Ever since the pandemic, American companies big and small have been scrambling to find enough workers to stay fully staffed. They’ve been forced to offer big salaries and generous perks, while employees were free to shop around for better offers or simply walk off the job to join the Great Resignation. But now, layoffs are up and job openings are down. The economy is slowing, and the Federal Reserve is hiking interest rates at the fastest pace in decades. By any objective measure, the balance of power in the job market should be tipping back to employers.

Strangely, though, it isn’t. Ask pretty much anyone who’s hiring these days, and they’ll tell you something curious: It remains incredibly hard to find and hire enough qualified people for the roles they’re desperately trying to fill. Somehow, workers still hold the power — and a massive shift that’s underway in the labor market could keep it that way forever.

The shift boils down to demographics. Ever since the baby boom that followed World War II, companies have enjoyed a never-ending supply of workers to tap. Hate your job? Fine — we’ll just replace you with one of the hundred others who would be happy to fill your shoes. The abundance of workers made them cheap — and disposable.

But now, those baby boomers are retiring in droves, and companies are suddenly finding themselves without an endless reserve of available bodies. « The labor shortage we’re dealing with today is likely to remain this way — and perhaps get even worse, » says Jay Denton, the chief analytics officer at LaborIQ, which provides salary analysis to employers. « It’s going to continue to be really hard to attract people and get them into new jobs. » We’re entering what is shaping up to be the Forever Labor Shortage.

It may seem like ancient history today, but the baby boom that followed the Second World War spurred a massive shift in the US labor market. As the boomers came of age, the economy was suddenly flush with millions of new workers looking for jobs. The working-age population jumped by 17% in the 1960s and by another 19% in the following decade. If you were looking to hire, times were good.

But the boomers, unlike their parents, didn’t have many babies themselves. The pill and the legalization of abortion sent fertility rates cratering — from 3.7 babies per woman in 1960 to 1.8 babies a decade and a half later. For a few decades, an influx of women and immigrants into the workforce kept the labor pool expanding. But by 2000, the rising supply of female workers reached its peak. And after Donald Trump took office, immigration took a nosedive. That meant there were no new workers left to hire, just as the first of the baby boomers were starting to retire.

Then COVID-19 put the labor shortage into hyperdrive. Immigration came to a standstill, the boomer retirement wave began in earnest, and millions of younger boomers decided to tap into the stock boom and retire early. « All these tailwinds were pushing in the same direction, and suddenly they were all stopping at the same time, » says Aaron Terrazas, the chief economist at the job-search site Glassdoor. « The slow-moving demographic tidal wave is finally cresting. »

In April, the unemployment rate declined to its lowest level since 1969 — meaning there are few available workers left to hire. Despite all the talk of how « no one wants to work anymore, » there’s actually a higher share of 25- to 54-year-olds with a job today than before the pandemic. And the shortage is just getting started. The Congressional Budget Office projects the potential labor force to expand by a mere 3.6% between 2022 and 2031 — one-eighth of the pace in the 1970s. Over the following decade, that growth is projected to slow even more, to 2.9%. That means employers face decades of an essentially stagnant labor pool.

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Source: Business Insider, Aki Ito, 15 mai 2023