From Labor Shortage To Labor Crisis

Dec. 21, 2004
American companies are creating too many jobs for not enough people.

There's a labor shortage -- and it's not just in Silicon Valley or Wall Street. Parts of the Dakotas, North Carolina, and other areas across the country are experiencing a 1% unemployment rate. The labor shortage is not just for white collar jobs either. Fast food companies such as Taco Bell are having trouble recruiting and retaining minimum-wage employees. Some grocery stores have even been offering signing bonuses to entice cashiers. Salons cannot find enough hairdressers. U.S. unemployment as a whole has been hovering at 4.3% for the last few months -- the lowest in over 20 years. Upper level management and technical positions currently have a 1.4% unemployment rate -- an all-time low. Because of the predicted future fluctuations of the economy, there may be a short-term alleviation of the labor shortage in a few years. However, the current labor shortage has roots in more than just the robust U.S. economy. Within 10 years our country may be experiencing a genuine labor crisis. Labor is scarce, and it will continue this way through the first half of the 21st century. According to estimates from the U.S. Labor Dept., the unemployment rate in seven years could be at 2%, meaning that many companies are going to have to acquire qualified workers from other sources. And the job market 10 years from now will get even tighter. The diminishing labor pool is a result of population trends that are constricting the flow of new workers entering the workforce. Much of the demand for labor in the last 40 years has been filled by women entering the workforce and by large corporate downsizing. Though downsizing will continue, most of the large employers are lean enough to survive a downturn in the economy (unlike the early 1990s), while the really bloated employers such as local governments, federal agencies, and universities show no sign of downsizing. Also, most women who want to work are currently employed -- the growth rate of females entering the workforce is predicted to decrease from its current 1.8% to 1.4% in 15 years, according to the U.S. Bureau of Labor Statistics. These population trends suggest that unless there is a severe economic downturn or depression in the U.S. economy, it is unlikely that unemployment will reach 10% in the next 50 years. Some people claim that new technology will replace many jobs and help alleviate the tight labor market. History has shown us, though, that technology has usually created more jobs than it displaces. Technology was supposed to release the need for workers by making us more efficient -- it has reduced the need for bank tellers, telephone operators, and others. These cuts, however, do not even amount to half of the jobs created by computers and new inventions in recent years. Technology has increased the pace of business and competition -- forcing companies to maintain a technical "edge." The increased competition has lead to additional jobs that manage and develop technology. It also has shortened product life cycles, generating the need for a larger workforce to handle more tasks. Although technology is changing the supply-and-demand for workers; future worker shortages are expected in non-technical jobs. Indeed, the Dept. of Labor predicts that some of the biggest labor demands in the next 10 years will be for security guards, cashiers, and janitors -- jobs we can't outsource overseas. Since technology is not the answer to the labor shortage, corporations planning to be competitive in the 21st century will have to broaden their labor pool. Corporations looking to hire professional knowledge workers should begin exploring hiring immigrants, more people of color, and disabled workers. Immigrants: For American business to remain competitive, more skilled immigrants will have to be allowed to work in the United States. Within 15 years our economy easily will be able to absorb at least 250,000 professional immigrants and, quite possibly, their families. With renewed pressure on Congress, action on increasing the number of U.S. work Visas is expected to increase soon. Companies have to bring the labor pool here -- it is difficult to go there. Though overseas labor itself is usually cheaper -- it is very expensive to do business in many other countries. Opening offices, complying with expensive laws, building extensive corporate communications networks, ensuring a multi-million dollar investment -- not to mention overseas employees usually have trouble communicating in English. People of color: While the job market is stellar if you are a white male, unemployment is still rather high for African-Americans and Latinos. In California and other states, people of color will soon make up over 50% of the population. Companies should start preparing for this by actively recruiting minority candidates. At BridgePath Inc. we serve thousands of top-notch candidates of color from all over the nation. Many of these candidates have specifically expressed that they are looking to join firms with reputations of being open to people with diverse backgrounds. Disabled workers: Few corporations make an effort to hire disabled persons, but BridgePath has found these employees to be the most loyal and dedicated. The disabled unemployment rate is generally over twice the national average. These employees appreciate the break of getting a job and frequently go the extra mile to become star workers. Another avenue for companies to consider when looking to fill general positions in the $5 to $15 an hour range: retirees, former criminals, and former welfare recipients. Retirees: The average baby boomer will be 65 in 13 years, but not ready to retire. Most baby boomers do not have secure retirement packages and cannot rely on sparse Social Security payments to pay off their mortgages. These willing workers have years of productive experience and are usually very reliable and less likely to switch jobs than younger workers. Moreover, it is not uncommon nowadays for people to be productive well into their 80s. Former criminals: Big risk but lots of available workers. There are over 1.5 million people in prison, 80% of which have been incarcerated for non-violent crimes. Though hiring former criminals could be risky, many of them are hard workers and grateful to employers. Former welfare recipients: Since our federal laws were reformed in 1994, thousands of former welfare recipients have entered the workforce. Smart businesses should create a program for hiring this potential employee gold mine now. When the employment crunch really hits, many businesses will be unable to grow even in otherwise favorable economic conditions. Companies should begin a process of hiring from a broadened labor pool and start hiring from the non-traditional labor segments outlined above. Auren Hoffman is president of BridgePath Inc., an online placement service for top-notch candidates. BridgePath services over 150,000 job seekers.

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