We’re Running Out Of Workers. Now What Do We Do?
In all my years as a working professional, I’ve never lived in an economy where “there are not enough workers.” But that’s where we are.
For the next ten years, the term “shortage of talent” is going to be one of the most important topics in business.
Consider a few striking statistics:
- The fertility rate in the US is now 1.6, in the UK it’s 1.8, in Germany it’s 1.5, and in Japan it’s 1.4. (In 1960 it was 3.5 in the US.) Young families in developed economies are not having enough children.
- People are living longer. By 2030 Americans over the age of 65 will make up 20% of our population (up from 16% today), so the fastest-growing segment of the workforce is now “people over the age of 55.” Retirement costs will go up, and people will want to work longer.
- This actual number of hours worked (despite the relentless online experience we have today) is going down. In the 1950s people worked almost 10% more “hours” at work, despite the fact that we work at home and in coffee shops all day.
- Productivity, the amount of work produced per hour of effort (or dollar of labor) is barely growing, with the latest growth rates about 1.2%.
- Immigration has become a political football, and it has stagnated in the last few years.
The end result of this is what we now see: a record-setting low unemployment rate and a tremendous focus on reskilling, internal mobility, and new models of work. Manpower’s latest study shows that 69% of employers are now “struggling” to fill positions.
This, in a nutshell, is the Future of Work.
In the United States, the Conference Board now concludes that this “aging workforce” problem will slow the US GDP significantly in the future, leading us to the stagnation problem Japan has experienced for years.
Will Automation Come To The Rescue? We Are Becoming A Service Economy.
One could quickly conclude that “this is the goal of automation.” All the studies of AI, automation, and RPA will fix this problem, and the economy will continue to grow despite the fact that we are running out of people.
Well, there are some challenges here too. First, most of the new economy jobs we need are not easy to automate. In the United States over the last 40 years, the percentage of GDP derived from manufacturing dropped from 23% to 12%. This is a frightening drop.
What types of jobs have increased? Professional services (went from 5% to 10% of the US economy), healthcare (which grew from 4% to 8% of jobs), and jobs like CPAs, architects, advertising agencies, publishing, and computer programming. These are service jobs, and economists now know they are very hard to automate.
As I like to talk about with clients, the biggest discovery in the digital transformation of business is not that everyone is becoming a software engineer, it’s that we’re all becoming professional service workers! Everyone is not designing, communicating, convincing, managing, leading, supporting, or persuading others at work. So the new economy, the one with fewer people to work, is now becoming very “human” and harder to automate than ever before.
I”m reading a fascinating book on this topic (it’s called Fully Grown by Dietrich Vollrath) and the author’s conclusion is the same one I’ve arrived at over the last few years. Slow growth is good, and we need to feel better about “slowing down growth” to make our world better, reduce stress on people, and fix problems in skills inequity, income inequality, and the lack of employment in small cities and towns.
Automation is clearly a hot topic, but it’s not fixing the problem of demographics. Unemployment continues to get lower and lower, and employers are fighting with each other for talent.
Not Attracting Candidates, but Creating Candidates
How will you hire in an economy like this? It’s quite simple: we have to shift to a world of “creating candidates” not “attracting candidates.”
We have to “create candidates” not “attract candidates.”
In other words, you have to hire people with the potential to grow and train them, create apprenticeships and internships to get young people, or move and reskill people inside your company to grow. These are new focus areas in HR, and some of the most powerful disciplines to grow your company.
Topics like improving the candidate experience, focusing on making the company a trusted institution, and reaching out to job seekers earlier and earlier are key. I just finished a series of meetings in India where many companies are hiring even faster than here, and many can now hire people based on “one click job applications.” This kind of “irresistible candidate experience” will help you attract the right people.
I also believe the focus on gig work and what I call the “pixelated workforce” is driven by this trend. Organizations are expanding working options so we can find and access the talent we need.
What Can HR Do?
I have been studying this problem for almost a decade and I think we (HR professionals and our teams) are in the hot seat to deal with these issues. Let me point out some ideas.
- If you’re a global company, it’s time to globalize your talent and mobility strategy. Companies like Unilever, Schneider Electric, IBM, and many others move people from country to country as a normal part of business. This pushes the issue of global diversity in leadership, changing the company from a “single company headquarters” to multiple company headquarters, and developing a “talent marketplace” internally.
- Look for opportunities to empower and re-engage older workers. People in their 50s, 60s, and 70s are ready and willing to take on new roles, undertake reskilling, and extend their careers for your company. Research shows they are the most productive (and least stressed) individuals in the workforce, we just need to find new ways to keep them relevant in new roles (eg. recareering).
- Reach into the education system and non-traditional sources of talent. Microsoft actively recruits and trains college students as interns. Unilever assesses candidates without considering their educational history. Companies like AMC Theaters and many retailers no longer look for college grads, they assess people based on personality and ambition. Even Goldman and JP Morgan Chase are not focused on pedigree any more.
- Build a series of internal Capability Academies. As people move and enter your company, you need to give them opportunities to build deep and broad skills. This will keep them, attract them, and make them more productive at work. My research shows that it can be six-times less expensive to “reskill” than hire externally for many jobs.
- Focus on building Power Skills not just technical skills at work. Research now shows that productivity and job success is harder than many believe: we need to show people how to operate well in our companies, and this means expanding our definition of “skills” to broad capabilities.
- Put together a team to focus on the employee experience. We are launching a new program in the Josh Bersin Academy on this topic: read here about how Workday and others build meaningful experiences at work.
- Develop an alternative workforce strategy. Today almost 88% of companies do not even know who their contingent workers are. It’s time to take this part of the workforce seriously. Read our in-depth report on best practices here.
- Start a big program on productivity at work. We, in HR, should be talking about team structure, better tools to manage teams, how to lead and manage projects, and how to reward people for success in getting things done. The old model of “individual performance” and rewards for individual achievement are getting in the way. We have to rethink performance management, rewards, and the role of leadership in this new world.
- Stop thinking about people as an expense, and wake up to the fact that they are an asset. In fact, as I discuss in an article in Forbes, people are the only appreciating asset you have in a business. Invest in people, listen to people, and give people the opportunity to reinvent themselves.
I am fascinated by these changes, and I think they bring us to a whole new economy in 2020. Read my Predictions Report if you want to understand more.
In the meantime start thinking about people as one of the most scarce and important things you have. It will lead you to the best HR and management decisions in the year ahead.