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Even before the pandemic, a demographic “perfect storm” was brewing in developed labor markets, reducing talent availability at both the leadership and entry levels of organizations. Today, future-seeking leaders understand the varied factors creating talent shortages as they tackle the challenge.
The impact is pronounced in countries including the United States, United Kingdom, Canada, France, Germany, and the Netherlands. As large swells of Baby Boomers retire and Millennials move past entry-level roles, talent shortages among Generation X and Generation Z workers exacerbate what many are calling “The Great Resignation.”
Using the United States as an example, Willis Towers Watson’s analysis of U.S. Census and Bureau of Labor Statistics data shows the problem: Despite overall population growth (11.9%) and labor force growth (4.5%), the labor force actually shrank from 2010 to 2020 in age groups 16-24 (-3.4%), the historical entry-level talent pool, and 45-54 (-10.6%), the historical leadership talent pool. The data show the same result when analyzed from 2010-2019, demonstrating this problem originated before the pandemic.
The pandemic then drove down labor force participation rates (the proportion of the working-age population that is either working or actively looking for work) for these and other age groups, creating even more of a crunch. The resulting low supply of workers gave employees greater choice and “buying power,” increasing their ability to negotiate higher wages and more favorable benefits and work arrangements by changing jobs. Employers were not able to replace employees due to low workforce availability. Thus, the cycle of talent shortages and “The Great Resignation” was born.
While overall labor force participation rates may increase as economies emerge from the pandemic, labor economists anticipate even lower levels of participation in 2030 for workers under the age of 45. And because the 2030 labor force for age groups 16-34 and 55-64 is expected to be smaller than in 2020, the problem will not self-correct any time soon.
Future-seeking leaders recognize the significant changes in employee work preferences and habits due to the pandemic, as well as the more permanent demographic shifts that will be in place for the next decade. Therefore, they are taking the following actions:
01
In the U.S., the highest growth age group in the labor force from 2010 to 2020 was 65 and older (58%), followed by 55-64 (17.2%), and then 25-34 (8.6%). Most other groups stayed flat or shrank during this period. Organizations have an opportunity to tap late-career workers for roles they previously may not have considered. These include “post-leadership” roles that leverage deep expertise and provide opportunities to mentor earlier career workers in a more flexible work environment, allowing for the pursuit of other interests in parallel. For those in the 25-34 age group, flexibility often entails dynamic work arrangements, support for employees who are starting families, as well as upskilling and continued education.
02
Rather than simply throwing higher salaries at the demographic problem and adding to wage inflation, future-focused leaders know that employees often join and stay in organizations with differentiated culture, values, and purpose. Data suggest organizations with transformative employee experiences are far more likely to report lower turnover. Leaders also create diverse and inclusive environments in which employee voices are heard and respected with dignity. This helps attract a broader employee base; for example, the Black/African-American labor force expanded 13% and the Hispanic labor force expanded 27% from 2010 to 2020.
03
Tapping talent from emerging markets and embracing “offshore” operational deployment strategies are not new concepts. Growth in education and available workers in India, China, Brazil, Philippines, Mexico, Indonesia, Vietnam, Turkey, Poland, Ukraine, and other countries creates hiring opportunities. Coupled with greater use of communication technology and virtual working arrangements, organizations are expanding their talent pools globally for a broader variety of roles.
04
Contingent worker arrangements are not new, nor are the variations of estimates of contingent workers in the U.S. (ranging from about 6 million according to BLS, to close to half the workforce according to other sources). In an environment in which permanent workers are difficult to find, future focused leaders continue to utilize contingent workers to help fill gaps.
05
Future-seeking leaders know that robotics and AI are not about replacing jobs, but rather creating a new world of collaboration between humans and machines and filling skill sets through technology. While robotics and AI require greater technology skills, they create scale in routine tasks and processing functions that reduce stress on labor markets.
06
Future-focused leaders offer an array of professional development opportunities, including partnerships with educational institutions and governmental bodies, to expand the skilled labor pool. Research suggests employees value development opportunities and work experiences that allow them to build new skills and remain relevant.
While no single strategy represents the complete answer, future-seeking leaders use a portfolio of approaches to be “net talent gainers” (hiring more people than they lose) even in the most challenging environment.
A version of this article originally appeared on Forbes.com on November 11, 2021.
