March 1, 2022 by Drew Repp
Last year in the Demographic Drought we rang the worker shortage alarm bell. Low birth rates, wealth accumulation, and boomer retirements are all contributing to a low labor force participation rate and shrinking prime-age workforce.
While these pressures will persist, the last two years accelerated and introduced new factors keeping people out of the workforce: a lack of available and affordable child care, an influx in personal savings, virus safety concerns, and vaccine mandates. The result? A perplexing challenge: engaging your workforce.
These new variables and potential solutions are explored in Demographic Drought: Bridging the Gap in our Labor Force. For communities, recognizing that the current lack of workers is not just a Covid-induced problem is vital. As fears of infection subside, vaccine and mask mandates are lifted, and Covid-related financial assistance runs outs, some in the near term will make their way back into the workforce. But the underlying factors which have set the stage for a persistent labor shortage are still there.
Communities would thus be wise to use the lessons of the Covid labor market to develop their playbook for the long-term demographic drought. Because it isn’t going away. When it comes to engaging your workforce, the first step is shifting your mindset from unemployed vs. employed workers, to the unengaged. Remember, if someone is actively seeking a job, they are considered part of the workforce. The unengaged are those that have chosen not to work or look for work.
Here are some steps to engaging your workforce:
Effective treatment always begins with a good diagnosis. Businesses and education providers are busy trying to survive. You can serve your community by helping it better understand the specific demographic trends in your area, and how those trends are likely to impact specific industries and occupations.
For example, a recent report found 60% of public finance employees in the US are over the age of 45 and 31% over age 55. Furthermore, impending retirements are expected to outpace those of comparable private-sector positions. If your region is home to federal and state agency offices or a county seat in a rural area, the lack of public finance professionals is likely to be more of a problem.
Conversely, the same report found public finance roles have a lower barrier to entry than private-sector counterparts—13% of public sector job postings don’t require a bachelor’s degree and 48% require less than two years of experience. This represents a great opportunity for aligned transitions, where residents can obtain entry-level work in a profession with quality pay, benefits, and career opportunities.
When it comes to engaging your workforce, one of the best places to start is with those that have historically been overlooked. Hidden workers are those that may lack traditional qualifications or come from underrepresented communities, may have physical or mental disabilities, a criminal record, or responsibilities as a caregiver. In each case, they potentially have the skills employers are seeking, but because of HR practices, they aren’t advancing in the hiring process. Or are discouraged from applying to begin with.
Economic and workforce development organizations should communicate to local employers that the perfect candidate likely doesn’t exist. And that by loosening or down-credentialing job requirements they will be tapping into a larger, and still qualified, talent pool. This may involve providing on-the-job training or offering flexibility and benefits that meet the unique needs of hidden workers, such as childcare stipend for caregivers or additional sick leave to address chronic health conditions.
And also remind employers that this isn’t settling or lowering hiring standards. It’s not that hidden workers aren’t qualified, it’s that they’ve been overlooked due to circumstances unrelated to their ability to perform the job.
Colleges, universities, workforce boards, boot camps, and employers are all focused on different parts of the problem. Economic development organizations can step in to make sure that all stages of the talent pipeline are connected and flowing smoothly.
If colleges aren’t market-aligned and therefore prepare graduates for jobs that don’t exist in your region, that’s bad for them, their graduates, and the community. If students leave your region upon graduation, that loss is going to be felt even more so as the labor shortage grows. But if those graduates see a clear path to a job in their local community, you’re ahead of the game in engaging your workforce.
This market alignment needs to start with a recognition of the types of roles that are in demand. The majority of the job openings right now don’t require a college degree. So this alignment work is helping unengaged workers understand they likely already have the skills needed.
Employers are beginning to downshift on degree requirements as well. Consequently, it’s important that colleges and universities understand how to adapt as well. But getting in alignment isn’t solely the responsibility of education. Business leaders need to engage with training and education providers through earn-and-learn opportunities, program advisory boards, guest lectures, or even donations of industry-specific equipment.
As we move closer to Covid being endemic, some people will hopefully return to the workforce. However, they may not return in the same way. New business starts surged during the pandemic, and it’s not just sole proprietorships. New business applications from firms likely to hire employees surged as well, from 1.3 million in 2019 to 1.8 million in 2021.
Those who left or lost their job in the pandemic may have started their own business and won’t ever be returning to their old employer. Or workers may return to work, but for a new business, not their former employer. This will be painful for legacy employers who are holding out hope their workforce will return in full. But with workers remaining on the sidelines, communities will need to adjust their expectations. When engaging your workforce, more important than where workers come back to is that they come back. If that means as a sole proprietor or the founder of a new company, great!
If you have an entrepreneurial ecosystem, fortify it with additional resources and programming. Even if your community doesn’t have an ecosystem, you still have entrepreneurship resources. Start by mapping the resources you do have: universities, co-working spaces, business leaders who could serve as mentors, etc., and then fill the gaps.
Business visits are a staple of economic development. They allow practitioners to learn the pain points of local employers and begin developing solutions. EDOs and chambers of commerce also play the role of facilitator, often bringing together business and industry leaders who can express their needs to government and education. However, a pivot is likely needed: EDOs and chambers need to hear directly from sidelined workers—what is keeping them out of the labor market and what would bring them back.
Consider flipping the business panel on its head. Partner with your local workforce board to pull together a panel of displaced workers who are willing to share their experience and hesitations about returning to work. Businesses, local elected officials sitting on ARP funds, and educators will surely learn things they can’t glean from aggregated data.
Each region is going to be different and so have different problems and solutions (see the first recommendation), and there is much data to help with this. But nothing beats hearing directly from residents to understand the finer points.
For local governments, unengaged workers mean productivity of businesses is likely to stall or fall, resulting in lost tax revenue. Some businesses may be able to innovate and find efficiencies to offset this, but as a whole, communities will need to mitigate the impacts to maintain the quality of life and services residents have become accustomed to.
It’s a tough task, but not an impossible one. With the problem not going away, the important thing is to start now. And we’d love to help. We have data and tools to help communities engage their workforce.