Amid record labor shortages, CED report outlines how business and government can fill the gaps
NEW YORK, April 20, 2022 /PRNewswire/ — Long before the pandemic hit, long-term demographic trends were beginning to tighten the US labor market. Today, more than two years after COVID-19 hit the U.S. economy and labor force participation rates, the labor market continues to tighten. Employers are struggling to find skilled workers to fill key positions, preventing businesses – and the economy as a whole – from reaching their full potential.
Today, the Committee for Economic Development, the public policy center of The Conference Board (CED), released a new solutions brief, The US Labor Shortage: A Plan to Meet the Challenge. As detailed in the report, prior to the onset of the pandemic, a series of worrisome long-term demographic trends, including minimal growth in the number of working-age Americans, declines in the number of working-age adults without a college degree college, and historically low birth rates in the United States – have formed a perfect storm that has left countless companies scrambling to fill vacancies. The report – the latest in a series on sustaining capitalism – goes on to note that the pandemic has only further tightened labor supply. Even with the economy reopening and rebounding, labor force participation rates have not returned to pre-pandemic levels.
“American companies of various industries and sizes are struggling to fill jobs as quit rates in the United States are at record highs, as is the average time to fill vacancies,” said Dr. Lori Esposito Murray, president of DEC. “Companies and policymakers must develop ways to encourage workers to re-enter — and stay — in the workforce. A two-tiered approach, aimed at boosting work participation for workers already in the United States and to increase the workforce through immigration, is the best way forward. Such an approach was necessary before the COVID-19 pandemic, and has only become more pressing in the years since.”
Key information from the solutions overview includes:
The U.S. workforce has shrunk due to demographic trends in the country:
- The huge generation of baby boomers is aging out of the labor force, with the share of Americans aged 65 and over rising from 12% at the turn of the century to 16%.
- The working-age population, i.e. people aged 18-64, will barely grow – with average annual growth year-on-year expected to be just 0.2 % – until 2030.
- This is due to both an aging population and a declining national birth rate, which is now lower than at any time in US history.
- Labor force participation has been declining since 2000, when it peaked at 67.1%. In February, it was 62.3%.
- Net migration has been declining since 2016 due to more restrictive immigration policies. Immigration has the potential to supplement and complement the existing American workforce with additional skills and talents, but the downturn has limited this effect.
The tight labor market stems from a combination of factors:
- From 2017 to 2019, the United States averaged 6.8 million job openings per month, a number that dropped sharply at the start of the pandemic and then began to rise steadily once the vaccines were in place. became available.
- The quit rate has more than doubled since 2009, from 16.1% that year to 32.8% in 2021.
- This “big resignation” has been attributed to several factors: workers who were already planning to leave their jobs delayed their decision until they had greater certainty in the face of the pandemic; widespread COVID-related unrest has prompted other workers to quit; shutdowns and remote work have caused some Americans to reevaluate their priorities and opportunities; changes in spending habits, along with government stimulus payments, have given some Americans the financial flexibility to change jobs; the tightness of the labor market has made changing jobs profitable for many workers.
- Every major industry group posted a higher rate of job creation in the fourth quarter of 2021 than the average for the three years before the pandemic.
Key recommendations from the solutions brief include:
In its new solutions brief, CED offers two overarching recommendations for addressing labor supply, each with multiple action steps for business and government. They include:
Increase and support American worker participation by:
- Increase public-private training: Private sector leaders should spearhead regional collaborative efforts for employer-led consortia with colleges, broad-access institutions, other trainers and public policy makers to link skills development to job opportunities.
- Adopt skills-based hiring practices: Business leaders should adopt competency-based rather than credential-based hiring and promotion models.
- Diversify talent pools: Leaders can tap into traditionally overlooked sources of talent by seeking out underrepresented, economically vulnerable groups and the long-term unemployed.
- Review and reform professional licensing requirements and reduce regulations: These regulations often hinder recruitment and hiring and/or deter workers from entering or remaining in certain occupations.
- Extend and increase the earned income tax credit: This will encourage more people with initially low-income job prospects to enter and stay in the labor market.
- Increase workplace flexibility for workers with dependent care responsibilities: Providing flexible work opportunities will allow employees to care for children or other dependents without harming their career prospects. Local governments should also prioritize pre-K education opportunities for at-risk children.
- Support older workers who wish to remain in the labor market: Policymakers should repeal the Social Security retirement income test, which reduces benefits for recipients who want to continue working and earning above a certain threshold before full retirement age.
- Create incentives for the unemployed, underemployed and non-active to improve their skills: This can be done by expanding the use of Pell Grants for credentialing programs, requiring colleges to submit data to enable the calculation of postgraduate career outcomes, and providing tax relief from unemployment benefits for the skills development to recipients without a four-year degree.
- Expand “learn and earn” learning programs: This should be done for students and workers at all stages of their careers.
Reform immigration to complement and support the American workforce by:
- Improving the H-1B visa program: The program can be improved by issuing H1-B visas more frequently; limit their request to a few months from the employee’s planned start date; accelerate the selection of selected candidates; replacing the random lottery with a modified approach to salary ranking; and adjust annual H-1B limits based on requests from the previous year.
- Increase permanent residency visa offers for skills needed for the economy: Leaders should rebalance US immigration priorities toward the national economic interest while protecting existing family reunification visa levels and the diversity lottery by increasing annual permanent immigration levels. They should also channel supplemental visa offers to immigrants selected for economic reasons and remove limitations based on country of origin for employment-based permanent residency offers.
- Piloting an “accelerated” entry program for the best international recruits: By targeting a limited number of highly skilled workers in the United States, authorities can speed up offers of permanent residency.
- Book an annual allocation of “location-based” employment visas: Leaders must ensure that more American communities can compete and benefit from international talent aligned with the specific needs of their regional labor market by allowing a set number of region-specific immigration offers.
The new Brief Solutions, The US Labor Shortage: A Plan to Meet the Challengeaccessible here.
The Committee for Economic Development (DEC) is the public policy center of The Conference Board. The nonprofit, nonpartisan, and corporate-led organization provides well-researched analysis and reasoned solutions in the interest of the nation. DEC Directors are CEOs and key executives of leading U.S. companies who bring their unique experience to address today’s pressing policy issues. Together they represent over 30 industries, over $1 trillion in revenue and over 4 million employees. www.ced.org
About The Conference Board
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SOURCE Conference Board Economic Development Committee (CED)