The opinions expressed by Entrepreneur authors are their very own.
We’ve all experienced something like this by now: It’s the middle of a non-holiday week, and you pull up to a local restaurant or store and see a hand-drawn sign hanging ominously in the window. “Sorry, closed today.” You stand there for a moment. Is this a holiday?
Ten, twenty years ago this was rare. But today it’s an on a regular basis occurrence. We all know that stores are almost certainly closed at unusual times due to lack of staff.
This refrain is becoming more common and is a harbinger of larger problems to come. More importantly, it points to a staffing gap that will only get worse before it gets higher.
New report, The coming storm, Lightcast, an analytical company that analyzes the labor market, analyzes the Bureau of Labor Statistics and projects that only 6.4 million staff will join the labor market in 2022–2032. Only 3.8 million of them might be over the age of 65, and only 2.6 million might be aged between 16 and 16. In 10 years, 64 people will enter the labor market. For comparison, 25 million baby boomers entered the workforce in the Seventies.
So why is it that your local store is having a hard time staying open? In the years 2022-2032, only 900,000 will enter the market. people below the bachelor’s level. That’s just 90,000 a 12 months and that is why local shops and many businesses are struggling.
What’s behind the people shortage?
1. Baby boomers are retiring faster than the economy was ready to absorb: The baby boom added 76 million people to the US labor market. This generation also had an exceptionally high labor force participation rate (LFPR), and many women entered the workforce during these years. Businesses of every kind had an unprecedented supply of labor. From the Seventies to the 2000s, this led to not enough work for the entire potential labor force.
However, in 2020, when restrictions related to the COVID-19 pandemic were introduced and distant work was introduced en masse, the baby boom generation could afford to avoid sudden changes in the workplace and left the labor market in record numbers. Currently, roughly five million staff have left the workforce in the last few years, many of them below the traditional retirement age of 65. Moreover, in industries similar to logistics, construction, manufacturing and healthcare, many staff are over 55 years old. As they go out of business quickly, there are not enough younger generations to replace them.
2. The current workforce has a much lower labor force participation rate: The current LFPR is around 62%. This implies that 62% of the prime-age workforce (16-64) is actually working. In the Seventies and Eighties, the baby boomer generation’s LFPR was around 80%.
Moreover, the total LFPR is expected to proceed its downward trend over the next decade. Just a 2% decline could mean the lack of two million prime-age staff.
3. The U.S. birth rate has remained below substitute level since the Seventies: According to the Centers for Disease Control and Prevention, the U.S. substitute rate is 1.62, which implies families have fewer than two children. For nations and labor markets to thrive, the ratio must exceed 2.1 children per household, with each generation after the baby boom being below the substitute level. In fact, The 12 months 2023 had the lowest birth rate in the recorded history of the United States, which ultimately means fewer people coming in to do all the work vital.
The extraordinary importance of early talent
These three are harming the labor market in an unprecedented way. A shortage of human capital – the Most worthy resource of any economy – will delay Americans’ economic struggles. Currently, there are not enough plumbers, pilots, construction staff, teachers, engineers, doctors and a host of other staff to meet society’s demands.
So what are you able to do?
The first and best answer is to get more people on board. As the Lightcast report confirms, immigration is a key element keeping the U.S. economy in higher shape than many other countries amid growing labor shortage problems. However, immigration is still difficult because most other countries also have low birth rates. This employment gap is: global problemand we cannot rely solely on other countries to meet our labor needs.
Another solution is to improve national birth rates and LFPR. However, these tendencies are difficult to reverse. Once the birth rate falls below 2.1, it rarely reverses, even after radical policy interventions. LFPR is likely to increase as Gen Xers and Millennials spend their parents’ capital or determine to get married and start a family.
Early talent strategy
The primary solution that many companies will need to focus on is an early talent strategy. Organizations that rely on a regular supply of employees must shift from a tactical approach to finding and developing talent to a more strategic approach.
Tactical approaches, similar to posting job ads in the hope that qualified people will apply or retaining a recruiter to hire people from outside other companies, may be costly and are becoming increasingly ineffective, as any human resources skilled can attest.
A strategic approach to talent development involves reaching out to potential candidates before they enter the labor market and even before they begin looking for a job. I mean primary and secondary school. You might not be ready to hire them yet, and they might not be ready to work for you yet. But awareness and building relationships go a good distance. If you are trying to recruit and hire them after other organizations have already done it, it would be tougher. Also, firstly, there is not enough supply of talent available.
So if you run a business and are starting to experience a labor shortage and are hoping that the situation will turn around in a few months or years, consider taking a more proactive approach to overcoming the shortage. It’s time to rethink the way you hire, recruit and find the talent you need. Your future pipeline depends on it.