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But Reed isn't alone. Executives at Cigna (CI), Intel (INTC), SAS, Sprint (PCS), Whirlpool (WHR), WPP (WPPGY), and Adecco (the world's largest placement firm) have told Business 2.0 that they, too, worry that the supply of labor is about to fall seriously short of demand. Former treasury secretary and current Harvard University president Larry Summers regards a skilled labor shortage as all but inevitable. Economists like former Deputy Secretary of Labor Edward Montgomery and Sigurd Nilsen, the director of education, workforce, and income security in the General Accounting Office, have issued warnings to the same effect. And in April the country's largest and most influential industrial trade group, the National Association of Manufacturers (NAM), added its voice to the chorus. The association released a white paper based on research by labor economist Anthony Carnevale, former chairman of President Clinton's National Commission for Employment Policy, that forecast a "skilled worker gap" that will start to appear the year after next and grow to 5.3 million workers by 2010 and 14 million 10 years later. (Including unskilled workers, the gaps will be 7 million in 2010 and 21 million in 2020.) "By comparison, what employers experienced in 1999 and 2000 was a minor irritation," Carnevale says. "The shortage won't just be about having to cut an extra shift. It will be about not being able to fill the first and second shift too." This will occur, he adds, without any heroic growth rates or bubblelike economic anomalies; all it will take is a return to the economy's long-term growth rate of 3 to 3.5 percent a year.
The cause of the labor squeeze is as simple as it is inexorable: During this decade and the next, the baby boom generation will retire. The largest generation in American history now constitutes about 60 percent of what both employers and economists call the prime-age workforce -- that is, workers between the ages of 25 and 54. The cohorts that follow are just too small to take the boomers' place. The shortage will be most acute among two key groups: managers, who tend to be older and closer to retirement, and skilled workers in high-demand, high-tech jobs.
To see the demographic time bomb in microcosm, just count the gray heads around your own office. At Sprint, for example, half of the 6,000 field and network technicians are over 50. At Cigna Systems, about a quarter of the 3,400 IT workers will pass 55 this decade. And at Cary, N.C., software maker SAS, more than a quarter of the staff will be eligible to retire by this decade's end. The company's VP for human resources, Jeff Chambers, says this group is filled with veteran designers and engineers, many of them architects of the company's most successful products. "It doesn't take a rocket scientist to see what's going on," he says. "Existing staff are going to start getting out soon, and the feeder pool just isn't coming up. If you're responsible for the workforce, you'd better ask yourself what you are going to do."
What employers will have to do, of course, is not difficult to predict: bid up wages, raid competitors for employees, seduce older workers to stay on the job, outsource whatever work they can, and lobby the government to jack up the quota for skilled immigrants. What they will not be able to do -- at least not for much longer -- is ignore the problem. "People think we're going to have plentiful workers forever, but that's not so," explains David Ellwood, a Harvard University professor who recently led an Aspen Institute study of the problem. "If you want to hire somebody who has traditionally been the bread and butter of the labor force, you're soon going to have to hire them away from somebody else."
As the boomers retire, the workforce will stop growing ...
The U.S. has always been able to count on an expanding labor force. But as the boomers are replaced by a smaller generation, the number of workers between the prime working ages of 25 and 54 will stagnate.
Prime-age workers (ages 25-54), in millions
and the average worker's education will flatline ...
During the past 20 years, the share of the workforce that had attended college grew from just over 40 percent to almost 60 percent. That figure will barely budge during the next two decades.
Prime-age workers (ages 25-54) with more than a high school degree
causing a serious shortage in skilled workers.
The static educational level of the workforce, coupled with the retirement of the baby boomers, means that there won't be enough skilled workers to meet continuously rising demand over the next 20 years.
Numbers of jobs and workers, in millions
(adjusted for multiple job-holding)
Sources: David Ellwood/Aspen Institute's Domestic Strategy Group; Anthony P. Carnevale and Donna M. Desrochers, Educational Testing Service