Where Has All The Labor Gone?

Labor shortages exist in almost every industry across the U.S., from major corporations to the smallest mom-and-pop shops.  It is not unique to the U.S.  as companies in most developed countries of the world have the same issue.  Covid was not only a health pandemic, it was the catalyst that changed the way people looked at work.  And when countries across the globe shut down businesses en masse, or restricted activities to working remotely, the psychological mindset of employees changed forever.

It began with work-life balance, something found as far back as 3,000 years ago in Chinese Feng Shui.  Full-time work, with commute time, consumed a minimum of 50 hours of the 268 hours in a 7-day week.  Some careers consumed 1-1/2 to 2 times that number of hours.  Individuals longed for a career where they could work from home, but employers were largely resistant to off-site employees.  Then Covid and government-mandated shutdowns forced the issue.

Almost immediately, in order to survive, businesses had to provide a remote work solution, and all their arguments against it went out the window.  Employees began to experience a new work-life balance – and they liked it.  Currently, more than 37% of employees have no interest in returning to their former commute-work-commute fly-a-desk grind.

At least in the U.S., where the federal government supplied stimulus checks so employees would still have an income, something else arose from that compensation existence – the opportunity to ponder ones future career.  The most recent result has been workers shopping for better paying jobs, workers quitting to jump to a better paying job (the Great Resignation), workers changing careers entirely, and workers shifting from a W-2 employee life to a 1099 self-employed effort by starting their own business.  New business starts began picking up pace in 2020 and accelerated through 2021 marking the largest gain in new starts in more than 3 decades, that hasn’t tapered off yet.

The perception of a better work-life balance either working from home, or owning your own business, or both, has a certain luster, even though the bloom may come off that rose as time marches on.  Nonetheless, working 60 hours a week for yourself with the potential of creating recurring income in some Internet digital business has a better feel to it than reporting to a boss in a job that may be no more secure than a business start-up.  The self-employed mindset may not be so easily swayed in the near-term by employer promises or paychecks, especially with stories of former employees who bested their previous income in their first year.

One quietly occurring tsunami moving through the U.S. workforce is retirement.  Each day since 2011 when the first baby-boomers born in 1946 began to retire, 10,000 boomers have left the workforce – yes, every day.  With them went 20, 30, even 40 years of knowledge.  With them went their loyalty mindset, or a willingness to continue to work for the same employer for decades.  This has been called the brain drain, and little has stemmed the tide of this sweeping exit of skilled workers.

Predicted more than 25 years ago was the current birth dearth, or the situation where family size in the U.S. would shrink post-1964, resulting in insufficient population growth to offset the retirement of the baby-boomers.  Just exactly that has happened and, for the first time in its history, the U.S. is experiencing near-zero population growth.  And, as baby-boomers pass away, with follow-on generations having smaller families later in life, the U.S. will likely experience negative population growth.  Countries experiencing negative population growth typically go into an extended period of economic decline because a disparity exists between the workers needed and the workforce available.  If birth rates suddenly doubled in 2022, it would take 25 years before that population growth could supply even a neophyte workforce.

Employers are raising wages, but a certain reality exists – companies have to make a profit to continue stay in business. A “job” is created by a company to complete certain tasks with a return on that investment.  The “job” belongs to the company, not the employee, and if the cost of that role rises past a certain point, the job may be redefined and crafted differently.  So what’s coming?

The plethora of apps for smartphones has demonstrated that all kinds of things can be done with a bit of coding.  The price of robots, like other electronics, continues to fall each year as more code is developed so that robots can perform more complex tasks, and do them safely in the presence of humans, or in place of humans. Robots are becoming more sophisticated and even life-like.  Coupled with AI – Artificial Intelligence, and machine learning that provides feedback so code can be refined, robot skill sets are advancing faster than 4-year college grads.  Nothing demonstrates this more than the dancing, jumping, running robots in videos coming out of Boston Dynamics; albeit, some very bright minds created those robots.

If humans are unwilling to perform a job at a cost that justifies the existence of that job, then industry will solve that problem another way.  Yes, we will need software engineers to write code, and manufacturing to make intricate parts, but those skill sets require post-secondary education for most people.  But, we won’t need as many software engineers as the people being replaced by machines that can work 24-7 with planned maintenance time and upgrades.  And in many cases, those engineers may be freelancers.

While some might point to other sources of labor, like immigration, the people flooding the southern U.S. border do not have the advanced skill set needed by industry, and won’t have for more than a decade.  With the U.S. labor participation rate (all people over the age of 16 able to work) hovering around 60%, adding more unskilled labor to the workforce will not slow the pace of human replacement.  In addition, there are few effective training programs to up-skill the U.S. workforce fast enough to generate skilled labor sooner than robots can be built and advanced to take over more and more jobs.  Even skilled labor brought in from overseas will end up in many of the jobs Americans could have had if the apprenticeship programs had been widely created two decades ago in the U.S., instead of universities churning out individuals with degrees that have little use in modern manufacturing or business.

So, the outlook that the U.S. will have several million unfilled jobs by 2025, exacerbated by reshoring,  may not materialize as technological advancements in robotics, automation, A.I., miniaturization, and other unseen developments change the vacancy equation.  Perhaps it is good that the U.S. population isn’t growing, and the work-life balance is shifting some of the population to self-employment and gig work.  We are reliving history.