Employees are gone.
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The U.S. labor force is growing very slowly, and that growth is primarily due to immigration rather than natural increase. The labor force participation rate has remained flat. However, many business attitudes developed when labor was plentiful. This is the message from Lightcast's report, “The Rising Storm: Building a Future-Ready Workforce to Tostand the Promering Labor Shortage.” This excellent report summarizes where we are now, where we are going and advice for employers.
Key elements of our demographic future have been in place for years and highlight the importance of business leaders understanding how these changes will require new business practices Some people.
Attitudes among business leaders are changing, and that's good news. From 1970 to 2010, early generations of baby boomers and their children entered the workforce. At the same time, female labor force participation increased rapidly. There were many workers.
But now the baby boomer generation is retiring. The generation that is now in its prime is no bigger than the boomer generation that is retiring. To make matters worse, many people of working age are not working. Some struggle with addiction or sheer laziness. Inheritances from boomers allow others to retire early. The pandemic exacerbated the labor shortage as many people retired early for health reasons and many stayed home to care for children whose schools were closed. The labor market is tight.
Business leaders are aware of this trend, but finding solutions is difficult. Ron Hetrick, co-author of the Rightcast report, spoke to me via video call. He acknowledged that those who learned how to be managers in an era of workforce abundance had not adequately taught the next generation how to manage employees. But Hetrick said these lessons have not been learned by new business leaders. They understand that we are in a tough labor market for the long term.
Companies are finding some solutions, Hetrick said. He talked about “load management,” citing the manufacturing industry as an example. Factory orders may fluctuate seasonally or over time. Companies pursuing lean inventory management reduce staffing when orders are low and increase staffing when orders pick up. But now, employees who have been temporarily laid off or had their hours reduced may not return. Currently, companies are not changing production volumes, instead taking advantage of periods of low orders to build up inventory. Then, when we have a lot of orders, we will get rid of the inventory.
While this is a great concept for goods, manufacturing accounts for only 8% of employment. Service is where most of the employees are. Those who underwrite insurance policies and bank loans are unable to inventory their documents in times of crisis. Hotel housekeepers cannot make extra beds for the future. And today's diners don't want yesterday's fries.
Some smart business owners may come up with load management techniques outside of manufacturing. Perhaps less store-wide sales and more targeted sales in different departments will become the norm. Perhaps more companies could offer discounts on out-of-season service purchases, as hotels routinely do. These approaches will emerge over time as employers face the challenge of labor pressure.
We are beginning to see some positive signs in the improvement of employee productivity. Physicians and other healthcare providers are using AI-powered writing technology to reduce the time they spend writing patient visit summaries. Robots are more capable than ever. Many shoppers prefer self-checkout and filling their own gas.
Mr. Hetrick, an economist specializing in the labor market, also commented on political policy. He said the politicians he spoke with “understood” the tight labor market but could not openly say “we don't need more jobs.” It's also difficult for candidates to tell general audiences that immigration should be loosened. And it would be dangerous to tell the public that occupational licensing requirements in the medical field should be relaxed. Even if politicians understand the problem, if they do not speak up, the people will not understand the problem.
I recommend using three broad strategies. The most important thing is to improve employee productivity. This can be achieved by providing better training, better tools, and better management, not by coaching employees too harshly. The second strategy is to improve employee retention. This is best achieved by front-line managers who are guided and encouraged by senior leaders to prioritize retention. The third workforce strategy essential for the future is improving employee recruitment, including recruiting those who are most likely to stay.
Lightcast reports are a great place to start your workforce strategy journey.
