The United States is sounding the alarm over a substantial labor shortage, driven by the departure of older individuals from the workforce and a lack of younger replacements.
The U.S. Chamber of Commerce, in its Wednesday small business update, presents an optimistic economic picture while acknowledging the likelihood of persistent long-term labor shortages. Neil Bradley, the Chamber’s chief policy officer, attributes this trend to demographic shifts, specifically the significant exodus of baby boomers from the workforce without a sufficient influx of younger individuals to meet the ongoing labor demand and replenish turnover.
“Those claiming that the current labor shortage is a temporary phase and will soon pass are overlooking the demographic realities of our nation,” remarked Bradley during the address. “The persistence of this issue is inevitable due to the ongoing shifts in our country’s demographics, and it’s here to stay for a while.” Some have labeled this phenomenon as the “silver tsunami,” alluding to the overwhelming wave of older workers retiring from the workforce.
In terms of the impact of the labor shortage, Mercer anticipates a potential shortfall of 3.2 million jobs within the U.S. healthcare sector over the next five years, while Deloitte projects the need to fill 2.1 million manufacturing positions by 2030. Korn Ferry, a Los Angeles-based consulting firm, suggests that global talent shortages could escalate to over 85 million people by 2030, according to one of their studies.
The Conference Board concurs with the severity of the labor shortages, particularly highlighting industries like construction and maintenance. To address the demand just for this year, the construction industry plans to attract approximately 500,000 more workers beyond its typical hiring pattern, as projected by the Associated Builders and Contractors, a trade association.
Small businesses have endured the major impact of labor shortages in recent years. While there has been some improvement since 2020, the issue has not completely disappeared. According to data from the Bureau of Labor Statistics, the current labor force participation rate stands at 62.5 percent, a decline from 67.2 percent in 2001. Forecasts indicate that the participation rate is expected to further decrease in the future.
Addressing the labor shortage involves considering immigrant workers as a longstanding yet effective solution. According to Bradley, attracting more individuals through legal channels is crucial for meeting workforce demands. He emphasizes the importance of people entering the country in the right way, legally and ready to contribute to the workforce.
To stand out in the competitive landscape for workers, Bradley suggests that founders emphasize and make the most of their natural advantages. Small businesses, he notes, inherently offer increased flexibility compared to more formal corporate environments, making them appealing workplaces for potential employees.
Entrepreneurs are increasingly adopting automation as a solution to meet demand in positions that remain unfilled. Bradley highlights the significance of utilizing technology to compensate for roles that were traditionally filled by human workers. He asserts that artificial intelligence (AI) is poised to play a crucial role in the survival and growth of small businesses. According to Bradley, AI has the potential to enhance efficiency, productivity, and overall business growth, ultimately aiding small businesses in meeting the growing demand for their products or services.