U.S. employers will soon face the largest labor shortage the country has ever seen, putting urgent pressure on both public and private entities to pivot their talent strategies and build a future-ready workforce, new research finds.
Lightcast, a provider of global labor market data and analytics, recently released a report that shows how a deluge of Baby Boomer retirements, plummeting childbirth rates, and historically low labor force participation will compound to create a deficit of 6 million workers by 2032.
The report, “The Rising Storm: Building a Future-Ready Workforce to Withstand the Looming Labor Shortage,” predicts the healthcare, hospitality, and service industries will be hardest, and says government and business leaders must take steps now to address the workforce deficit.
“The Rising Storm” is a follow-up to Lightcast’s “Demographic Drought” series that first predicted the coming labor shortage and opportunities to increase the labor participation rate. This latest version offers new insights into the labor force dynamics shaping a significant transformation in the way of work, as well as actionable strategies businesses, educators, and government leaders should implement now.
According to Lightcast’s analysis, the workforce deficit is being driven by several key factors, including:
- The “Silver Tsunami.” Of the 5 million workers who have exited the workforce since 2021, 80% were over the age of 55. Now, the average retirement age has dropped to 61, diminishing any hope that older workers might fill new gaps in the labor force.
- A rapid decline in the U.S.-born labor force. The only growth in the U.S. labor force since 2019 can be attributed to immigration, including April’s record-high level of prime-age women in the workforce. Foreign-born workers are keeping the economy afloat.
- A major mismatch between workers and available jobs. The shrinking U.S.-born labor force is also becoming younger, more educated, and more female, but these groups aren’t filling key trade, service, and healthcare roles. Immigrants are essential; 1 in 4 doctors and 1 in 5 nurses in the U.S. are foreign-born.
- The decline in workforce participation of prime-age men. Men are disappearing from the labor force, driven by an uptick in issues like substance abuse and incarceration that disproportionately impact this demographic.
“Like an approaching hurricane, we felt the outer bands of this coming storm during the pandemic as the ‘Silver Tsunami’ of Boomer retirements began, immigration came to a halt, and more than 5 million workers left the labor force,” said Ron Hetrick, Lightcast senior economist and co-author of the “Demographic Drought” series. “But that was just a preview.
“Over the next five to seven years, our labor pool’s growth will not match our population’s,” Hetrick said. “We will increasingly have more consumers than producers, driving price hikes and product shortages, if we don’t take swift action.”
According to Lightcast’s analysis, organizations will need four core strategies to adapt to the shifting labor market: globalization, automation, immigration, and workforce development. Finding new ways to expand the talent supply, whether through seeking capable employees abroad or utilizing AI in key roles, will be necessary to bridge gaps across industries.
Meanwhile, educators and employers must prioritize skills development and adaptability over college degrees.
“One of the factors contributing to this talent deficit is that we’ve de-valued service, manufacturing, construction, and other trade work while holding those requiring a college degree in higher esteem,” Hetrick said.
“That’s deterred a lot of people from pursuing these careers, despite substantial improvement in wages and lucrative career opportunities in many occupations in these sectors,” he said. “Most importantly, these are incredibly important jobs that sustain our economy, and we must shift that mentality immediately if we’re ever going to have enough people to produce, build, repair, and service our vital needs.”
To overcome hiring deficits, Lightcast suggests organizations prioritize skill adjacency, upskilling, and development to build a future-ready workforce, rather than filtering out talent that doesn’t meet their specific skills requirements at face value. This adaptable approach to trainability will provide greater agility and broaden the talent pool considerably.
