NEW YORK — Recruiters, get ready: Talent acquisition will become even more challenging as it becomes harder to find qualified candidates, more people switch jobs, wages accelerate and corporate profits are squeezed. It will be a challenge and an opportunity to shine.
“It’s not good news in terms of your jobs” as recruiters, said Gad Levanon, chief economist, North America for The Conference Board, at The Conference Board’s Talent Acquisition Conference on Sept. 30. “But in some sense, it’s more important now because there is pressure to maintain labor costs and fill positions faster. Your job is going to become more difficult, but also more crucial.”
What’s Causing Shortages
Levanon said two main forces drive the tightening labor market: the retirement of large numbers of Baby Boomers and a slowdown in labor productivity. In the past five years, labor productivity in the nonfarm business sector grew by just 0.5 percent annually, compared to 2 percent to 3 percent in the decade before the great recession. Meanwhile, unemployment fell in January to 4.9 percent, which economists consider full employment.
The good news is more Americans are getting back to work and there’s been a “significant recovery” among 25- to 34-year-olds. The downside for employers? The Conference Board predicts, based on U.S. Census figures, that there will be almost no growth in the next 15 years in the working age population in the U.S. since Generation Z is smaller than the Millennial generation. That’s markedly different from other periods in U.S. history, Levanon added.
Tight labor markets are clearly affecting HR. The perceived difficulty of hiring qualified workers is already above what it was in 2007, and time needed to fill job openings is the highest it has been in at least 16 years. For that reason, he said, companies may want to consider adjusting experience and degree requirements for some positions.
It’s also harder to retain workers. More are quitting, and while the number isn’t quite as high as it was in 2007, “it’s getting there,” Levanon said. Meanwhile, wages are starting to recover, although they are still well below pre-recession rates, and corporate profits are trending down.
Projected Labor Shortages by Occupation
The Conference Board’s Labor Shortage Index compares shortages expected in the next decade based on circumstances such as how much a career field is expected to grow and how many people will enter it or retire from it, whether education or experience is required to perform the job, how flexible the field is, whether certification is required, and whether positions can be offshored or done by telework or visa holders. Here are some findings:
Health-related jobs are at the highest risk of experiencing shortages, in part because of how quickly the field is growing due to the aging population and the introduction of health care reform. For example, the number of people working as occupational therapy and physical therapy assistants and aides in 2024 is expected to be 40 percent higher than in 2014.
There are large variations in the risk of projected shortages for STEM (science, technology, engineering and mathematics) occupations. Some aren’t considered high-risk because of the relatively large number of new entrants and visa holders immigrants in STEM occupations. Mathematical jobs (actuaries, operation research analysts and statisticians) tend to be at a very high risk.
While shortages are expected in computer jobs at rates higher than other occupations, Levanon said, the field will likely fare well in the next decade because it has a lower retirement rate and many new people are entering the field since it’s considered “the cool and sexy occupation.” About 2 percent to 3 percent of U.S. employees work from home, but that number jumps to 9.4 percent for computer occupations, he added.
Skilled trade labor positions (jobs like machinists, plant and system operators, and electricians) are at high risk in part because a lot of people are retiring from the field and few younger workers want to enter it, he said. For example, 41.3 percent of rail transportation workers are expected to retire in the next decade. And while using remote or teleworkers is a common solution for STEM occupations, it’s really not an option for skilled trades.
Labor Market Tightness Varies Across States
Risk of labor shortages varies across states. Nevada, Arizona and Florida, which suffered a lot from the housing crisis and are still recovering, still have above-normal unemployment rates and therefore are unlikely to experience labor shortages anytime soon. Meanwhile, New York state is “beginning to feel labor market tightness” and “has an unfavorable demographic outlook,” Levanon said.
Another factor affecting states is the age composition or ratio of people 3 to 17 years old and those 50 to 64. In 15 years, all the people currently 3 to 17 years old will be working age and the people currently 50 to 64 years old will be out of the workforce. “In Utah, there are a lot of young people compared to old people,” but in the Northeast, the population is older and more at risk for shortages, Levanon said.
What Employers Can Do
Solutions to shortages will vary from one company and one industry to another. But here are a few things to keep in mind: Anticipate retirement of older workers. Consider looking at the typical retirement age of different types of jobs and forecast when “the crunch will come,” Levanon said.
Evaluate future labor market conditions by occupation and location and consider relocating operations, if necessary.
Since various occupations and locations will experience different levels of shortages, be agile. Consider ditching one-size-fits-all companywide policies on wages, benefits or retention policies.
Explore alternative working arrangements like offshoring, teleworking, contingent workers and “gig economy” platforms.
Tap untapped pools of workers, including new immigrants, older workers delaying retirement, and discouraged or underemployed workers. During and after the economic downturn, there were about 2 million people in the U.S. who looked for a job and gave up but theoretically are still interested in working, Levanon said.
While the forecast sounds gloomy, Levanon told SHRM Online that he thinks HR professionals at most companies “are aware of the struggle and [are] in the trenches,” but he added it’s often difficult for them to convince leaders that talent shortages aren’t just an HR problem; they are systemic and impact the bottom line.
Armed with information that recruiting is increasingly difficult, it takes longer to fill positions, and quit rates are higher, talent acquisition leaders can help to address the problem with senior leaders.
“Those, I think, are the kind of data that convince business leaders,” he said.
Pamela Babcock is a freelance writer based in the New York City area.