bls 1 the challenge of the decade ahead presentation to the national association of state workforce...

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BLS

The challenge of the decade ahead

Presentation to the National Association of

State Workforce Board Chairs

February 25, 2006

Michael W. HorriganAssistant Commissioner

Bureau of Labor Statistics

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BLS

The Challenge of the Decade Ahead

Changing demographics

The difficulty of measuring labor market shortages

A simple alternative – High wage, high growth occupations.

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The Challenge That Lies Ahead

• The U.S. economy is entering a period of dramatic demographic change.

• Projected slowdown of labor force growth.

• Retirement of the baby boom generation.

• Increasing diversity of the U.S. workforce.

• Significantly higher levels of immigration in the last twenty years.

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The Challenge That Lies Ahead

• The impending (and current) retirement of the baby boom generation, our slower but more diverse labor force growth, and trends in immigration leads to two critical questions facing the workforce system:

• Will the U.S. economy face an overall shortage of workers in the next decade and beyond?

• And even if there is not an overall shortage, will there be a shortage of skilled workers in the U.S. economy?

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Population, projected 2010

MillionsMen Women

12 121010 868 6 44 22 0 0

85+80-8475-7970-7465-6960-6455-5950-5445-5940-4435-3930-3425-2920-2415-1910-14

5-90-4

Age

Source: Bureau of the Census

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3,366

2,553

-3,849

6,316

7,230

1,24265 and over

55 to 64

45 to 54

35 to 44

25 to 34

16 to 24

Growth in the labor force aged 45-64 between 2000 and 2010

Projected, in thousands

Source: Bureau of Labor Statistics

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The rate of growth of the civilian labor force has slowed considerably over the last twenty years.

1.1

1.7

2.6

1.6

1.11.2

1.0

1950-60 1960-70 1970-80 1980-90 1990-00 1994-04 2004-14

Annual rates of change

projected

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The rate of growth of the civilian labor force is projected to slow considerably over the next 50 years

1.1

0.4 0.30.6 0.6

1.1

0.6

2000-10 2010-20 2020-30 2030-40 2040-50 1950-00 2000-50

Annual rates of change

projected

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Meeting The Challenge

• Increases in labor force participation rates of older workers.

• Continued increases in labor productivity.

• Upgrading the skills of the U.S. workforce (native and foreign born) through education and training.

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Meeting The Challenge

• Domestic outsourcing

• Offshoring

• Satisfying product demand through trade (imports)

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Labor force participation rate by sex


Percent, 1952-2004 and projected 2004-2014

86.4

71.8

33.9

59.7

0

20

40

60

80

100

1952 1962 1972 1982 1992 2004 2014

Total

Men

Women

projected

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77.069.0

96.0 93.098.0

93.0 9689 87

67

46

18

16-24 25-34 35-44 45-54 55-64 65+

1950 2000

The labor force participation rate of older men declined sharply over the last 50 years

Percent


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Civilian labor force participation rate of men, ages 55-64

60

70

80

90

100

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Civilian labor force participation rate, men ages 65-69

20

25

30

35

40

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44.0

63.0

34.0

76.0

39.0

77.0

38

77

27

52

10 9

16-24 25-34 35-44 45-54 55-64 65+

1950 2000

The labor force participation rate of women increased sharply for all nearly all age groups over the last 50 years

Percent


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Labor force growth rates of minorities outpaces whites

3234

17

710

Asian Hispanic Black White Total

Percent change, 2004-14


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Whites remain the largest group of workers

82.1 80.2

13.1 15.911.3 12.0

4.3 5.1

White Hispanic Black Asian

2004 2014


Percent of labor force

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The number of immigrants into the U.S. has increased dramatically over the last twenty years.

8,795

5,736

4,107

5281,035

2,5153,322

4,493

7,338 7,605

1901-10 1911-20 1921-30 1931-40 1941-50 1951-60 1961-70 1971-80 1981-90 1991-2000


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BLS

Population by Nativity and Educational Attainment: 2002

21.9

10.9

40.7

26.5

4.4

8.7

60.1

26.8

0 10 20 30 40 50 60 70

Less than 9th grade

9-12th grade, no diploma

High school graduate or somecollege

Bachelor's degree or more

Foreign born NativeSource: Census Bureau

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Population with High School Education or More by Nativity and World Region of Birth: 2002

37.3

68.4

80.9

84

86.8

67.2

86.9

0 20 40 60 80 100

Central America

Caribbean

South America

Europe

Asia

Foreign born

Native

Source: Census Bureau

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Average annual rate of change

