Long-term numbers and demographic statistics suggest that a labor crisis is looming in the coming decades.
- On Friday, May 5, the Department of Labor announced that the unemployment rate for April was 3.4%, beating expectations of 3.6% and decreasing from 3.5% in March.
- While the economy is cooling, the labor market continues to remain resilient, pointing to a hopeful possibility of a soft landing for the economy amid the Fed’s anti-inflation measures.
- However, a new report from Moody’s Investors Service suggests that demographic trends could harm the labor market in the long term.
- With an aging population and declining birth rates, the percentage of “prime-age” workers between the ages of 25 and 53 in the U.S. is going to shrink
- All G20 nations are facing similar challenges, with Korea, Germany, and the U.S. being among the hardest hit, Axios reports.
Why It’s Important
The economy has evolved rapidly in the past three years, as the effects of COVID-19 reshaped the working conditions for the entire economy, caused worker burnout in multiple high-stress industries, and shifted non-essential office jobs into remote jobs. That has shifted in the years since. Moody’s notes that mentions of “labor shortages” have been muted by discussions of “job cuts,” reflecting hundreds of thousands of tech workers receiving layoffs in the past six months.
These changes are only the beginning. As millions of retirement-aged workers leave the workforce, they stand to cause spikes in demand for experienced workers to replace them. This will mean improvement for “labor shortages” in the short-term as young employees replace those jobs, but potential issues in the long term as the next generation is unable to fill the positions.
The shift from an older experienced workforce to a younger inexperienced workforce always suggests that the labor pool is going to go through a phase of brain drain, as decades of job experience and lessons are lost by retirees taking it with them, which could harm productivity in the coming decades, Axios notes.