Mind the Gap: Solutions for the Contemporary Labor Shortage
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There are 8 million job openings in the U.S., but only 6.8 million people are unemployed. Therefore, if every unemployed person became employed, several million jobs would still be open. These statistics are concerning and indicate that there has been a dramatic decline in workforce participation in America. Labor shortages often lead to economic issues like inflation and stunted economic growth. This disparity points to an asymmetry in labor demand and supply. This article explores different issues that are leading to this gap and discusses possible solutions that policymakers may consider when addressing this problem.
Statistically, the pandemic can be seen as a drastic turning point for workforce participation. In May 2022, sixty-six percent of Americans who lost their job during the pandemic said they were either somewhat active or completely inactive in the job search process. From that same survey, half of the Americans who lost their job during the pandemic said they refused to take jobs that are not remote. Nineteen percent of those surveyed Americans who became unemployed during the pandemic have transitioned to become “homemakers,” seventeen percent have retired, and fourteen percent are working part-time. Importantly, almost a quarter of these Americans have stated that they felt incentivized not to look for work because of government aid packages during the pandemic.
Many of the unfilled job openings are in the construction, wind energy, manufacturing, and transportation industries. These are somewhat known as “blue-collar” jobs, or skilled tradespeople jobs. Those sectors are being hit disproportionately by the labor shortage, a trend that has been noticed since before the pandemic. This is partly because there has been a demographic, educational, and economic shift within the workforce, and there are fewer Americans that are trained to work in these industries. There are fewer vocational training and apprenticeship programs, which leads to a decrease in skilled workers for those industries. A recent report by the Manufacturing Institute and Deloitte projects that 2.1 million manufacturing jobs could go unfilled by 2030 due to a lack of skilled workers.
One reason for the stark decrease in workforce participation is the aging population in the United States. The U.S. population has been steadily decreasing in recent decades, as Americans are having fewer children, and life expectancy has been generally increasing. In 2023, the average American family had 1.9 children— a decrease from the 1960s, which saw families raising an average of 2.33 children. Fewer children being born means that America is facing the issue of an increasingly diminishing population, with a population spread that favors older generations. Baby Boomers, born between 1946 and 1964, make up nearly twenty-one percent of Americans. On average, Americans are living longer than before because of advances in medicine and technology. In addition, since the pandemic, Baby Boomers have been retiring at a rate higher than ever before. 3.2 million more Baby Boomers retired in 2020 than they did in 2019, marking the largest increase in the rate of Baby Boomer retirement. This phenomenon has been labeled “the Silver Tsunami.” The early retirement of these individuals has led to fewer Americans participating in the workforce.
Another reason there is such a stark decrease in workforce participation is the lack of childcare and medical care in America. Seventy-two percent of nonworking Americans surveyed by Artemis Strategy Group said their main reason for not working was caregiving responsibilities or personal health issues. Nineteen percent of Americans who became unemployed during the pandemic have transitioned to become “homemakers.” Rising childcare prices have led to an increase in workforce participation, especially among parents. The average cost of childcare in the U.S. has risen to $11,582 a year. Many parents choose to avoid this cost, and instead stay at home and provide full-time care. It is important to note this issue also disproportionately affects women. Although women with children benefit from remote work and hybrid schedules, the increase in childcare costs puts them at risk of leaving less incentivized to join the workforce.
A third reason causing this issue may be anti-immigration policies in the United States. Immigrants not only enlarge the labor pool in the United States, but they are better equipped to do the jobs that the labor market needs. Immigrants make up twenty-nine percent of the construction workforce, twenty percent of the leisure industry workforce, and twenty percent of the agricultural industry workforce. However, animosity towards employing immigrants and the lack of flexible immigration pathways for potential workers has led to concerns about immigrants’ labor force participation. Immigrants are exactly what this country needs to fill the gap and end the labor shortage—but the incongruence of policy and employment has led to this realized asymmetry.
