BY DR. M. RAY PERRYMAN
The next few decades will bring major changes in the U.S. labor market. The growth rate will slow and the labor force will become older and more diverse. The percentage of the population which is working will also continue to fall. The implications for businesses, the economy and society are profound. Let’s look at a few of the major trends.
Population growth will slow. There are two components of population change: The natural rate of increase (which is births minus deaths among the resident population) and immigration. The total growth rate is expected to drop from current levels of more than 0.8 percent per year to little more than half that rate in the future. Within the next few years, immigration will become the larger source of population gains due to aging and decreasing fertility rates. By the mid-2040s, the U.S. Bureau of Labor Statistics predicts 80 percent of U.S. population growth will be due to immigration.
The labor force is projected to expand even slower. The BLS predicts the civilian non-institutional population will grow from 251 million in 2015 to 326 million in 2060 (an increase of 75 million); however, the labor force is projected to increase from
157 million in 2015 to 186 million in 2060, an increase of only 29 million.
Labor force participation will continue to decline. The labor force participation rate measures the number of people age 16 or older who are either working or have looked for work in the past year as a proportion of the total population age 16 or older. In 1950, more than 86 percent of the U.S. male population age 16 and over was part of the labor force, but the proportion has fallen steadily since that time to about 69 percent now. In 1950, less than 34 percent of women 16 or older were participating, but the proportion of women in the workforce grew rapidly in the following decades and peaked at roughly 60 percent in the late 1990s and early 2000s. Overall labor force participation is now at 62 percent.
By the late 2020s, the BLS predicts that only about 60 percent of Americans 16 and older will be part of the labor force, with the proportion dropping to 57 percent by 2060. There are multiple reasons for this decline. Years of slow hiring may lead some people to drop out of the workforce, never to return. Skills mismatches between unemployed workers (and people who might consider looking for work) and available jobs are another issue.
Demographic patterns are also contributing to lower participation. Baby Boomers have been a large share of the labor force, but this generation is now aging beyond its prime working years. The oldest boomers began to reach retirement age several years ago.
Social changes and choices are also affecting the overall participation rate. Young people (ages 16 to 24) are less likely to work than in the past, with school the most commonly cited reason among those choosing not to work. Even among people in the prime working age range of 25 to 54, which has the strongest attachment to the labor market, the labor force participation rate is falling.
Between 2015 and 2060, BLS predicts that the percentage of workers age 55 or older will increase from 22 percent to 27 percent. Workers in the age 16-24 category will drop from 13 percent of the total to 10 percent (due in part to the increasing emphasis on higher education, which is a good thing).
Shifts in race and ethnicity will continue. Nationally, the share of non-Hispanic whites will drop from about 64 percent in 2015 to 46 percent in 2060. Hispanics will be an increasingly important component of the U.S. workforce, rising from less than 17 percent in 2015 to 30 percent in 2060. In Texas, these patterns will be even more pronounced.
How will we get the work done? Immigration reform can be a part of the solution. There may be ways to entice more prime working-aged people back into the labor force, but dropping labor force participation is likely going to be a fact of life for the foreseeable future. Technological advances will also continue the shift from labor to capital, with machines taking on increasingly complex tasks.
No matter how appealing it may be to some, the laws of biology will not allow us to harken back to or wax nostalgic about a different time and different circumstances. Reality is going to compel forward-looking solutions.