Where Have All the Workers Gone?

It’s no secret that there is a labor shortage in our country. Restaurants are limiting hours. Gas stations are running out of gas. Random retail shelves are bare. While the shortage is obvious to the average American now, it has been to those of us in the trades —HVAC, plumbing and electrical—for years. The simple answer is that generous unemployment benefits are making it easy for people to stay unemployed. In the short term, this may be true, but it’s not the whole story. Expanded unemployment benefits were necessary to keep people afloat in 2020, when the pandemic shut down businesses across the country. But in July of 2021, with help wanted signs everywhere, it makes little sense to pay people to stay home from work. Why go out into the world, send the kids off to daycare, and risk getting Covid, when we can all stay home, safe, and make the same amount of money? Economists have determined that anyone making under $32k/year may be compelled to stay home. In Colorado, where the maximum unemployment benefit is higher, anyone earning less than $60k/year has a difficult decision. With the federal government pumping $9 billion per week into additional unemployment benefits, September 3 may be a day of reckoning for the economy and the thirty million people receiving benefits.

A Vanishing Workforce

The more serious problem is that the labor force participation rate has been declining for decades. The number of people working during their prime earning years (25-54) is at an all-time low.¹ As baby boomers retire, they leave a gap in their wake. To close that gap, companies need a fresh supply of workers ready to fill those open positions. Unfortunately, since the eighties, we’ve been selling kids the idea that a college degree is the key to the American dream—a solid middle-class life. No Child Left Behind eliminated shop classes to focus on college prep for everyone. Vo-tech programs weren’t funded as well as necessary. Fast-forward a few decades and the successful execution of that message has become clear. This month, we scheduled interviews with nine candidates for a dispatcher position and only two showed up for the interview. As a result of this college-for-all push, the skilled trades, manufacturing and service industries have an image problem with Millennials and Gen Z. For example, the trades are seen as unglamourous, back-breaking work that only pays average wages. What our society has failed to tell teenage students is that their counterpart in the trades will start earning more money, sooner, without student loan debt, and very likely experience a higher rate of job satisfaction.

The Big Picture

As for the decline in labor force participation outside of the trades, some point to trade policy and globalization as the reason. If this were the case, our G-7 peers would see similar declines. They haven’t; only Italy has fewer prime-age workers participating in the workforce.² Also cited is something economists call job polarization. This is what happens when automation replaces so-called middle-skill jobs and workers are pushed into either low-skill or high-skill jobs. While this relates more to manufacturing than it does to the trades, it explains the bigger picture of workforce participation. When a middle-skill worker is underqualified for a high-skill job and overqualified for a low-skill job, they quite possibly end up with no job. One can only handle so much discouragement before dropping out of the workforce completely. Then there’s the matter of the large number of people who cite poor health as the reason for dropping out of the workforce. Princeton economist Alan Krueger tied opioid prescription data to the decline in workforce participation and found that nearly half of prime-age men who aren’t working are taking pain medication of some kind. He concluded that regardless of which came first, the opiate crisis and the declining workforce participation rate are intertwined.³ There is the effect of the increased rate of incarceration in our country. About a third of those no longer participating in the workforce are either current or former prisoners. Experts put the number at around 20 million—20 million adults removed from the workforce.⁴ Once someone has a criminal record, they are effectively kicked out of the workforce.

A Local Solution

The labor shortage is real and it’s not an easy fix. Much of it will be resolved when the federal benefits expire in September. But other issues are deep, systemic, and will require creative solutions from both business and government. These solutions may require employers to look for innovative ways to attract and retain enthusiastic employees from an ever-dwindling pool of workers. At our company, we recognize the need to expand our apprentice program that will allow the next generation of HVAC workers to make money while they train for a career in the field. We’ll likely work to connect with schools to identify kids who have certain skills but are not necessarily interested in college. It may be a national dilemma, but the resolution is a local one.

Sources

1) Krueger, Alan B. Where Have All The Workers Gone? An Inquiry Into The Decline Of The U.S. Labor Force Participation Rate. Brookings Papers On Economic Activity. Princeton University. September 1, 2017. www.brookings.edu/wp-content/uploads/2017/09/1_krueger.pd 2) Jones, Terry. Labor Force Participation Rate Mystery: Why Have So Many Americans Stopped Working? Investors.com. Investor’s Business Daily. February 14, 2020. https://www.investors.com/news/labor-force-participation-rate-low/ 3) Krueger, Alan B. Where Have All The Workers Gone? An Inquiry Into The Decline Of The U.S. Labor Force Participation Rate. Brookings Papers On Economic Activity. Princeton University. September 1, 2017. www.brookings.edu/wp-content/uploads/2017/09/1_krueger.pdf 4) Jones, Terry. Labor Force Participation Rate Mystery: Why Have So Many Americans Stopped Working? Investors.com. Investor’s Business Daily. February 14, 2020. https://www.investors.com/news/labor-force-participation-rate-low/