Projecting Future Skill Shortages Through 2029

Date Posted: July 30, 2019

Posted In: Workforce,

From American Action Forum:  by Douglas Holtz-Eakin and Tom Lee

• The economic benefits of education are well known, as any education above a high school diploma boosts a worker’s likelihood of being employed, his or her earnings, and the economy as a whole.
• This study estimates that, over the next decade, employers in nearly every state will face significant shortages both of workers with an associate degree or some college (nearly 800,000 workers) and of workers with a bachelor’s degree or higher (over 8.5 million workers), leading to nearly $1.2 trillion in lost economic output.
• The labor shortage is likely driven in part by demographic shifts, but these findings indicate that current levels of educational attainment are insufficient, and policymakers can address these shortfalls by encouraging higher levels of education and skills development.

Introduction

Prior AAF research found that higher educational attainment has clear economic benefits for both workers and the economy. All education levels beyond a high school diploma lead to increased chances of employment and higher wages, and, as a result, educational attainment has a powerful effect on the national and state-level economies.

Given the economic value of education and the skills it provides, it is worth considering whether the United States educational system is producing workers with the skills and educational qualifications that employers are demanding now and will be in the future. This study seeks to answer this question.

Recent demographic and employment trends make understanding potential shortfalls in the labor force even more pressing. A recent survey of employers found that about 83 percent of respondents are having difficulty finding suitable candidates to hire, and about 75 percent of those respondents believed a skill shortage existed in their applicant pools. [1] Government data provide more evidence of a labor shortage. In the Bureau of Labor Statistics’ (BLS) April 2019 release of Job Openings and Labor Turnover, [2] there were about 7.4 million job openings, but about 5.9 million hires – a gap that has persisted since January 2015, as the chart below from the Federal Reserve [3] shows.

This gap between job openings and available labor is likely due in large part to demographic shifts: The United States faces an aging workforce, [4] decreasing labor force participation rates, and a general slowing in growth of the civilian noninstitutional population (i.e. people not either incarcerated or in the military). [5] These factors mean that firms and businesses face difficulties hiring new workers with the appropriate skills, in part because there simply aren’t the number of workers there have been in the past (relative to the size of the economy). The stagnating labor force will put more pressure on the educational system to produce workers with the skills that employers need; employers can’t simply count on a large labor pool from which to choose the right workers.

Read more.