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The Shortage Of Labor

One of the major concerns of today’s companies is the shortage of labor, especially in management. The baby boomers are nearing retirement age in the United States and the birth rate is dropping. These circumstances, coupled with the booming economy are the main causes of the labor shortage. There is a high demand for labor but the once seemingly bottomless pool of employees and managers that companies drew from has started to dry up. What are the factors that contributed to the problem and how are today’s corporations going to handle this problem?

The type of labor needed in today’s society has been undergoing a constant change. There is an increase in demand for workers but there is a much greater demand for educated white-collar workers, especially management material. Projections state that the growth in managerial positions will increase 20% by the year 2010 yet the population aged 35-50 will decrease nearly 10%. What these figures say is the already diminishing supply of executives is going to dwindle even more over the next 10 years. There is a shortage of blue-collar workers now and there will also be an even greater shortage of them in the future.

In order for employers to find people who are willing to perform unskilled, repetitive jobs they are going to have to be willing to raise the level of compensation offered to employees. If McDonalds needs someone to flip hamburgers they better be prepared to pay double to triple minimum wage. There are a wide variety of employment opportunities and today’s workforce can afford to be selective when choosing a job. The demand for employees is high while the supply is low. The figures on the change in average population ages and growth in industrialized nations is beginning to make the corporate world stand up and take notice.

If the trends continue as they have been for the past thirty years, the shortage of labor is going to continually get worse with each year that passes. The predictions from the United States Census Bureau state that between 1990 and 2000 the increase of the American population over 60 will be 10. 5% but in 2010 to 2020, the increase will be 32. 5%. The change in the 60 plus population in the United States is projected to nearly triple in thirty years. Compare these figures to the increase in under sixty-year-old population.

From 1990 to 2000, the increase in under sixty year olds will be 6. and it is projected to drop to 2. 8% by 2010. If you look at the changes in the workplace you will see that the average age of an employee is steadily rising as the average age of retirement continues to drop. The projected increase in 55-64 year olds in the workforce from 1996 to 2006 is a staggering 54%. The projected change in the 25-34 year old bracket is -8. 8%. These trends are not only true in the United States. Japan is also going to be coping with similar problems.

Today the people over age 65 compose 16% of Japan’s population, but by the year 2020 it is projected that percentage will soar to 26. . Japan, just like the United States is going to have to attempt to retain some of this group in the workforce to compensate for the continually falling birthrate in their country. This problem is very true in Europe too. Since 1995 Germany, France and Italy have experienced a continual fall in working population ages 15-64. This trend is projected to continue into the year 2000. Our aging population is also choosing to retire much earlier than they once did. This is a factor contributing to the strong economy we are enjoying now. The old are growing older, living longer and they are healthier than ever.

Breakthroughs in medicine have enabled people to live much longer. The advancements our pharmaceutical companies research and development departments have made are staggering. Diseases that once were a death sentence are curable. Organs that are failing in the human body can be replaced or rebuilt. There are even some types of cancer that are considered curable. These things were not true twenty years ago. There also is a trend in this country towards remaining healthy. Americans are taking much better care of themselves; there is a genuine concern towards health.

People are not smoking as much as they did in previous decades and there is a trend towards exercise. We take vitamins, we go out for a weekend run or bike ride and we are eating healthier. All these factors contribute to a longer life expectancy and a rising demand for products and services. Another major contributor was the big push in the eighties, out with the old, in with the new school of thought, forcing the older management and executives into early retirement has left the companies of today in dire need of top caliber people. This coupled with the fact that each year more and more baby boomers decide to retire early.

The gains the baby boomers stand to receive far outweigh the costs in most cases. Their 401k plans and stock options have sky rocketed in value because of the strong economy we have been experiencing for nearly twenty years now. Today’s older working population has the choice to continue working or retire because for the most part, they are financially sound. Many are choosing the retirement option. They no longer have to deal with the day-to-day grind, the high pressure and rigorous schedules that are demanded of senior executives in today’s world.

They have worked hard for many years and now have the option to retire and enjoy the remainder of their lives. It’s a choice that is hard to say no to. It’s a choice that has proven to be very costly to today’s businesses. The companies of today are rapidly losing their think pools. The older executives possess a great deal of knowledge and diplomacy that is priceless to many organizations. These people could be mentors to the future stars of the company but they can’t do that if they are no longer employed in some capacity by their respective firm.

What the forward thinkers of today’s companies are trying to do is lure these valuable assets into staying in the work force. In order to do that, human resource departments must be very flexible with their offers. Some companies are offering what they refer to as dream jobs to their execs who are considering retirement. What a dream job consists of is the opportunity for the ‘would be retiree’ to work in whatever location and department of the corporation they prefer, doing what they choose to do. They also are able to work part time verses full time.

This gives the person a new job and a fresh outlook on work, which can be extremely beneficial to the individual while it also allows the company to hold on to a key player in their organization. Employers are being forced to offer options similar to this because if they are not available where a person is currently employed, they will choose an early retirement and seek more flexible working conditions elsewhere. There are many companies willing to be more flexible and understanding to the older executive’s wants and needs in order to take advantage of their years of knowledge and experience.

Placing this category of employee in a position to guide and advise the management of tomorrow, forming a stronger base and filling in some of the gaps formed as people retire is very smart strategy. One example of how companies are handling the situation is utilizing their aging managers as consultants. Chevron became aware of the problem three years ago and this is an example of how they have handled it. One of their well-respected executive chemical engineers, Jesse Krider announced his retirement from Chevron but he now works as a consultant overseas.

This enables Chevron to hold on to his 30 plus years of expertise and allows Krider to see the world doing something he enjoys. It is a mutually beneficial situation. Another solution is already up and running at IBM in Belgium. IBM needed to cut lower labor costs and they concentrated on offering an early retirement package to the 55-60 year olds. What they did next was to set up another company called Skill Team and offered a job to any of the former IBM employees affected by the forced retirement.

The rewards to the employee at Skill Team are working 58% of the time they worked before for 88% of the last salary received at IBM. Skill Team offers its services to IBM allowing IBM to maintain a fair percentage of its think pool while the former big blue employees can ease their way into retirement. A third example is corporations inviting the retired executives to sit on the boards of their companies and subsidiaries. John Castle, chairman of the leveraged-buyout firm Castle Harlen Inc, exercises this philosophy.

He taps into the resource of the retired executives by asking them to serve on the boards of the companies his firm takes over. This arrangement is perfect for all involved. The retiree is looking at a short-term commitment because Castle Harlen usually sells off the companies it acquires in less than seven years and Castle Harlen has the services of a qualified director without the worries of what the director will do when they sell off or dissolve the company.

These are a few examples of the creative approach some of today’s companies are taking to cope with the economic obstacles caused by an aging workforce. The companies of today are aware of the constantly growing problem and are working towards a solution. I think that they are moving in the right direction. Offering flexibility in what was once a very rigid structured hierarchy is certainly a step in the right direction. People in today’s world lead very different lives than they did 4o years ago.

A rewarding profession is not exclusively defined by the income generated anymore, rewarding can also mean personally rewarding. A good employee doesn’t necessarily work 40 hours each and every week, some work part time or are involved in a job-sharing program. In order to keep the workforce meeting the needs of the economy, the employer must continue to become more flexible and remain open to suggestions. Today’s companies are on the right track. I believe that with proper management and forward thinking, we will be able to cope with the ever-increasing shortage of labor.

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