The Conference Board first alerted businesses and policymakers of coming labor shortages in September 2014, at a time when most observers were still focused on slow employment recovery from the Great Recession. In the 19 months since, much of the predictions of the report From Not Enough Jobs to Not Enough Workers have come to pass, even as unique and unexpected developments have altered the outlook in many regions and sectors. Help Wanted: What Looming Labor Shortages Mean for Your Business, a new report released today, updates the employment and talent picture for the years ahead.
“As we were among the first to predict nearly two years ago, a combination of demographic and business pressures has seriously increased the gap between open jobs and available and qualified workers in mature economies,” said Gad Levanon, Chief Economist, North America, at The Conference Board and a co-author of the report. “But while talent shortages are already being felt in countries like the U.S., Germany, and Japan, a surprisingly large number of mature economies—particularly in Europe—have yet to transition from employment recovery to worker shortages.
“That said, the profit-squeezing factors of low revenue growth, accelerating labor costs, and higher quit rates are only likely to widen and deepen over the next 15 years. Today’s report offers the most high-resolution look yet at the timing and impact of this ‘new normal’ in labor markets across a comprehensive range of regions and industries.”
A labor shortages risk index for 457 occupations was constructed to support the report’s analysis. In the coming months, an array of smaller reports and blog posts will examine the individual stories behind this global phenomenon. Among the key findings of Help Wanted: What Looming Labor Shortages Mean for Your Business:
- Today’s talent shortages are not a passing tempest, but a perfect economic storm. The combination of the retiring baby boomer generation and very weak labor productivity growth is contributing to historically low growth in the capacity to produce. Simply put, fewer workers in a low-productivity environment mean less can be produced than before. In such conditions, even weak growth on the demand side has been enough to tighten the labor market in many mature economies.
- Labor markets in the U.S. are even tighter than expected. Tight labor markets are now a reality in parts of the United States, a phenomenon this report examines closely across locations and occupations. Employment growth since September 2014 has been exceptionally strong, growing at about 2 percent annually despite GDP growing at about the same rate—well below its rate in previous expansions. (Typically, GDP grows significantly faster than employment.)
- Wage growth in the U.S. is primed to (finally) accelerate. Wages have been a lagging key indicator in the current recovery. But recently it has begun to rebound, especially among new hires and younger workers. Barring a recession, within two years, the unemployment rate should be close to 4 percent, and the US labor market will be very tight. We expect wage growth to be one percentage point higher in 2017 than it is now.
- Europe still lags. Despite the broad trend of tighter labor markets, surprisingly few mature economies have reached full employment seven years after the end of the global recession in 2009. That is partly due to the disappointing economic growth in recent years, with many mature economies experiencing two or even three recessions since 2008. In most European economies, we do not expect full employment to be reached in the coming year—and, in some countries, not even in the next three years.
- Hard-hit industries. The report profiles two occupation groups likely to face the strongest pressures in the U.S.: healthcare jobs and skilled trade labor. The former faces rapidly growing demand as the result of an aging population. The latter category, which encompasses jobs like machinists and power plant operators, faces a dearth of new entrants to replace retiring workers. By contrast, concerns over computer and science occupations may be overstated, as the supply of workers is likely to keep up with demand.
- Different pressures in emerging economies. Beyond the mature economies, population and economic growth is projected to be much higher than in mature economies over the next decade. But, as the report examines in emerging Asian economies, the sheer quantity of workers may not be enough to attract multinational companies to these countries. In these areas, labor shortages are primarily a matter of securing the right skills to work in a global modern corporate environment.
- C-suite strategies. The report examines responses open to business leaders, including: preparing for demographic shifts, shrinking economic activity in certain geographies, offshoring, teleworking, immigration, delayed retirement, contingent workers and the underemployed, and tapping discouraged workers whom have yet to return to the labor force since the Great Recession.
For complete details visit:
Report: Help Wanted: What Looming Labor Shortages Mean for Your Business
(Research Report R-1601-16-RR)
By Gad Levanon and Abdul Erumban, with Ben Cheng, Eric Hayek, Brian Schaitkin, Frank Steemers, and Eliza Winger
Join the conversation on Twitter. @Conference Board | #LaborShortage2016
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