The Looming Labor Shortage

In a post yesterday on population growth, I shared a fascinating visual that looked at the age structure of our population in 2017 versus projections for 2100. The tweet is shared again below, click on arrow in the visual to see the changes.

Population size is important in several ways. Historically, experts worried about societies ability to sustain an ever-growing population. With climate change issues mounting, those concerns remain. However, a scenario where our global populations shrink brings a different set of challenges. As this article on projected labor shortages describes, the growth rate of an economy is determined by two factors: growth in hours worked and growth in productivity. The sustained economic growth of the last 250 years can be attributed to a growing skilled workforce (education played a major role) and major innovations that drove productivity.

In the 1970s, the working-age population (15 to 64) was growing by nearly 2 million a year and, boosted by older women going to work, the labor force grew by about 2.5 million a year. No wonder employment grew by 19 million during the decade and annual GDP growth averaged 3.2%.

Rex Nutting – The real labor shortage is looming, and everything we’re doing is making it worse

The baby boom of the 1960s and 1970s alongside women entering the workforce drove rapid growth in the labor force. The visual to the right shows a second labor boom that occurred in the 1990s, attributed to Gen X and the first wave of millennials entering the workforce. The forces of convergence described through this Blog play a role, as the global decline in fertility rates contributes to this labor decline. The article via Rex Nutting identifies seven things that can be done to increase the supply of productive workers. They include increased immigration, making work more attractive, making it easier for women and the elderly to work, investing more in AI and automation, increasing fair trade, and changing the culture of impatience. The article provides thoughts on each of the seven.

These societal factors, from population growth, labor shortages, and more, underscore the level of uncertainty in the environment. With all the attention focused on scientific and technological advancement, it’s easy to ignore societal, economic, and geopolitical building blocks. Yet, it’s the collective that shapes our future – and it is the collective that future thinking efforts must focus on.

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