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If your business has tried to hire someone in the last year, you already know; hiring has never been harder. In Central Oregon, it has never been more challenging to find the right people for the right seats, at the right price and on the right timeline. Over the last 20 months, we’ve seen increases in pay expectations from the workforce, fewer applicants for open roles and longer lead times to fill positions. For months, the COVID-19 pandemic seemed to be the villain we could collectively place blame on for the woes of hiring. However, census and market data are showing a more grim outlook on the labor market for years to come. Some of the numbers put out by EMSI, an economic outlook group focused on the labor market, are hard to believe.
An EMSI report titled “The Demographic Drought” released in May 2021 highlighted the numbers surrounding the labor shortage. In the report, EMSI coined the term, “Great Sansdemic,” which means, without people. They’re predicting the shortage of millions of people will last for years to come. Why exactly are we seeing such a decrease in people? EMSI has pointed out a few specific reasons.
First, Baby Boomers, the generation of people born between 1946 and 1964, retired from the workforce 50 percent faster than in previous years. In normal years, two million boomers retire. Since 2020, we’ve seen upwards of three million boomers leave the workforce each year (often from senior-level positions). With an average net worth over a million dollars, many boomers have elected to opt out of work.
Second, our birth rate is too low to replace the retiring workforce. In 2020, there were 3.6 million births in the U.S., the lowest rate since 1979. The replacement birth rate, i.e. the number of births required to replace the current population, is 2.1 births per woman. Since the 1970’s, the birth rate in the U.S. has been on a downward trend, averaging closer to 1.7. On the surface, that might not seem like a big deal, but having nearly 20 percent fewer births than we need to replace ourselves is not an issue that is easily solved.
According to EMSI, the third primary driver of our labor shortage is the significant number of people electing not to work full time jobs. Between 2020 and 2021, 2.4 million women left the labor market, largely due to an unfair split of parenting work. In the same time period, 1.8 million prime age men (ages 25-54) quit working in full-time jobs.
Another way to summarize these numbers is the Labor Force Participation rate. Labor Force Participation is a measure of how many people in a country are actively working or seeking work. The latest measurement shows a decline from 61.7 percent labor participation to an all-time low of 60.4 percent. That percentage change represents a decrease of roughly 4.2 million people in the U.S.
Where is everyone going if not to work? And, more importantly, what can businesses in Central Oregon do about it? Let’s take these one at a time, starting with where everyone is going. The main drivers of people leaving the workforce, according to EMSI’s report, are (1) A delayed need to generate income, (2), the substance abuse and opioid epidemics and (3) a fundamental shift away from full-time employment.
By 2030, it’s expected that millennials will inherit $68 Trillion from their baby boomer parents and relatives. Real estate, businesses, stocks and bonds and other financial assets will change hands at record pace this decade. So much so in fact, the millennial generation is on pace to be the wealthiest group of people in history. The net effect of wealthy boomers and expected inheritance is a reduced need to participate in the workforce to generate income.
The second reason EMSI shares, the substance abuse and opioid epidemic, is not one most of us would expect to see. However, the opioid epidemic is its own poison that has been brewing in the background for two decades. Since 1999, prescriptions for opioids have skyrocketed across the U.S. A 2018 report by the American Action Forum found that in 2015 alone, over 850,000 prime age men were absent from the workforce due to misuse of opioids following a prescription. Since 2015, the number of prescriptions has continued to rise.
Finally, over the last decade, the number of prime age men seeking part-time work has gone up by 33 percent. In 2007, there were six million men in the U.S. that opted to work in part-time roles. By 2019, that number was over eight million. The combination of wealthy parents and the flexibility of part-time work schedules have reduced the drive for prime age men to participate in full-time work. By the numbers, men would rather work multiple part-time roles instead of a single, full-time job.
Naturally, the next big question is what can we do about it? How we continue to build and run businesses in Central Oregon with a literal lack of people is going to be a challenge for years to come. In the face of this challenge, we have to start with retention. No one wants to join a sinking ship, so making sure your business retains people for the long term is step one.
The next thing to start thinking about, which is closely aligned with retention, is upskilling and training. Look for ways to keep people in the company by training them to do other jobs. Online resources like Udemy and Skillshare can be used as a cheap resource to train people on particular skills. Next, start looking at non-traditional markets for applicants. Adults without college degrees and other demographic groups (e.g. younger or older) can be a great source for people. Being able to hire for will (e.g. attitude) and train up on the skill side is a great way to build a great team.
Next, take stock of what is really happening day to day and spend time figuring out what can be eliminated, automated or outsourced. When possible, eliminate tasks that are time consuming and not value-added work. If something cannot be eliminated, consider using software tools to automate the task(s). If it can’t be eliminated or automated, consider using remote employees. Many roles that require heavy computer and phone usage can be done from anywhere. Use that to your advantage by hiring people in other areas (states or other countries). Once the tools are in place to bring in fully remote people, the same tools can be used for local employees to work in a hybrid model (e.g. partially remote). Having the ability to work a more flexible schedule can be both a recruiting and a retention tool.
Is your office a place you would hang out? Another option to consider for attracting people that could otherwise work elsewhere is make the office a place that people want to be. That might mean modernizing the office furniture, expanding the snack selection or reorganizing the floor plan to make way for more positive interactions.
When it comes to hiring people, cash is still king, but that does not mean other benefits should be ignored. Hiring is a competition, and people will gravitate towards the teams with the best culture and perks. As an example, some companies are moving towards an unlimited PTO policy, offering sign on bonuses and even mental health days. Other things to consider would be additional health insurance options that cover more of the monthly premium, employee ownership programs, student loan repayment plans, cell phone stipends or even an internet stipend if someone is working from home. Average benefits packages will attract average people. If you want to build a great team, great benefits are required.
Finally, when it comes time to hire, consider adding additional fire power to the process by bringing in an external search partner. External recruiters can be a resource for identifying people at speed, introducing people that are confidentially looking for new roles that aren’t active on job boards and for vetting someone’s skills.
To summarize, there are a number of factors contributing to the shortage of people in this country looking for full-time employment including accelerated retirement for baby boomers, a lack of people and an increase in the number of prime age people leaving the workforce. The consequences for businesses are that people will be more challenging to find, hire and keep.
What exactly will this mean for Central Oregon? It means we will continue to see longer lead times, high pay expectations and few applicants for our open roles. It means that local businesses need to embrace hiring as a competition and invest in training programs. It means we have a long road ahead of us to make sure our businesses continue running smoothly.
