As more boomers age out of the American workforce, their employers are having a hard time filling their shoes.
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According to a new report from Citigroup, firms are facing constraints on the availability of qualified labor resources as older workers age out of the workforce or reduce their hours, leaving a gap in productivity. Older workers leaving the workforce to enter retirement is part of the labor market cycle that opens up opportunities for young adults to fill—good news for the millennials that have faced bleak hiring prospects since the Great Recession. But employers say they can’t find the skilled workers from the younger workforce members, making it hard for them to increase their payroll and could have long-term consequences on economic growth.
Citi's Nathan Sheets, report author, says that for the qualified younger workers that step in to take more of the now-vacant jobs will likely be working harder and longer hours—for more pay.
“When there is less labor available, each worker has more capital, so it’s natural for them to be paid more,” Sheets says.
Paul Conway, former chief of staff at the Labor Department, says the report is positive for a younger labor force that has had a stunted career trajectory due to a lagging economy.
“There has been a lack of creation of full-time, meaningful jobs—especially for younger Americans,” Conway says. “If you consider professional development and job skills—they may go through three or four different jobs and develop a series of expertise.”
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Conway says the young worker might face an uphill battle to fulfill open positions due to their delay in skill development and “real-world” job prospects, they may have more of a hodgepodge of jobs rather than a list of resume-making career moves.
“This generation is struggling with serious questions,” he says. “They have been delayed, because the new reality is a series of part-time jobs, or unpaid internships.”
Despite the Citi report, Conway doesn't see boomers leaving work in full force anytime soon since they aren't financially ready for retirement. So while many will be phasing out, it will be more of a slow-burn for the shift to take place rather than many opportunities all at once for millennial applicants.
“Older workers are staying in longer, and are delaying retirement or are taking part-time jobs,” he says. “If it’s not in high-information, high-tech environments, employers are happy to retain the expertise of an older worker.”
Will Tech Help Fill the Gap?
Sheets expects tension will be felt throughout the corporate sector as the shift from older to younger workers occurs. During this time, he expects more substitutions among the labor force with automation and computerization than before.
“This will tend to focus more on capital-intensive industries with machinery,” he says.
In other words, companies still have the upper hand over applicants, Conway says.
“There will be much greater economic expansion and more job creation,” he says. “But it’s still a hiring person’s market.”
Higher Taxes, But Higher Wages?
The workers who are skilled enough to partake in this circle of labor, and step up to replace older retirees will also likely be paying more in taxes, Sheets says.
“There will also be higher taxes [to compensate] for more retirees and Social Security,” Sheets says.
But again, they will be better compensated, Sheets says.
Conway also says Obama Care will lead to higher taxes for younger workers, who are picking up the tab for the 30 million new people being brought into the health-care system under the new law.
“They will be paying more, not less, for health-care, and that burden will grow over time,” Conway says.