We are now in a vast workforce change. And it’s not just because of the Great Resignation (or Great Shakeup) where millions of people resigned from their jobs after the COVID-19 pandemic. The current talent shortage is acute in STEM skills such as engineering, data management and analytics; but it also includes shortages of blue-collar and white-collar workers such as truck drivers, call center agents and manufacturing skills. And it will be much worse. Companies need to take a more systematic approach and put hiring mechanisms in place now so they can succeed despite this challenge.
This fact partly explains labor displacement: more people leave the labor market than enter the labor market. Our working population is aging and retiring or opting for part-time jobs, and the next generation does not have enough young people entering the workforce to counteract this trend.
Moreover, this shift in workforce demographics is not a one-time event. Every year from now on, more people will leave the labor market than they will enter the labor market; therefore, each year we will have fewer workers available than we currently have. The college population will not replenish at a sufficient rate. Additionally, universities are now focusing less on STEM skills and more on liberal arts. Thus, the active population coming out of universities lacks training for the world of engineering and computer science.
Trends resulting from the transfer of labor
The changing demographics of the workforce will bring about several realities.
First, businesses will need to invest more money and time in improving productivity. Since they won’t have enough white collar workers, they will have to invest in automation and other technologies to do the work that people were doing. We are already seeing this with self-service checkouts in grocery stores and self-service features in restaurants. Companies are now making huge investments in automating white-collar jobs. And it will intensify.
This investment activity pairs well with companies that build operational platforms through which they compete. Platforms are generating new operating models that result in lower cost. Investment in platforms is creating a dramatic increase in demand for more computing, engineering and data science skills. Unfortunately, the demand for technical expertise will increase and the supply will continue to decrease.
A second result of labor transfer is the pressure to encourage immigration. The Biden administration encourages blue-collar immigration and welcomes immigrants. We will also soon see companies in places like Kuwait, for example, that cannot find labor and will increasingly encourage immigration. However, there are social pressures against immigration to the United States.
Third, we will continue to see work that has historically been done in the United States move overseas to service providers that have talent available in destinations such as India, the Philippines and Eastern Europe. ‘East.
However, if we look at global demographics, it is clear that many countries to which companies transfer their work will also begin to experience the process of shrinking labor pools. We can already see this happening in China in a significant way. The trend of shrinking labor pools is also already well advanced in Eastern Europe, and it will happen in India this decade.
The only region of the world where it is clear that the population will continue to increase is Africa. Ten years from now we will see significant labor migration to Africa because that is where the population is growing and will continue to grow.
Automation, immigration and relocation. These are three natural consequences of this shift in workforce demographics. The three factors are now at play in the labor market, and it is difficult to navigate. Greater pressure to access needed skilled talent will further increase the need to access labor pools outside of the United States and Europe. Additionally, social pressures will limit immigration, putting greater pressure on automation and outsourcing.
What is the remedy for these consequences? My advice to businesses, as I said in the first paragraph, is to put hiring mechanisms in place now. Companies need to realize that this transfer of labor is not temporary and they need to put mechanisms in place now (not later) to attract talent.
Mechanisms for managing the consequences of labor transfer
In a systematic approach to managing the consequences of the vast transfer of labour, companies should first try to hire and retain as many engineers and IT people as possible, recognizing that it is unlikely that they are able to hire enough people.
Next, companies should assess their populations approaching retirement and take steps to delay their departure and see if they can get more years of work out of it.
Historically, companies sought to move these populations with early retirement formulas because they are more expensive. But it’s a fool’s ride now. In the new normal, companies should try to persuade a 62-year-old engineer (for example) to give them five more years instead of taking early retirement. In this new world, replacing IT and engineering talent will likely cost more than the cost of maintaining them.
Third, companies need to expand their labor pools. Look for new unaddressed labor pools or pools in unfamiliar locations. There are “invisible” people in a community that companies can hire right now.
For example, during the COVID-19 pandemic, more women have opted out of the labor pool to raise their children. This is an attractive working group. They have training and experience, and often they are excellent workers. A part-time or highly flexible work-from-home schedule can potentially draw them back into the labor pool.
Most companies will not adopt this strategy. But those who do will benefit and can have a head start in the labor war. Because businesses are not competing in a large labor market, they need an edge over others. They need to be more aggressive in identifying populations in their own backyard and aggressive in honing people. For example, engineering boot camps can improve the skills of highly competent individuals, allowing them to access new roles.
A company should consider targeting marginalized groups, for example people entering the country, such as refugees. Technical executives from South America or Africa who immigrate to the United States arrive in this country with strong technical skills. But because of language problems and dislocation, they settle for blue-collar jobs. Companies can exploit their technological skills.
Due to changes in the labor market, companies must now hire all the people they can, using all the tools at their disposal. Even so, it’s likely they’ll still need to develop relationships with third-party service providers who can complement the necessary talent.
The time has come to tackle this problem. Companies need to take a much more systematic approach to accessing and retaining talent.