Published Mar-29-2007
Much has been written recently about the coming retirement of the baby boom generation. The oldest boomers turned 60 years old in 2006. Many boomers will reach traditional retirement age within the next 10 years. This raises fears of a possible labor shortage. Most analysis has focused on national statistics. But what about Oregon's labor supply in the coming years?
Note: A full report on this topic is available at www.qualityinfo.org/pubs/single/enough_workers.pdf
An increase in the pace of retirement will put pressure on many employers to do more recruiting and training of new workers and to find ways to keep older workers, or at least to pass on their knowledge to their replacements before they retire. There is also some reason to believe many Boomers will continue to work but on a reduced schedule past traditional retirement age due either to financial need or preference to keep active.
With people living longer, we can expect an increase in the number of people in older age groups and in their share of the total population. This means that people of typical working age will be a smaller share of the total population.
In 2000, there were about 56 working-age people (for this analysis, age 20 to 59) for every 100 people in Oregon (Graph 1). By 2030, despite growth in the total number of people in the working-age group, even more rapid growth in the non-working-age group means that the working-age share of the population is projected to decline to 51 people per 100 population. This suggests that, in the future, each worker will have to support a larger number of other people than in the recent past. Projections show the situation approaching but remaining somewhat more favorable than in the 1960s and 1970s, when there were only 47 or 48 working-age people per 100 people in Oregon.
While large and fast-growing industries should have the most growth and replacement openings, even some slow-growing industries are likely to have substantial numbers of job openings as older workers retire. For example, although we expect manufacturing to grow only a little during the period, the industry should have many replacement openings due to retirement of older workers (Graph 2). Thus, even industries with slow net growth may have difficulty filling their many replacement job openings.
In our 2004 employer survey on training and retaining, employers having a problem with turnover said many of their workers left for jobs with higher pay or better benefits at other companies. The inability to match competitors' wage and benefit offers may be a symptom of low profits. In turn, low profits may be a symptom that other employers are either more efficient or are selling a product or service that the market values more highly.
Another reason seems to be contradictory: the pace of growth. Employers in rapidly growing industries often have difficulty finding qualified job applicants. While businesses in such industries may be highly profitable, they are more likely to have difficulty finding qualified employees if the jobs require specialized training. A current example of a fast-growing industry with lots of unfilled job openings is the health care industry, in which 17 occupations are facing worker shortages in Oregon, according to a recent study.
Other reasons entire industries or occupations or individual businesses may face greater difficulty hiring workers include undesirable work schedules or working conditions (mentioned by employers in our 2004 survey), a negative reputation among potential employees, very few people in training, and many current workers retiring or leaving for another reason. Similarly, regions may develop tight labor markets if they have rapid economic growth, a high cost of living, or an older age structure with many people retiring. For example, high housing costs and rapid economic growth have tightened Central Oregon's labor market.
Employers also search for improvements in labor productivity, typically through automation. The nation's employers have increased labor productivity rapidly over the past decade. More increases may be profitable in the future as the cost of labor is likely to rise with decreased labor availability. In addition, employers may decide they can reduce their hiring criteria by increasing training programs, drug counseling, schedule flexibility, and workplace accommodations for older workers or those with disabilities. If all else fails, businesses may relocate the jobs to places with more available labor. Outsourcing and offshoring have been in the news over the past decade.
In addition to actions employers may take, workers themselves tend to help loosen a tight labor market if provided with incentives to do so. Up to a point, as wages and benefits rise, more people enter or remain in the workforce, thus making labor more available. In addition, occupations with higher wages and benefits as well as better working conditions, and job opportunities tend to attract workers to pursue the training or education required for these occupations.
Unfortunately, the labor market's adjustment to changes in demand for workers in a particular occupation may take years to accomplish if the desired training and experience takes years to obtain. Economists speak of the "cobweb model" of labor supply and demand in which long training periods cause a substantial lag between demand and supply, potentially resulting in the two being mismatched for extended periods.
When local labor supply doesn't fill the need, migration from other areas with greater labor availability is likely to meet some of the demand for workers. Almost 170,000 people moved into Oregon between 2004 and 2005, according to the U.S. Census Bureau's 2005 American Community Survey. This is almost 5 percent of the state's population. About three-of-five recent in-migrants age 18 or older were in the labor force. Of course, some people leave Oregon each year. Net migration of about 33,000 in 2005 indicates that about 137,000 people, no doubt many of them in the labor force, moved out of Oregon between 2004 and 2005. One important reason for moving is to take a new job. Thus, migration is likely to have an influence on the availability of workers with needed skills.
The actions of employers and workers may be joined by changes in government policy to address the issue. Oregon's age structure in 2015 is projected to be very similar to Japan's in 2000. Japan has taken several actions to help address its employers' need for workers. It has expanded its support network for working parents, encouraged flexible work schedules and phased rather than abrupt retirement, expanded internship programs for vocational school students, and reformed laws to encourage employment of people with disabilities.
Adjustment to tighter labor market conditions are underway already. For example, some business associations have launched worker training and certification programs, and some employers are aggressively recruiting older workers. A recent AARP survey of 400 Oregon employers indicates that about one-third of businesses have taken action to prepare for a potential labor shortage. Common actions include improving technology, increasing training, and adjusting work schedules.