Demographic trends point to smaller workforce. How will you adjust?

The long-awaited future of workforce is here: and it is as long feared. We are now in a new world, that was long in coming, where we have too few workers relative to the size of the population. And that means a chronic shortage of workers will be a fact of life for businesses for years to come.

We’ve known this situation was coming for years because our society is aging. It’s not a complicated story. Older generations are larger than succeeding generations. Specifically, the proportion of the population that is above 55 has been growing over time, while the share of 19 and younger has been stable. The population pyramid is becoming inverted.

Over the past two decades, there has been a remarkable 117% increase in the number of workers aged 65 or older, and it is projected that the number of workers aged 55 or older will grow three times faster than the number of workers aged 25-54.

And it’s not getting better anytime soon. There are fewer first-grade students enrolled in school than high school seniors in 30 states. This means smaller college classes and likely school closures around the country as well as small future pools of workers.

All this matters because older people – spoiler alert – eventually work less than younger people. We can see this effect clearly in labor force participation data. Labor force participation rose sharply beginning in the mid-1960s and rose through the early part of the 2000s. It has been declining since then. This follows the age trajectory of the baby boomers, the oldest of whom entered the workforce in the ’60s and started leaving in the early 2000s.

The retreat of men from the workforce has played a factor as well. Their participation has fallen from close to 90% in the late 1940s to 68% today. For a long time, women were replacing men in the workforce; that is no longer the case, as women’s participation has plateaued for years.

All these facts together paint a grim picture for future labor force participation: it isn’t going to rise. In fact, the Bureau of Labor Statistics estimates that the overall labor force participation rate will drop to 60.4% in 2030. That is below the 63.3% rate in February 2020.

What does this all mean?

We are going to be chronically short on workers for years to come and have entered a new era when it comes to the labor market. Local communities such as ours must do everything possible to address our workforce challenges – including a focus on housing, early childhood, and transit.

We can’t fix the problem with more births, at least not in the short term, and this national demographic challenge requires both localized and federal-level solutions.

The challenge is hard to fix. We must be sure to have policies that enable mothers of young children to remain in the workforce and find ways for men to return to the workforce in higher numbers.

We also need (legal) immigration in a big way and need to focus on our talent pipeline development and opportunities for our kids to stay and grow their careers in Eagle County. The chronic labor shortages faced by seasonal employers for years have only been exacerbated by the changing dynamic of the American workforce since the pandemic.

It's an exciting yet challenging time, with opportunities for innovation and creativity. We need an all-hands-on-deck approach to the workforce challenges ahead of us to mitigate the demographic realities.

Chris Romer is president & CEO of Vail Valley Partnership, the regional chamber of commerce. Learn more at VailValleyPartnership.com