ARTICLE | February 12, 2024
Authored by RSM US LLP
By Curtis Dubay, Chief Economist, U.S. Chamber of Commerce
The worker shortage the U.S. has been battling since the pandemic will remain for the next generation—and possibly longer—due to an aging U.S. population and shifting trends in workforce participation.
Future workers and workplaces will look different, and smart employers will acknowledge the shifting demographics and adapt.
The U.S. talent pool is shrinking. Our country’s labor force participation rate has been trending downward for more than 20 years as the aging of our population, and therefore our workforce, outpaces our national birth rate. According to the Bureau of Labor Statistics, the number of workers age 55 and older is projected to grow three times faster than the number of workers ages 25 to 54, presenting several challenges for employers.
Employers may have difficulty finding experienced talent for vacant roles as older generations retire. And the rapidly aging population will affect younger, working-age adults who need to provide care and support for elderly individuals.
Fewer legal immigrants coming to the U.S. means that critical sources of talent from abroad are drying up. Without meaningful progress on legal immigration reform, the lack of foreign workers will continue to exacerbate the workforce problems companies are currently facing.
To better attract and retain talent during the worker shortage, employers are allowing flexibility in hours, adapting to hybrid work, and expanding child care offerings and other incentives. When looking to fill roles, employers should consider often-overlooked talent pools such as veterans, military spouses, formerly incarcerated individuals and individuals with disabilities.
In fact, in the Q4 2023 RSM US Middle Market Business Index survey, 30% of middle market executives said their companies are expanding eligibility for hiring, including considering those convicted of crimes or lacking traditional education or experience. Forty-one percent said they are focusing on recruiting a more diverse base of employees, including minority, disabled and older workers.
Good progress is also being made on a shift toward skills-based hiring—focusing on the skills workers have rather than requiring certain credentials such as a four-year degree. Walmart, the Society for Human Resource Management and the U.S. Chamber of Commerce recently joined forces to help more American businesses put this strategy into practice.
When looking to fill roles, employers should consider often-overlooked talent pools such as veterans, military spouses, formerly incarcerated individuals and individuals with disabilities.
For workers, navigating the imminent future of the workforce will demand continuous skill development and training. Many individuals who want to keep their roles will need to upskill and reskill to keep pace with technological advancements. Some of the most in-demand skills for employers right now include cloud computing, artificial intelligence and adaptability.
The economic impact
A prolonged worker shortage limits businesses’ ability to grow, stunting the country’s economic growth and ability to compete globally. At the same time, work habits accelerated by the pandemic are affecting the office space market. Vacancy rates have risen rapidly as hybrid and remote work habits endure.
Adding to that stress are higher interest rates. Building owners are having difficulty refinancing their buildings, leading to a rise in foreclosures, which has a tremendous impact on regional banks—and on the small and midsize businesses that rely on those banks for financing.
The office space market will likely start to rebound as those looking to take advantage of low prices start buying available properties. But long term, a more robust return-to-office for workers is needed to bring back the office space market. That opportunity will only happen when the labor market weakens, allowing employers to gain more leverage. Given that the worker shortage is here to stay for at least the next generation, this may not fully happen for years to come.
This article was written by RSM US LLP and originally appeared on 2024-01-25.
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