2.7

1.9

1.51.9

1.5

2.32.7

60Q2-69Q4

69Q4-80Q1

80Q1-90Q3

90Q3-01Q1

90Q3-95Q1

95Q1-01Q1

'04-14

Annual rate of growth of output per hour, nonfarm business, comparison of selected business cycle expansionary periods

projected

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Annualized growth rates of labor productivity during recessions


0.5

2.7

0.1

-1.2

-0.1-1.0

4.4

60Q2-61Q1

69Q4-70Q4

73Q4-75Q1

80Q1-80Q3

81Q3-82Q4

90Q3-91Q1

01Q1-01Q4

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Business investment and exports show relatively fast growth



3.2 3.7 2.8

-5.9

-8.1

-3.9

8.3

4.76.7

2.5

5.1 4.7

2.3 2.41.3

1984-94 1994-04 2004-14

PCE InvestmentExports

Imports

Government

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A simple alternative – High wage, high growth occupations.

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Labor market shortages

The label of ‘shortage’ is also highly problematic in terms of the strict measurement requirements for a shortage to truly exist.

The classic theoretical definition of a shortage is the presence of persistent vacancies in the face of rising wages.

The is currently no survey vehicle that measures both job vacancies and the movement of wages over time associated with those vacancies.

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In addition, there are numerous other margins of adjustment that can take place in lieu of / or in addition to / rising wages in the face of increased hiring difficulties.

These adjustments are often the most interesting aspects of labor market activity.

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Examples of these adjustments include:

– Increases in the hours of work.

– The use of mandatory overtime or mandatory scheduling requirements such as coverage of the graveyard or weekend shifts.

– Increased reliance of contract employees, immigration or offshore employment

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Examples of these adjustments include:

– Changes in the educational attainment requirements of jobs.

– Increased use of contractors, including the use of ‘retired’ self-employed contractors.

– Increased use of part-time workers, flexiplace arrangements, hiring bonuses, payment of relocation expenses.

– Changes in the use of capital in the production environment.

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Measuring all of these possible responses by firms to increased difficulties in finding workers is extremely difficult.

In many cases, the data do not exist.

From a labor market information and training point of view, many of these possible adjustments are not as highly valued as others.

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For example, assume that we could project that an occupation will be in shortage – and that a firm will react in one of the following ways:

– Significantly increase real wages and employment over the next 10 years

– Significantly increase real wages for core employees, maintain current employment levels and hire (and fire) contractors in response to changing demand conditions

– Maintain or lower current real wages, introduce new automation techniques, and increase the use of both immigrant and contract labor

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These examples represent a spectrum of possible responses. From a labor market information point of view, however, the difficulty of measuring shortages suggests a different strategy:

– No matter what other labor market adjustments may be made (increased automation, use of contract labor, etc), can we identify the ‘shortage’ occupations that will experience high real wage and high employment growth?

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If demand rises by more than supply then employment and earnings increase

A

B

C

earnings

Employment

D1

D2

S2

S1

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Employment and wage growth

Unfortunately, BLS does not project ‘wage growth (nominal or real)’. We only project employment growth by occupation.

One easy to identify alternative is to identify occupations in the base year of the projections that are high wage and are projected to grow faster than average.

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A simple alternative – High wage, high growth occupations by different skill groupings

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Measuring skills

We also identified 6 educational clusters that are based on the percentages of employees ages 25-44 in each occupation with high school or less, some college, and a Bachelor’s degree or higher.

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New BLS Data on the educational attainment of occupations

% high school

% some college

% college

High school jobs

> 60% < 20% < 20%

High school / Some college jobs

> 20% > 20% < 20%

Some college jobs

<20% > 60% < 20%

High school / some college / college jobs

> 20% > 20% > 20%

Some college / college jobs

< 20% > 20% > 20%

College jobs < 20% < 20% > 60%

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BLS

Educational attainment of the number and percent of projected employment change, 2004-2014

EducationLevel

Level (thousands)

Percent

High school or less

6,922 36.6

Some College 5,246 27.7

Bachelor’s or higher

6,759 35.7

Total 18,928 100.0

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High-wage, high-demand occupations, 2004-2014

Occupations with median annual earnings in the top half of the 2004 OES earnings distribution

Occupations that are projected to grow faster than the overall average of 13.0 percent over the 2004-2014 period.

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BLS

Educational attainment of high-wage, high-demand occupations, 2004-2014.

EducationLevel

Level (thousands)

Percent

High school or less

1,137 13.0

Some College 2,104 24.1

Bachelor’s or higher

5,479 62.8

Total 8,721 100.0

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