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Qualified worker shortages to have uneven effect across US

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Qualified worker shortages to have uneven effect across US

Northeast and Midwest hit hardest.

Echoing the sentiments of majority of middle market executives, companies in high-risk US regions need to start planning now for deep and long-lasting labor shortages, according to a new report published today by The Conference Board. 

"We are now in a period of unusually slow working-age population growth—nearly zero through 2030, according to the U.S. Census Bureau," said Gad Levanon, Director of Macroeconomic Research at The Conference Board and a co-author of the report. "The underlying demographic trends mean even delayed retirement and higher participation rates will do little to stop labor demand from far outstripping labor-force growth. But while adjusting to this reality will require national thinking and perhaps a federal policy response, the onset and impact of the worker shortage will vary widely across the US. For many places in the Northeast and Midwest, the time is now."    

"We are now in a period of unusually slow working-age population growth—nearly zero through 2030."

Synthesizing the latest data, the report breaks down the 2015–30 labor-market outlook for each of the 50 states. Among the key findings:

  • Immigration may be a wildcard—and game-changer—for expanding labor supply to meet expected demand. While factors like birth and death rates, population distribution, and retirement expectations are only bent—if at all—over decades and generations, net migration can be increased considerably in the relatively short term. While unlikely in the current political climate, reform that boosts visas for skilled workers and regularizes the status of undocumented residents could substantially mitigate projected labor shortages across the country.
  • The size and shape of working-age populations vary widely across states, and will diverge further. To calculate where they are headed, the report compares the current size of two age groups as a proportion of the working-age population: 3–17 year olds, whom will be entering the workforce over the next 15 year; and 50–64 year olds, whom be will be leaving. With its unusually high fertility rate, the younger group in Utah outnumbers the older by over 18 percentage points. Texas (+7.77 points), Idaho(+6.36), and Arizona (+3.94) also have large rising cohorts of young workers. Throughout the Northeast, by contrast, 3–17 year olds are substantially outnumbered as a proportion of the population by 50–64 year olds, with the problem most acute in Maine (−10.91), Vermont (−10.35), and New Hampshire(−8.81).
  • The combined effects of age distribution and migration will mean serious labor-force contraction in some states, relatively healthy growth in others. Nationwide, the working-age population is projected to grow 5.2% between 2015 and 2030. However, while states like Nevada, Arizona, and Texas may see their working-age populations grow by over 20%, others—largely in the Northeast and Midwest—could see contraction approaching 10%. (These projections are based on historical trends and will likely be counteracted somewhat by worker movements adjusting to demand.)
  • States at the highest risk of labor shortages are those that both have relatively low unemployment rates now and projected weak labor force growth in the future. These states are concentrated in the Midwest and New England, but also include Montana, Kentucky, South Carolina, and Oregon. By contrast, favorable demographic trends and relatively high unemployment remaining from the Great Recession reduce the likelihood of serious shortages in California, Arizona, Nevada, and other Southwest states. A unique case, Texas has extremely tight labor markets now, but a long-term outlook moderated by high numbers of youth and migrants entering the workforce.
  • Effects of a tightening labor markets are already being felt in many locales, even as others continue to struggle with high unemployment. Businesses must take these forces into account in their planning, and work with policymakers to improve job skills and labor-force participation in the areas in which they operate. Given sufficient private- and public-sector attention, the size of the labor market and its low barriers to worker movement may ultimately help the US weather the challenge of aging populations better than other advanced economies like Europe and Japan.



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