As life begins to fluctuate in response to the pandemic, companies are trying to work through what happens next-- whether their employees should be returning to work, staying home, or…
The Bureau of Labor Statistics (BLS) recently reported that the labor force participation rate is on its way down, and will continue to do so in the coming years. In 2020, it was 61.7% and is projected to be 60.4% in 2030.
The decline is attributed to the increase of Baby Boomers retiring, alongside the decreasing birth rate in the U.S. Timing would have it that as of 2030, the youngest Boomers will be of traditional retirement age.
“This is a tough picture, looking forward,” said Ron Hetrick, a senior labor economist at labor market analytics firm Emsi Burning Glass in Moscow, Idaho in an interview with the Society for Human Resource Management (SHRM). “People who think that once the pandemic subsides things will get better forget that in February 2020 we had the lowest unemployment rate in history. Since then, we have lost many more Baby Boomers and haven’t really added new labor market entrants.”
It is estimated that about half of adults are expected to work beyond the age of 62 according to a survey by the Federal Reserve Bank of New York that was conducted this past summer.
In the survey where they talked to 1,200 American households, they also found that 50% of Americans were, on average, more likely to retire before they turned 62 closed. Also, only 32.4% of Americans were planning on working beyond 67 years old, which is a record low.
What could be driving Baby Boomers to increasingly retire at a younger age during this particular time? A recent survey showed that 1.5 million Americans said their top concern was to decrease the risk of contracting COVID-19 in the workplace.
Even as early as last Fall, a report from the Retirement Equity Lab revealed that people over 55 had unemployment rates higher than the younger cohort. This is a trend that hadn’t been seen for over a half-century.
Unfortunately, the younger population won’t be offsetting the looming talent shortage partially brought on by Baby Boomers leaving the workforce. BLS’s report revealed that workers that are aged 16-24 have been declining for decades. The decline is predicted to continue through 2030.
To add fuel to the fire, from now until 2030, 12 million jobs are expected to be created according to the BLS report. Yet, only 8.9 million people are expected to enter the workforce over that time, resulting in a significant decline in talent available to businesses and organizations.
In addition to available younger employees decreasing, prime-age populations have shown a slow decrease in the participation rate. For that population (25-54) although it will continue to trend downward at a slower rate than the younger population, the rate is expected to remain relatively level through 2030. This should be the case for the next decade according to experts.
What does it mean for the labor markets?
“I believe you will continue to see wage inflation and scarce talent throughout all fields and industries. Companies will have to reevaluate their hiring practice, development, and retention strategies,” explains Dean Madison, CEO of TD Madison & Associates. “These new strategies could include offering apprenticeships, manager trainee programs, and targeted skills training to develop the needed talent for the future. Companies that start to incorporate these elements into corporate strategy will be in a better place to capitalize on market opportunities than their competitors.”
