This Week's Herman Trend Alert

Leadership in Normal 2.0

  The Herman Trend Alert

March 1, 2006

Where are the People?

As we warn of the growing shortage of skilled workers---the most severe in history, we are often asked if the problem is caused by the retirement of the 76.4 Million people in the Baby Boom generation. Our answer has to be a guarded "no." Certainly, some Boomers will retire over the next few years; however, many more will not. The problem is more complicated.

Following the Baby Boom generation, births during 1946 to 1964, 68.5 Million children were born into Generation X (1965 to 1985). That sharp decline in the birthrate is a major contributor to our shortage. We saw 2.6 percent annual increases in the birth rate in the 1970s, but by the 1990s the birth rate in the United States had dropped to a 1.1 percent annual increase. This perspective was highlighted in a recent report issued by the Rand Corporation, a non-profit think tank conducting research studies for over 50 years.

Rand's study concluded that "The annual growth rate of the nation's workforce is expected to slow to a nearly static 0.4 percent by 2010." Immigration has added more people to the workforce, supporting expansion, but the supply growth rate is still substantially lower than the demand energized by the expanding economy.

As we throw around these statistics, it is important to match them against the calendar. Employers are wrestling with a skilled labor shortage---now. Today's birthrate will not affect their labor supply for two decades. The problems employers face today are influenced by the birthrate in the late 1980s. Babies born today will have an impact on the flow of entry level workers in 2024 and beyond.

Babies born today do affect the flow of workers. More mothers are opting to stay at home with their children, instead of returning to the workforce. This shift has nothing to do with demographics; this is a values-based decision.

Young people coming out of America's colleges and universities were expected be eager participants in the labor force. Instead, many of them choose to work for themselves, to put money into their own pockets.

The workforce is changing.

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