Where have all the workers gone?

Where have all the workers gone?

Friday, July 1, 2022 from Floor Covering Weekly

Where have all the workers gone?
If your company is having trouble finding qualified workers to fill open positions, you’re certainly not alone. Many companies have been forced to cut back services, extend deadlines or even turn down new business because of labor shortages. There are more than twice as many job openings nationally at present as there are unemployed persons, according to the U.S. Department of Labor. Given that the economy suffered a serious downturn two years ago as the pandemic hit, and that it still is facing some serious problems as we saw with the decline in GDP in the first quarter, it’s surprising that there is still a worker shortage. However, the evidence is that the deficit is largely the result of fewer younger persons in the labor force, and that this is the group that should be targeted by companies looking to fill positions.

There have been several explanations offered for this shortage of workers. One is that the pandemic encouraged many older workers to retire earlier than might be expected. Another is that the time at home during the pandemic encouraged a “Great Resignation” where workers are leaving their current employers to look for better paying jobs, or opportunities that provide the option for remote work. However, the most plausible explanation is that workers have been responding to the unique circumstances of the pandemic where there were unusually high levels of illness coupled with child-care and family-care responsibilities that prevented younger workers from re-entering the labor force.

What’s the evidence of this? First, there has not been a dramatic decline in the size of the U.S. labor force as a result of the pandemic. Between the first quarter of 2020 — as the pandemic was just hitting the U.S. — and the first quarter of this year, the size of the labor force declined by more than 100,000 persons, well under 0.1 percent of our 160 million plus labor force. While the overall decline in the labor force was relatively modest, the number of men in the labor force increased by almost 600,000, while the number of women declined by almost 700,000. While this is consistent with the loss in service-related jobs such as those in the hospitality and personal services sectors that are disproportionately filled by women, it also suggests that child-care or other family-care responsibilities have encouraged many women to leave the workforce.

This theory is reinforced by the evolving age distribution of the labor force. The age categories that saw the steepest labor force losses were the 18–24-year-olds — with labor force losses of 220,00 between Q1 2020 and Q1 2022 — and 25–34-year-olds with losses of 730,000. These losses were more than offset by labor force gains of 1.3 million among the 35–44-year-olds. Finally, there has been a modest decline in the 45–64-year-old and 65-plus population in the labor force.

These numbers don’t suggest a surge in early retirements or even large numbers of workers in their prime career development ages leaving the labor force while waiting for a better opportunity to develop. What they do suggest is two trends: younger workers may have been having difficulties finding employment and either pursued education or job-training while waiting for the economy to recover. Secondly, and more significantly, is the loss of workers aged 25-34, who were disproportionally likely to have young children with few daycare and in-class educational options. Dropping out of the workforce was often the only realistic choice, and these responsibilities disproportionally fell on women.

Kermit Baker is the chief economist at the American Institute of Architects. He can be reached by email at [email protected]