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What If Lack Of Jobs Isn’t The Cause Of High Unemployment?

You would think that a headline screaming “Percent Working Lowest Since ‘83”
would blame the recession, President Obama, or Congress. To many
people, it would make sense. Someone has to take the fall. There was no
reason to read further.

Unfortunately the headline does not tell the real story. So in the words of Paul Harvey, “here’s the rest of the story.”

While no one could argue that part of the reason for only 45.4
percent of Americans working in 2010 was the recession, the loss of jobs
since 2007 only accelerated what many anticipated would happen
regardless of the economy (including yours truly) – an overall decline
in the percentage of working adults to dependents.  Had employers,
bureaucrats, and politicians paid the slightest bit of attention, this
USA Today front page headline would be a mere footnote. The real truth
is that the headline and story could have been written 20 years ago when
this event was first predicted.

For example, the current percentage of Baby Boomers to U.S.
population is 13 percent. By 2030, the number increases to over 20
percent of the population with 71 million people aged 65 or older. While
Baby Boomers will work longer, they will work less … and collect Social
Security and use Medicare.  Eventually all Baby Boomers will become
dependent on the working age population.

Since 1900, the number of older adults has increased eleven-fold,
from 3.1 million in 1900 to 35 million in 2000. In 2010 one of every
five employees was aged 55 or older. By the middle 21st century, there
will be more seniors than children. That statistical milestone is less
than 40 years away.

The statistics alone may be startling but a picture is worth a
thousand numbers!  In my book The Perfect Labor Storm 2.0 and hundreds
of presentations about it, I use a Population-pyramids
population pyramid so demonstrate what’s happening to our workforce and
why I’m shocked anyone continues to be surprised at headlines like the
one published in the USA Today.

 

I also describe the population shift in this video.

My colleague John Sumser in a recent article also did a great job of describing the population pyramid
“For the entire history of the human race, with virtually no
exceptions. the age distribution of population has had the shape of a
pyramid. As people get older, there are fewer of them. The pyramid shape
means that there are few old people and lots of young people. The older
that people get, the more of them die.”

That population pyramid model lasted for centuries.  But as he wrote,
“important parts of our world no longer resemble a pyramid. While life
expectancy was growing, the average number of people in a family has
been declining rapidly…More old people and fewer kids
(proportionately) means that the so-called pyramid no longer resembles a
pyramid in the US and all of the industrialized world.”

That shift from a people pyramid to a silo means that the bulk of
those people not working changed from children to adults. Not only does
that imply more Social Security, Medicare, and pension costs, but fewer
people working to support a growing dependent population. Likewise the
cost of supporting more older people than younger ones has substantial
economic implications, $500,000 caring for a senior compared to $125,000
educating a child.

This demographic shift is happening quicker too.  In 2000 the U.S.
had roughly the same number of children and non-working adults. Since
then, the population of non-working adults has grown 27 million while
the nation added just 3 million children under 18.

Age isn’t the only factor causing the lower labor participation
rate.  Men have been leaving the workforce for decades. In 1960, more
than 80 percent of men worked.  Today just 66.8 percent of men are
working. Concurrently, the female participation rate jumped from 36
percent in 1960 to 56 percent in 2010. While the increase is certainly
dramatic, lost in the translation is that the female participation rate
leveled off in 1995.

The implications for employers are enormous. Shortages of workers
moving forward will come in the form of quantity and quality. As
challenging as recruitment is today, employers are just experiencing the
tip of an iceberg.

 

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