OLMIS

by Brenda Turner
Published May-1-2008

Introduction Replacements by Industry Replacements by Occupation Educational Requirements for Replacement Job Openings Skill Requirement for Replacement Job Openings Employers Reacting Is it Really All that Bad?

Oregon gained back the jobs it lost during the 2001-2003 recession, and then some. New jobs have been created, and more are expected in the long run, though 2008 has been somewhat turbulent. Fluctuations in employment levels are often the topic of news media reports, which note how fast (or slow) the economy is growing based on employment level changes. Employment growth, of course, equates to an increased demand for workers.

Demand caused by growth, however, is only one part of the story; the other relates to demand created by the need to replace workers who leave their jobs to enter other occupations, retire, or leave the labor force for other reasons. It is important to keep in mind both of these sources of job openings – growth and replacement – because, taken together, they are the best representation of the number of job openings for new labor force entrants in each occupation.

The state's employment is forecast to grow by a healthy 14.1 percent between 2006 and 2016, with an additional 247,000 jobs. Over this same period, projected replacement needs are expected to exceed growth-related job openings in most occupations. In fact, for every one job opening expected due to economic growth, almost two job openings are expected due to replacement needs.

Employers are seeing their workforces age, and some are starting to wonder how they will attract workers to replace retirees. Forty-two percent of Oregon workers are 45 or older (Graph 1). Some employers are taking a close look at their workforces, and considering how to deal with an impending exodus of older workers.

When any employee – management or not – leaves a job, not only do they leave behind a vacant position, but they also take a few things with them – and it's not their favorite company stapler or a box of pens. They take knowledge and experience. With so many baby boomers who have been in the workforce, and maybe even the same industry, company, or position, for years, there is a large body of knowledge and experience nearly ready to retire as well. Companies that do not plan ahead could spend extra resources to bring their new workers up to speed, and still lose valuable knowledge along the way. It is difficult if not impossible to replace experience with anything but experience.

Over the 10-year period from 2006 to 2016, manufacturing industries are facing a significant number of job openings due to replacement needs, at over 90 percent (Table 1). Other industries are also expected to have far more openings due to replacement than due to growth.

In five of Oregon's broad industries – mining, utilities, transportation and warehousing, educational services, and public administration – over half of the workforce is 45 and older. Oregon's mining industry is quite small, with about 2,200 workers. The state's utilities industry is somewhat bigger, with 6,500 employees. The other three industries are large, with 50,000 or more workers. At least 40 percent of employment in nine other broad industries is 45 and older. They are:

• Agriculture, forestry, fishing, and hunting
  
• Manufacturing
  
• Wholesale trade
  
• Finance and Insurance
  
• Real estate and rental and leasing
  
• Professional, Scientific, and Technical Services
  
• Management of Companies and Enterprises
  
• Health care and social assistance
  
• Other services (except public administration)

The large numbers of older workers in these sectors lead one to ponder the question: Who is going to replace these workers when they retire? And there seems to be a lot to think about.

In industries such as education and health care, which require postsecondary education for many employees, an adequate supply of appropriately educated workers is key to avoiding severe shortages. As baby boomers retire, even other industries that do not widely require postsecondary education are faced with attracting an applicant pool to fill a larger number of job openings than they have previously experienced.

Wood product manufacturing is not a growing industry (with employment projected to decline by 6% from 2006 to 2016), but that does not mean there are no job openings. There is still a need to replace workers – both those who leave for other occupations, and those who leave the labor force due to retirement or other reasons. When interviewed in late 2006, the majority of SierraPine Ltd.'s Springfield Division had been with the company for 30 or more years. With an average worker age of 53, the company expects to face significant retirements in coming years and, therefore, job openings due to replacement needs. Tammy Rowd, controller for the Springfield Division, estimated half of the division's workforce would retire within the next 10 years.

"SierraPine faces (periodic) layoffs, and the most recent hires are laid off first due to hierarchy," Rowd said. This makes it difficult for new employees to gain the experience needed to eventually move into positions now held by older workers.

Turning from an industry view to an occupational view, health care occupations rank low in terms of the share of projected job openings due to replacing workers (Graph 2). This is not because the need to replace workers is low, but rather the projected growth in health care occupations is quite high. Other sectors are expected to grow as well, but health care is the only one that is projected to see more job openings in the next 10 years due to expansion than replacement needs.

