000 will be in educational institutions; 399,000 will be in state government; and 319,000 will be in nonprofits, including religious and community organizations.