Businessolver Blog

The Economy is Driving Unemployment, But There’s More to the Equation

The Economy is Driving Unemployment, But There’s More to the Equation
Posted on Wednesday, January 29, 2020 by Brian Ward
Share:

For organizations looking to add high-quality talent, the labor pool may be feeling like a vast desert with no oases in sight.

Future-proof-your-benefits

In fact, it’s been a long time without any relief: For 21 straight months, the number of job openings has exceeded the number of applicants. It’s no wonder HR pros cite recruiting as their biggest challenge for 2020.

Back in 2009, when the recession was ending and the jobless rate was high, many employers received over 75 resumes for each opening, and fielding over 50 was common. In 2018, depending on the size of the employer, a job opening generated around 30 resumes.

Conventional wisdom points to the economic recovery as driving the tight labor market, as employers expand and more jobs are available. But that’s only part of the story. There are several important demographic trends contributing to the makeup of the labor force that employers need to understand in order to maximize their hiring and retention strategies.

In the US, workforce participation has been trending down since 2000, when it was 67.1%. It hit its lowest rate 62.4% in 2015. In December, it was back up 63.2%.  But, that’s still lower than the pre-recession high, and lower than the participation rate even during the economic downturn.

The economy is creating more jobs, but no one is manufacturing more employees. Instead, the US birth rate has actually been falling, from 3.65 in 1960 to 1.72 in 2018, a 32-year low. Even a boom in births this year wouldn’t help fill any job openings for several decades when today’s babies become tomorrow’s employees.

And, it could be longer as workforce participation among the youngest members of the population has also been decreasing.

In 1998, people between 16 and 19 years old participated in the labor force at a rate of 52.8%. By 2018, this had dropped significantly to just over 35%. That makes hiring for entry-level jobs requiring a high school diploma a lot more challenging for today’s employers.  

For jobs that require a college degree, the landscape is only slightly better. In 1998, people age 20 to 24 were in the workforce at a rate of 77.5%. Young people two decades later participate less at 71.1%.

While younger people are postponing entering the workforce, many older employees are transitioning out. It’s estimated that 10,000 Americans turn 65 each day, and some of those are retiring and driving down the overall workforce participation rate (not to mention taking their experience and institutional knowledge with them.)

Employers that take these demographic pressures into account can maximize their recruiting and retention strategies by aligning their benefits programs to make workforce participation more enticing for would-be employees.

  1. Sweeten the pot for entry-level workers. There’s a lot of competition for newly-minted employees, and these potential assets may not be swayed by your healthcare coverage because they are still on a parent’s plan. Instead, focus on programs and benefits that help them prepare for short- and long-term financial needs, like goal accounts.  
  2. Focus on recruitment of highly experienced employees. Many Americans retire before age 65, so they are on their own for healthcare coverage until Medicare kicks in. You might be able to entice experienced people who retired from other employers back into the workforce by offering access to benefits through a marketplace.
  3. Ditto for post-65 retirees. More retirees are open to the possibility of part-time or contract work, and they could potentially hit the ground running to fill holes in your workforce. Even though these retirees are eligible for Medicare they might have a high level of interest in other benefits like vision or dental.

There’s no end in sight for the challenges associated with finding and keeping talent as the tight labor market is projected to continue. Employers that understand the structural demographic issues that are driving some of the scarcity of talent are in the best position to be strategic about using benefits in their recruitment approach.

While decreasing workforce participation is one contributing factor, it isn’t the only one. Want to learn more about the emerging workforce? Read our white paper: Future-proof your benefits: Four must-know demographic trends to drive organizational success.

{{cta(‘5bbd412c-7410-4dea-b3b2-deb77fb4afc3′,’justifycenter’)}}