Sales workers such as retail salespersons (23,339 replacement openings between 2006 and 2016, or 72% of total openings) and cashiers (16,978; 86%) have particularly high replacement needs because large numbers of workers are continually entering and leaving these jobs. The same is true for services occupations such as waiters and waitresses (15,503; 74%), and food preparation and serving workers (15,882; 73%). These large occupations have significant projected replacement needs. Many vacancies occur when workers move out of these occupations to others, as opposed leaving the labor force.

Funeral directors, riggers, and chemical equipment operators and tenders are smaller occupations and have far fewer expected job openings than those listed above. For these occupations, the share of openings due to replacement needs is very high at more than 90 percent. The openings are weighted more by the share of workers nearing retirement than workers frequently entering and leaving these occupations.

Because of replacement needs, even occupations projected to decline in terms of total employment between 2006 and 2016 – for example, several logging and railroad occupations, postal workers, semiconductor processors, and electrical and electronic equipment assemblers – provide some job opportunities. A total of 40 out of the 720 occupational titles used in the Oregon Employment Department (OED) occupational employment database are projected to decline, thus total employment of these 40 occupations will be lower in 2016 than in 2006. Still, workers will be leaving those occupations mostly due to retirement, faster than the occupation's decline, pointing to opportunities for workers new to the occupations.

Thirty-two percent of Oregon's jobs in 2006 had a minimum requirement of some postsecondary training after high school from a career school, community college, or university. Although further education may help job seekers be more competitive in the labor market, this minimum requirement is the most common education/training level Oregon employers seek when hiring workers. The other 68 percent of jobs either require related work experience or can be learned on the job.

A slightly smaller share – 26 percent – of replacement job openings require some level of postsecondary training. This small shift reflects the large number of projected replacement openings that have lower educational and training requirements. Many are in lower-paying occupations. This story is repeated with competitive educational requirements – the level of education or training that makes a job seeker more competitive in the labor market – with 58 percent jobs in 2006 and 49 percent of replacement job openings in 2006 requiring at least some level of postsecondary education.

Based on OED occupational skill sets, the most common skills needed for today's jobs are the same as those needed for replacement job openings between 2006 and 2016. The top-five skills for jobs in 2006 and for replacement job openings are: 1) process records and maintain forms and files; 2) apply basic mathematics such as arithmetic and ratios; 3) provide customer service; 4) follow safety procedures; and 5) work as a team member.

No doubt, skills are important. However, a worker's experience levels with these skills should not be overlooked. It is one thing to know how to follow safety procedures. It is another thing to have followed specific safety procedures daily for 20 years or more. The knowledge, experience, and skills that go away when any worker leaves an occupation – whether for retirement or otherwise – must be considered in coming years, not just how to replace bodies walking out the door, but how to replace the knowledge, skills, and experience they are taking with them.

It is inevitable. The large number of replacement openings in this state, fueled by baby boomers reaching retirement age, will affect Oregon's employers, some more than others. How are employers reacting to the baby-boom bubble slowly moving toward the door?

Some are putting an emphasis on increasing the number of students entering training programs – expecting these students will feed their labor pool. Others are looking at ways to keep retirees on the job longer. Job sharing is one option that allows workers to stay on part time. Another is project-based work that allows for long "vacation" breaks in between projects, giving retirees extended time off but not losing them permanently.

Employers who are accommodating, who look at their human resource policies with open eyes, and give potential retirees a reason to stay can work to keep employees on longer. Of course, retirees who have not planned well for retirement may be forced to stay in the work place longer, though not necessarily in their current occupations.

Oregon's population is increasing. And many of the people moving here are in the age group of "younger workers" (15-40). These younger workers are more apt to change jobs and careers more often than prior generations, and young workers are eager learners, adaptable, creative, collaborative, confident, and tech-savvy. This compares to mid-career workers who are ambitious, flexible, productive, and people oriented, and late-career workers who are more focused on project work and mentoring.

Older workers may work longer than we currently expect them to, either due to poor planning, personal choices, boredom in retirement, and a number of other reasons. Simply put, they may choose to stay on the job longer.

Let's not forget labor market forces that will have an impact, with increased wages used to attract workers and businesses paying for training of low-skilled workers to replace those who leave.

Replacing workers who leave the labor force is unavoidable. It happens all the time, but it will happen more and more as baby boomers move closer to the ends of their working lives. Replacing them with eager, knowledgeable, and appropriately trained workers will soften the blow to companies and industries facing increasing shares of replacement openings.