Executive Briefings

Opinion: The Labor Force of the 2020s

As an economic futurist, I try to deal in highly likely projections, and population trends are the likeliest. Who will be available to work for your company in 10 years?

The news here is bad, at least for business owners and executives with a vision of growing their companies. There won't be much growth of the labor force, so businesses will have to adopt new strategies for employee retention and recruitment.

Population is fairly easy to forecast over the next decade because anyone who might work for you has already been born. We know that everyone gets one year older each year, at least those who don’t die in the meantime. And death rates for working-age people tend to be low and fairly predictable, so we have an excellent idea of how many native-born people of working age there will be in the coming decade. (This article takes a U.S. perspective, but the methodology would work for any country.)

The immigrant population is harder to forecast, but we can see clear brackets from historical experience. We may be off, but probably not enough to alter our overall conclusion of a tight labor market.

In coming years, there isn’t much growth in the U.S. population aged 25-64 years old because baby boomers are aging out of the working-age group, and most millennials are already in. The median millennial was born in 1990, so we’re on the fading tail of that distribution as far as the number of people entering the typical working years.

The Census Bureau updated the projections in 2014 and assumed that the recent decline in foreign immigration would reverse itself. Instead, immigration continues to be low. The next forecast update will probably anticipate even fewer immigrants, so companies should plan on a greater labor force challenge.

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The news here is bad, at least for business owners and executives with a vision of growing their companies. There won't be much growth of the labor force, so businesses will have to adopt new strategies for employee retention and recruitment.

Population is fairly easy to forecast over the next decade because anyone who might work for you has already been born. We know that everyone gets one year older each year, at least those who don’t die in the meantime. And death rates for working-age people tend to be low and fairly predictable, so we have an excellent idea of how many native-born people of working age there will be in the coming decade. (This article takes a U.S. perspective, but the methodology would work for any country.)

The immigrant population is harder to forecast, but we can see clear brackets from historical experience. We may be off, but probably not enough to alter our overall conclusion of a tight labor market.

In coming years, there isn’t much growth in the U.S. population aged 25-64 years old because baby boomers are aging out of the working-age group, and most millennials are already in. The median millennial was born in 1990, so we’re on the fading tail of that distribution as far as the number of people entering the typical working years.

The Census Bureau updated the projections in 2014 and assumed that the recent decline in foreign immigration would reverse itself. Instead, immigration continues to be low. The next forecast update will probably anticipate even fewer immigrants, so companies should plan on a greater labor force challenge.

Read Full Article