Labor shortages — especially in blue-collar fields — will persist for the next decade, according to a new study released today by the Conference Board.
The Board warned that, without a concerted effort by companies and governments, the nation’s overall standard of living will decline, along with profits in blue-collar-heavy industries such as transportation, warehousing and manufacturing.
The study examined the causes of labor shortages and how companies are filling their job openings.
The Conference Board surveyed more than 200 human resource executives, who detailed the ways vacancies are hurting their companies and how they are solving this problem. It found that shrinking supply and soaring demand are causing blue-collar labor shortages.
Baby Boomers perform much of the nation’s blue-collar work, but they are leaving the workforce in droves, the study found. The proliferation of retiring Baby Boomers will continue through 2030.
Amid this Baby Boomer exodus, the working-age population has largely stopped growing. The U.S. economy has never before experienced such a swell of retirements amid near-zero growth in its working-age population.
The tight labor market has brought more individuals into the workforce, but participation hasn’t grown fast enough to prevent it from further tightening.
The study also found that men without a college degree are less likely to work. Their declining workforce participation results, in part, from more of them being single, living with their parents, and having less of a need to earn an income.
In addition, the share of people not in the labor force due to disability has soared and is now at a record high, with a strong concentration in the South and the Midwest.
Furthermore, more young adults are avoiding the trades. As a growing share of young adults enroll in four-year colleges, the number of working-age people with a bachelor’s degree continues to increase. Meanwhile, the number without a bachelor’s degree — those who typically choose blue-collar jobs — continues to shrink.
Young adults are much less likely to be in the labor force. The decline in labor force participation of 16-24-year-olds significantly reduces the supply of workers in jobs that hire young, less-educated workers.
Amid a shrinking pool of blue-collar workers, several factors have led to more demand for them. Overall labor productivity has slowed, creating more demand for human workers. Slow productivity growth means employers need to increase employment more rapidly to meet demand, further tightening the labor market.
From 2010 to 2019, labor productivity in the nonfarm U.S. business sector increased by 0.9 percent per year, on average, compared to 2 to 3 percent annually in the decade prior to the Great Recession.
Manufacturing labor productivity is suffering near-zero growth, leading to a hiring frenzy.
Manufacturing is the largest employer of blue-collar workers. Over the past decade, its productivity growth has essentially remained flat, after having averaged more than 4 percent annually for the previous two decades.
The surge of e-commerce activity has also created a surge in blue-collar jobs, particularly in transportation and warehousing.
The study concluded that labor shortages are helping workers but hurting companies.
Wages are rising fastest for new hires and blue-collar workers. As a result of these trends, the labor market for jobs that do not require a college degree is tighter than for highly educated white-collar workers.
For the first time in recorded history, wage growth for management and professional workers is significantly lower than for other occupations. At the same time, rapid wage acceleration for new hires is contributing to historic levels of pay compression and higher labor turnover.
Increased labor turnover is straining business operations. Rapid wage growth, especially among new hires, has led to increased job-hopping.
With the voluntary quits rate well above the 2007 rate and the time needed to fill positions reaching historic highs, many companies are operating with unfilled positions and overstretched workforces.
Labor quality is a rising concern. Given the perceived difficulty of finding qualified candidates, employers are hiring less-educated workers, which is partially responsible for historically high levels of concern about labor quality.
WORKFORCE DIVERSITY IMPROVES
Women are making record gains in employment, the study found. Part of this gain reflects the rising share of women in traditionally male-dominated blue-collar occupations, especially in transportation.
Companies are increasing their efforts to recruit other underrepresented populations such as minorities, mature workers, the disabled, immigrants, the previously incarcerated and veterans.
LABOR SHORTAGE SOLUTIONS
Human resources leaders said frequently-used solutions include:
• Boosting salaries and wages: Although the most popular tactic, raising pay helps only to a point. Given increased employment opportunities for workers and the financial constraints companies face, employers must innovate to attract and retain workers.
• Tactical HR solutions: The biggest difference between companies most and least affected by shortages is that those hardest hit are making tactical changes to the recruitment process.
• Increasing referrals: 51 percent of blue-collar-heavy companies said they had added or modified an employee referral program, compared to only 21 percent of white-collar-heavy companies.
• Ramping up social media: Increasing social media efforts ranked as the second most popular recruitment strategy (69 percent) among blue-collar-heavy companies, behind increasing wages and salaries (79 percent).
• Shortening the recruitment process: 37 percent of blue-collar-heavy companies see candidates ghosting interviews, and are responding by not requiring multiple interviews.
• Extending outreach beyond the usual recruits: 55 percent of blue-collar-heavy companies ranked expanding the target demographic as a key tactic; just 30 percent of white-collar-heavy companies said the same.
See the report and survey results here.