Our Current Labor Shortage Is Just a Sneak Peek Into the Future

The disappointing April jobs numbers have set off a panicky search for reasons why a fully caffeinated American economy isn’t matched by a sizzling jobs market and a plunging unemployment rate. Various explanations have been offered, including continuing fear of the coronavirus, particularly among workers in the leisure, service, and hospitality sectors; a lack of urgency in job-seeking due to stimulus-fattened household savings; and what many regard as overly generous unemployment benefits that may discourage work

Emsi, a labor market research firm based in Moscow, Idaho, has offered a different explanation. Complaints from businesses about not being able to find workers are actually the precursor to a long-term labor drought—what Emsi calls a sansdemic, literally “without people”—that’s been building for decades. The firm has marshalled an impressive compilation of data to support the notion that while COVID-19 and the various federal relief and stimulus programs may be aggravating the labor crisis, they almost certainly didn’t create it.

The top-line factor in the labor market shortage, the Emsi report argues, is the shrinking pool of available workers caused by declining fertility. As a number of American Enterprise Institute scholars, as well as other public intellectuals, have noted, the U.S. has been below the “replacement rate” of births, about 2.1 children per family, for decades now. This baby shortage is now manifesting itself in smaller numbers of students going to college and workers entering the labor market. This reality can’t be undone without a time machine enabling couples to go back and make different decisions about family size 20 years ago. Moreover, as Europe and Japan have discovered, once the base of the demographic pyramid shrinks, it’s dreadfully difficult to figure out how to make it grow again. The young, fertile couples in their child-bearing years just aren’t there to make more babies. Call it a “Catch-2022.”

This demographics-driven tightening of the labor market has been exacerbated by a general retreat from work. For the past several years or so, we’ve been fretting about the exit of prime-age working-age men from jobs. But there are new factors subtracting from the pool of available workers, as well. One is the number of younger workers who are choosing part-time over full-time work, a possible side effect of the growing gig economy. The Emsi report shows the number of prime-age working men who voluntarily opt for part-time work went from 6 million in 2007 to nearly 8 million in 2019. This trend is particularly pronounced among 21- to 30-year-olds, who reduced their total hours worked by 12 percent between 2000 and 2015. In 2014, 15 percent of these men did not work a full week at any point in the year. 

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