Balance Supply and Demand Forecast in Hrp by yyp14196


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									                               The Pending Labor Shortage
                                          Fact or Fiction?

Is a labor shortage really pending? There has been an abundance of print on the topic since the
year 2000, with attention-grabbing media reports that read:

•   There is a national shortage of school bus drivers…
•   The demand for pilots is so acute…
•   Teachers are also in high demand…i
•   Critical Labor Shortages Challenge Traditional Education and Workforce Policiesii
•   2001 Employment Outlook: Skills Shortage Likely to Continueiii
•   Shortage of nurses poses threat to health careiv

Clearly, a labor shortage would affect many occupations and industries. Many organizations
think the events of September 11th tipped the balance of power back to employers and, therefore,
brought an end to the labor shortage. However, that may not be the case. As the following chart
reflects, there may not be enough new workers coming along to take the place of retiring baby

                          Labor Demand Will Outstrip Supplyv
                         Expected Labor Force and Labor Force Demand

Although this is good news for workers trying to leverage and market their skills to potential
employers, it’s bad news for employers trying to attract and retain staff. Organizations that
ignore this prediction and continue operating in a reactive staffing mode will lose any talent war
that may develop. But what if a talent war never materializes? Organizations that think and plan
strategically for their staffing needs will be more likely to secure a talented work force that will
serve them well in any economic climate. There is no downside to strategic staffing and
workforce planning.
Did September 11th affect The Workforce?

Do not let the events of September 11th lull you into a sense of complacency about workforce
retention. According to a recent article in Workforce:

     “Even though employees may appear to be more committed to their
     companies since September 11, the jump represents a false loyalty. Once
     the economy improves and September 11 gets further behind us, employees
     will return to the job-hopping habits of the late 20th century. Retention is
     still the key human resource issue. Finding and keeping quality employees
     was an issue long before September 11, and even though unemployment has
     risen and downsizing receives a lot of press, Human Resource professionals
     cannot be casual about the need to retain good employees. Human Resource
     Directors should definitely still be thinking about the war for talent. When
     you look at the demographic trends, there simply aren’t enough younger
     cohorts to take the place of retiring boomers.”vi

Will your organization be prepared? What is your action plan?

If the war for talent is real and long-term, workforce planning can help determine where an
organization is at risk and set the stage for strategic staffing. There are several risk factors that
should be explored. The aging workforce, high turnover (voluntary and involuntary), increasing
diversity, and the skills gap in the future workforce may be the most prevalent factors to

An organization can’t fix the effects of all these trends at once, but it can measure how these
trends could affect the organization and plan for the most severe risk factors.

The Aging Workforce

The aging of the workforce is probably THE most important trend in the labor market today.
During the next 30 years, the number of people aged 65 and older will double from 35.1 million
to 70.3 million.vii The following chart shows how the Texas state workforce in particular is
aging. The 16 – 29 and 30 – 39 age groups are clearly decreasing as a percentage of the state
workforce, while the 50 – 59 and older populations are clearly increasing. That trend is expected
to increase dramatically. In addition, as the baby boomers retire and continue to live longer, they
will place increased demands on services typically required by an older population, particularly
healthcare. This group will continue to leave a demographic and economic wake in its path,
much like it's always done since 1946.
                                                                                  The Texas Workforce is Aging

                            70 and Over

                               60 to 69

                               50 to 59
                Age Group

                               40 to 49                                                                                                                                                   1998

                               30 to 39

                               16 to 29

                                     0.00%          5.00%                10.00%               15.00%             20.00%              25.00%             30.00%                35.00%
                                                                         30 - 39 Age Group Shrinks while 50 - 59 and 60 - 69 Age Groups Grow

             How will organizations overcome the onslaught of aging workers, increasing retirements, higher
             demands on services, and the changing needs and motivations of older workers? They may need
             to strengthen incentives for older workers to work longer. For example, they may consider
             rehiring retirees and offering reduced work schedules or job sharing. Some companies have
             gone so far as to let retirees continue to work in multiple locations across the country throughout
             the year -- an arrangement that is perfect for a retiree who wants to spend winters in the south
             and summers up north.