What are solutions that may address these issues? Firstly, there could be government incentives put in place to encourage Baby Boomers not to retire early. Many have proposed increasing the retirement age in order to keep Americans working longer. This issue has been discussed by policymakers; in September, Congressman Brendan Boyle asked the Congressional Budget Office to look into increasing the retirement age from 67 to 69. With the increase in medical advances in the United States, a new policy may be put in place in the coming years. The last time the retirement age was changed was 1983, when it was increased from 65 to 67. This program was phased in over the course of forty years. A 2002 University of Kentucky Law Review note observed that the justification for this program was that Americans are living longer and that older workers were higher in demand for their skills. These are the same challenges that face America today, so the justification will likely work in the current case, as well. However, there is a possibility that if there is an increase, the constitutional concern may arise that Americans are receiving their Social Security benefits on a delayed basis and would be receiving less benefits than they thought they would throughout their lifetime. However, if the program is phased-in the way it was in 1983, this concern would be alleviated.
The government should also consider a tax bill, which would utilize methods like tax cuts, tax credits or tax deductions. The government can award working Americans with tax credits, further incentivizing them to stay in the workforce. The government may even choose to specifically award Americans nearing retirement with more tax credits. There have been constitutional concerns with the idea using the social security tax system to manipulate labor economics since President Franklin Roosevelt proposed the idea of the Social Security Act. These concerns include concerns with the constitutionality of the government’s use of its taxation power. However, since the government uses these taxation mechanisms to “provide for the general welfare,” an increase in the retirement age would be constitutional.
The government may also consider combating this labor shortage by providing childcare assistance for working parents. Other wealthy countries, like Denmark, Germany, and Sweden, contribute an average of $14,000 a year to a toddler’s care—the United States contributes a mere $500. Congress is discussing changing the spending bill to guarantee free child care to low-income families. Also, the bill is set to discuss a universal pre-kindergarten program. Universal pre-k programs are not mandatory in any state, with many states having selection processes like a lottery system. President Joe Biden and U.S. Secretary of Education Miguel Cardona have vocally supported universal pre-k. But the issue remains controversial, and we may not see a resolution on it soon.
In addition, the perception of the future of immigrant workers seems to shift each day in this political climate. Currently, workers can receive employment-based visas, but this program is extremely limited in that it processes cases slowly, caps the number of workers at low levels, and allocates these workers inefficiently. However, one policy change that has been discussed is a more flexible immigration program, which supports immigration sponsorship strategies that benefit both the company and the foreign national worker. These government plans should incorporate America’s needs with the current labor shortage when calculating immigration policies.
Finally, the government should address the decrease in workers that are in the “blue-collar” industry. Firstly, skilled industries, like manufacturing, are dominated by Baby Boomers. In the manufacturing industry, one-third of the workforce is over fifty-five years old. Therefore, the strategies the government uses to retain early retirees in the workforce should be targeted at skilled industries as well. In addition, there is a lack of vocational training, like trade school, available for young Americans to learn the skills necessary for these industries. Vocational training and apprenticeship programs have seen a lack of funding and support. The government should especially focus on funding these programs to produce young American workers that can aid with this misallocation of skill and employment.
This will allow immigrant workers to help close the labor gap and will also provide these workers with a more predictable pathway to citizenship. With all these solutions in place, the government can help close the labor gap.
Suggested Citation: Shaina Zargari, Mind the Gap: Solutions for the Contemporary Labor Shortage, Cornell J.L. & Pub. Pol’y, The Issue Spotter, (Nov. 12, 2024), https://jlpp.org/mind-the-gap-solutions-for-the-contemporary-labor-shortage/.
Shaina Zargari is a J.D. Candidate at Cornell Law School in the class of 2026. She graduated from Cornell University with a degree in Industrial and Labor Relations. Aside from her involvement with Cornell Law School’s Journal of Law and Public Policy, Shaina serves as the president of the Jewish Law Student Association, and in leadership roles for the First-Generation Law Students Association and Cornell Association of Law and Economics.