Will an Aging Population Result in a Shortage of Workers?
I’ve been arguing here that advancing technology is likely to lead to a serious structural unemployment problem in the long run (and perhaps we are seeing the beginning of that trend now). Marketwatch reports that a new study makes exactly the opposite prediction: as the workforce ages, there’ll be a shortage of workers and we may see the beginnings of it within the next 2-3 years.
How did the report’s authors arrive at this conclusion? First, government analysts expect 14.6 million new nonfarm payroll jobs will be created between 2008 and 2018. Including self-employed workers, family members working in family businesses and workers in farming the total hits 15.3 million new jobs. Read the Bureau of Labor Statistics’ employment projections.
Next, given the government’s projected population growth and current labor force participation rates — and assuming no major changes in immigration — there will be about 9.1 million additional workers over the same time period. Taking into account multiple job holders, the total number of jobs expected to be filled is 9.6 million.
Finally, subtracting the projected number of filled jobs from the expected number of new jobs results in a range of 5 million to 5.7 million vacant jobs. However, using projected labor force participation rates – baby boomers are not expected to retire at as high a rate as earlier cohorts of older workers — there would be 3.3 million to 4 million vacant jobs, according to the report.
While I don’t doubt that we will see shortages in certain occupations (can we really expect people to line up to be a “home health aid?”), I’m very skeptical of these numbers—and of any approach that attempts to predict the future purely on a numerical basis without taking into account the structural and technological shifts that are going to continue (and very possibly accelerate) in the coming years. I wonder how they arrived at the “14.6 million new jobs created” number.
I think it’s very likely that estimates like these significantly underestimate the pontential impact of both job automation technology and offshoring. Automation—in the form of robotics as well as software automation and focused artificial intelligence applications—will gradually penetrate into nearly every employment sector and threaten both skilled and unskilled workers. In many cases, higher paying jobs, especially knowledge worker positions, will be among the most vulnerable.
Where automation is not yet capable of taking over a job, management will increasingly turn to offshoring. As software continues to advace, the result is likely to initially be tools that enable low wage offshore workers to perform increasingly complex, high value jobs. Eventually, those software applications will, in many cases, advance to the point where they become autonomous—eliminating the job entirely. I also think it is likely that both automation and offshoring will become less expensive and easier to access—in other works, they will become more accessible to the small businesses that drive most job creation in the U.S.
While demographics may gradually reduce the number of available workers (relative to the total population, not in absolute terms), technology has the potential to rapidly advance in a disruptive way—possibly eliminating entire job categories that include millions of workers in a very short time. Yes, advancing technology will also create new industries, and therefore new jobs, but history has shown pretty conclusively that new technology industries tend to not be very labor intensive—they are capital intensive and do not create large numbers of jobs.
As new industries employ only a few people and older industries get disrupted by advancing technology, things may get ugly. Compare Google with McDonalds. What happens if McDonalds automates and someday begins to look more like Google in terms of the workforce it requires?
While, I feel confident that these trends will evenually develop, it is very difficult to project the exact timing. My guess is that we’ll begin to see significant evidence within the next decade and that by 2020 there will be significant doubt surrounding the historical assumptions about job creation. As I noted earlier, the San Francisco Fed recently published a study suggesting that assumptions about the relationship between econonic growth and job creation are changing. In any case, numbers such as the ones from the study cited above are likely to be meaningless.