             High Turnover

             Even as the baby boomers retire, the national trend toward high voluntary turnover on the part of
             younger workers will continue. The chart below illustrates the development of that trend during
             the past decade. According to U.S. Secretary of Labor Elaine Chao, workers are leaving
             employers more often. “The average 34-year-old has already worked for nine different
             companies in his or her brief career.”viii

1 9 .5 0 %

1 7 .5 0 %

1 5 .5 0 %

1 3 .5 0 %

1 1 .5 0 %

 9 .5 0 %

 7 .5 0 %
                  1 9 9 1                 1 9 9 2   1 9 9 3        1 9 9 4          1 9 9 5            1 9 9 6       1 9 9 7         1 9 9 8        1 9 9 9         2 0 0 0            2 0 0 1
      T e x a s T u rn o v e r R a te                                                                                  B N A T u r n o v e r R a t e ( C o n v e r t e d t o m a t c h T e x a s ' F is c a l
      A v e r a g e T u r n o v e r f o r B o r d e r in g S t a t e s                                                 A v e r a g e T u r n o v e r f o r L o c a l C o u n t y a n d C it y G o v e r n m e
High voluntary turnover is probably the most insidious human resource malady an organization
can suffer. Here’s what makes it so deceitful:

•   Turnover never shows up on the balance sheet.
•   Employees are typically not asked why they are leaving, or are not asked at the right time or
    in the right way to elicit an honest response.

If there is no direct cost of turnover, and if an organization never really knows why people leave,
the organization can’t fix the problem -- it’s insidious. The turnover problem belongs to Human
Resources until the accountants of the world figure out how to place it on the balance sheet.
And, as long as voluntary turnover is a Human Resources problem, organizations expect Human
Resources to fill vacant positions. Unfortunately, this only exacerbates the problem because it
limits the amount of time and money Human Resources can devote to retention. That is why
organizations spend more resources on recruiting staff rather than retaining them.

Only the most progressive organizations agree turnover costs money. They make every effort to
determine why people leave, and strategically plan to retain top talent.

If an organization experiences high involuntary turnover, then it is hiring the wrong people.
Most employers hire (and most employees accept jobs) based on a match in skills. However,
most employers fire (and most employees quit) based on problems with organizational fit.
Consider hiring for organizational fit in addition to matching skills.

Increasing Diversity

The future workforce will be more diverse.

    Women’s share of the labor force will                                    There will be more females
    edge up
                                                                             Women’s share of the labor
    Percent of labor force
                                                    55     53
                                                                             force keeps edging up, while
                                47         48                                the men’s share edges down.

                           Women                          Men

              1990           2000        2010,     1990   2000     2010,
                                       projected                 projected
      Source: Bureau of Labor Statistics
  Labor force growth will be fastest for                                                             There will be more older workers
  workers 45 and older
   Percent change
                                                                                                     The 45 and older population is
                                                          16-24         25 -44       45 a nd older
                                                                                                     expected to grow dramatically,
                                                                                                     while the 25 – 44 population
                                                                                              37     actually shrinks.

                               8                        8

                                               -3                                    -4
            1980-1990                               1990-2000                     2000-2010,
     Source: Bureau of Labor Statistics

  Labor force growth rates of minorities                                                               There will be more minorities
  will outpace that of whites
                                                                                                      In the US labor force and Texas
   Percent change, projected 2000-2010
                                                                                                      population, some minority
            44                                       US Labor Force                                   populations are expected to
                                36                   TX Population
                                                                                                      grow at 6 or 7 times the rate of
                                          30                                                          the White, non-Hispanic
                                                     21                                               population.
                                                            15                         12
                                                                        6     8

          Asian and          H ispanic, any         B lack, non-      W hite, non-        Total
          other, non-             race               H ispanic         H ispanic
           H ispanic

