From Barron's, September 2:
In the summer of 2020, Mike Zaffaroni, the owner of Liberty Landscape Supply in Jacksonville, Fla., needed to start staffing up to fulfill a pair of contracts to plant trees around the city. At first the hiring went relatively smoothly, but as fall approached, things started to change: A growing number of candidates were failing to make it to their scheduled interviews. He would sometimes expect 10 people, but only one would show. “It’s one of the most alarming things I’ve seen in my working career,” he says.
In the two years since, Zaffaroni has raised his starting wages by nearly 40%. He expanded his benefits program, shortened his interview process, and began considering a broader pool of workers, including those with limited experience or a spotty work history. But none of it has been enough: His 112-person company still has 19 current openings and few prospects to fill them.
Now, Zaffaroni is applying for a set of visas that would allow him to hire 10 foreign temporary workers next year—a first for his 15-year-old business. “I really think that’s the only way to solve the problem in the short term,” Zaffaroni says. “Because I don’t know that we’re going to pull a whole bunch of workers back into the workforce.”
As the labor market settles into a postpandemic normal, Zaffaroni is among millions of employers across the country still bending over backward to try to hire from a pool of workers that appears increasingly dry. In July alone, U.S. companies posted 11.2 million job openings for a market that has just six million unemployed workers to fill them, a vast disconnect that has been trending wider for more than a year. For all of the Great Resignation talk, the workforce has already surpassed its pre-Covid size—but the economy has continued to grow in the meantime, creating fresh waves of unquenchable demand.
Now, the hiring challenges that many expected would fade as the worst of the Covid shocks dissipated look less like a passing trend and more like a new reality. Economists warn that the U.S. is staring down what will become one of the biggest economic challenges of the next several decades: a permanent—or at least deeply entrenched—labor shortage. At its worst, the depleted workforce could sandbag productivity and economic growth, hinder the Federal Reserve’s efforts to tame inflation, and even threaten the nation’s status as a global superpower.
“I think a lot of companies are still like, ‘We’ve got to make it through this little blip,’ ” says Ron Hetrick, a senior labor economist with Lightcast who led a 2021 economic report on the forthcoming workforce challenges called “The Demographic Drought.” “And I’m like, ‘Blip? Are you kidding?’ ”
Average annual growth of the U.S. prime working-age population is projected to slow sharply to just 0.2% over the next three decades, down from 1% average annual growth over the past 40 years. By 2100, as much as two-thirds of the country could be out of the workforce and financially dependent on the remaining one-third, according to an estimate from Hetrick and his co-authors. For companies, persistent labor shortages mean hobbled growth, and for consumers, fewer high-touch services and 24-hour or next-day options. “It’s not just a matter of having to do more with less,” says Zaffaroni, the landscape-supply company owner. “It’s having less, and doing less, and productivity actually dropping because you don’t have those resources.”
The concern that the U.S. would one day run short on workers has been circulating for decades, as economists braced for baby boomers to begin retiring around 2010. As far back as 2001, the Federal Reserve Bank of Boston organized a conference focused entirely on the economic impact of demographic change, which included research that found the country would need a 40% jump in labor productivity by the mid-2030s just to maintain then-current living standards....
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