Where are all the workers?
The worst labor shortage in U.S. history is putting a damper on our entire economy, keeping companies from full capacity, and taking a toll on commercial real estate and how to solve it.
Is there really a shortage?
What is a labor shortage? Quite simply, it’s a lack of qualified workers. This includes jobs that are simply left unfilled, and workers who don’t have the right skills performing at a sub-par level.
"As of January 2018, roughly 6.3 million positions remained open but unfilled in the United States—a record high."
It’s a significant problem. According to Manpower Group, roughly 40 percent of employers report difficulty filling jobs. And it’s not just tech or IT jobs—just try finding an electrician or a carpenter.
And we predict the problem will only get worse.
Why does labor scarcity exist?
The number of prime-age workers (those between 25 and 54) who are actually participating in the job force is actually going up. But it’s still below levels of the last 20 years. In fact, it peaked in January 1999 and has been falling ever since.
Why? Well, the problem has roots in both supply and demand and the issues affect men and women differently.
There are 18 million U.S. women who are not working, a quarter of whom have at least a bachelor’s degree. These qualified women could be filling open positions.
Over the past 70 years, men’s participation rate in the labor force has fallen more than 18 percent.
That’s greatly affecting men with a high school education or less, because many of the jobs once held by those workers have been eliminated due to technology/mechanization and offshoring.
The result for those underskilled men? Long-term unemployment, the atrophying of existing skills and even opioid abuse.
And what of their female counterparts? Back in April 2000, the number of women in the workforce hit a high of 60.3 percent. But that number has since fallen to just 56.7 percent. Part of that’s structural change running its course, but much can be attributed to the problems women—and especially mothers—face in the workforce including:
- Lack of guaranteed paid maternity leave
- Wage disparities
- Lack of affordable daycare
- Inflexible work schedules
On the demand side there’s an issue called “credential creep” in which employers and recruiters use educational degrees to screen candidates. Right now, roughly 26.5 million workers in the U.S. are working in positions that once were held by non-graduates.
And then there’s occupational licensing, in which governments regulate who can perform certain occupations. In 1950, only one in 20 workers required a license to work.
In 2017, that number’s gone up to one in five.
Location, location, location
There’s also a geographical mismatch between where the available jobs are and where the potential workers live. But expensive housing exacerbates that problem as does licensing that doesn’t transfer between cities and states.
What does this mean for commercial real estate?
Labor shortages result in higher vacancy rates, lower asking rents and greater concessions across markets.
|Property type||1Q2018 asking rent (per sf or unit)||Growth with perfect employment||Perfect employment rent|
What are the potential remedies?
Increasing college enrollment for qualified students, especially for those looking to enter the technology field. And better vocational training could also produce a better labor pool as would better reeducation and retraining for workers displaced by trade, offshoring and technical improvements.
Make it easier for women to remain in or reenter the workforce.
Any policy or workplace program that increases paid maternity/paternity leave, improves wage disparity, increases the availability of affordable childcare or offers a more flexible schedule or improves work-life balance would encourage more women to opt back in.
Make it easier for workers to move to the jobs.
Any policy that facilitates the movement of labor between regions and cities could help, as could subsidies for housing, relocation and interview costs as well as improved infrastructure that better connects outlying areas could all remedy the labor shortage.