     Source: Bureau of Labor Statistics

These trends alone are not cause for concern, but all people have different reasons and
motivations for working. If organizations do not create an atmosphere in which top talent feels
valued, regardless of their age, ethnicity or gender, they will leave for an organization that does
value top talent. It’s a good idea to have an organization’s workforce match its client base
demographically. It’s also good to have policies and benefits that are attractive to a diverse
group. Organizations should consider diversity training, family friendly policies, and equal pay
The Skills Gap

A recent publication from the Society for Human Resource Managers states:

     “Numerous studies point out that the US population is not prepared for the
     skills necessary for success in the digital economy. From lagging scores on
     standardized testing to a growing chasm in access to and comfort with
     technology, the issue of skills development may become of primary concern
     as employers face increased global competition for goods, services, and

We have similar issues right here in Texas. According to a recent quote        The workforce of
from State Comptroller Carole Keeton Rylander: "The U.S. Bureau of             the future may
Labor Statistics predicts that by the year 2030, 60 percent of Texans will     come with some
have only a high school diploma or less."x                                     assembly required

And U.S. Secretary of Labor Elaine Chao says: “Our economy is making
an unprecedented transition into high-skilled, information-based industries. This has created a
disconnect between the jobs that are being created and the current skills of many workers.”xi

Clearly, the workforce of the future may come with some assembly required. Future jobs will
require higher levels of education and skills, which makes the task of finding quality workers
even harder. Organizations will need to consider providing adult education, partnerships with
local schools, employee training and development, and additional technology solutions to
prepare tomorrow’s workforce for the jobs of tomorrow.

If the Labor Shortage is Real

There is ample evidence to suggest a labor shortage is on the horizon for the United States, the
state of Texas, and state agencies. Organizations that fail to implement broad-based programs to
attract and retain a quality workforce will find it more difficult to accomplish their mission.

There is no single solution to combat the labor shortage. But organizations that have the
foresight to plan for the future will be successful whether the labor shortage is real or imagined.
There is no downside to proper planning and good policy.
Suggested reading:

Judy, Richard W. & D’Amico, Carol D. (1999). Workforce 2020. Indianapolis, Indiana:
Hudson Institute.

“Older Workers,” Demographic Trends Pose Challenges for Employers and Workers, United
States General Accounting Office, GAO-02-85, November 2001.

Fullerton, Howard N., and Toossi, Mitra, “Labor Force Projections to 2010: steady growth and
changing composition,” Monthly Labor Review, November 2001.

Hecker, Daniel E., “Occupational employment projections to 2010,” Monthly Labor Review,
November 2001.

  Society for Human Resource Management, Workplace Visions, No. 4 – 2000. pp. 1-4.
    Employment Policy Foundation, Statement Submitted to House of Representatives,
Committee on Education and the Workforce, September 25, 2001.
     Edward Potter, “2001 Employment Outlook: Skills Shortage Likely to Continue,” Business Xpansion Journal,
April 2001, p.1.
     Roser, Mary Ann, “Shortage of Nurses Poses Threat to Health Care” Austin American-Statesman, April 21, 2002,
p. A1.
   Employment Policy Foundation, employment forecast, October 23, 2001, p. 2.
     Shari Caudron, “Why 9/11 Didn't Change the Workplace”, Workforce, March 2002, pp. 34-38.
     Employment Policy Foundation, employment forecast, October 23, 2001, p. 1.
     Elaine L. Chao, Secretary, U.S. Department of Labor, Report on the American Workforce, 2001, p. 2.
    Society for Human Resource Management, Workplace Visions, No. 1 – 2002. p. 1.
    Susswein, Gary, “Rylander: Let new grads attend 2-year colleges free” Austin American-Statesman, May 8, 2002,
p. B1.
    Elaine L. Chao, Secretary, U.S. Department of Labor, Report on the American Workforce, 2001, p. 1.

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