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Preparing for the Workforce Shortabe

By Elizabeth M. Rice, SPHR

The U.S. Department of Labor forecasts that by 2012 the U.S. economy will have the largest workforce in the nation's history-more than 162 million people. Impressive as that figure may sound, it will not be enough to fill the more than 165 million jobs projected to be available. The shortage of 3 million workers is just part of the story, however. Millions of other jobs will go unfilled because workers lack the specialized skills required to fill the vacancies. The government estimates a shortage of more than 10 million skilled workers by 2012.

Several factors are converging to create the shortage of skilled labor. Not surprisingly that famous demographic bubble, the baby boomer generation, is once again affecting the economy. Born between 1946 and 1964, the baby boomers are quickly approaching retirement age. When the baby boomers leave the workforce, they will take their considerable knowledge and skills with them. Younger workers are entering the workforce, but in many cases they do not possess the same skills as the workers they replace. For example, the National Aeronautics and Space Administration (NASA) estimates that American colleges will turn out only 198,000 engineers to take the place of the 2 million baby boomers scheduled to retire by 2008.

Innovative Employee Solutions® (IES) recently interviewed David Sholkoff, partner with Deloitte Consulting Human Capital Practice, to talk about the effect that the shortage will have on companies. "The shortage of skilled workers is already placing new pressures on businesses," Sholkoff said. "As the economy continues to improve and create employment opportunities, highly skilled employees are starting to look for better opportunities."

Sholkoff believes that companies can take measured steps now to offset the shortage in skilled workers:

Identify "critical talent."

Organizations need to define the skills that are critical to its business strategy, and then identify the people within the organization who possess these skills. These individuals are considered the "critical talent." They are not necessarily the most highly paid executives. Instead, they are people who have highly developed, specialized skills and know how to get things done within the organization.

Keep employees happy

Maintain good relations with your all of your employees and recognize the different needs specific to each generation. Often this means looking past compensation to other factors that may help these individuals in their various life stages. These incentives may include benefits such as financial planning, long term insurance, and flexible work hours. For example, some baby boomers live in "sandwich" households, sharing their homes with both their parents and their children. By addressing their unique needs they will have greater loyalty to your organization and will be more open to building a long term relationship with your company.

Adapt to different work styles.

Work forces are already more diverse than they ever have been, and they will become even more diverse in the future. Companies can adapt to these changes by demonstrating greater flexibility toward employees. For example, research shows that older workers are most effective early in the day while many younger workers perform better later in the day or even at night. Companies should look at flextime and other programs to leverage the talent they have.

Some sectors are facing a critical shortfall in skilled labor already. The healthcare industry is the nation's fastest-growing employment sector, but the number of skilled professionals entering the workforce is not keeping up. The current shortage of registered nurses is estimated to be 200,000. As the baby boomers retire, the shortage is expected to grow to between 800,000 and 1,000,000 by the year 2020. Some industries are facing shortages because skilled workers simply are not attracted to them. "The energy industry is having a hard time attracting a skilled workforce," said Sholkoff. "In the past, people turned to the oil and gas companies for job security, but that's no longer the case. Skilled workers are becoming choosier, and this trend will continue as the shortage grows."

Many companies are looking overseas to avert the labor shortage, but this may not be the panacea some think it is. The competition for overseas labor will be fierce. The United States is not the only country with an aging workforce. Europe and Asia also face a shortage of skilled workers as their own baby boomers retire. In fact, foreign employers will face the crisis even sooner than their American counterparts since retirement ages generally are lower overseas.

To avoid the coming brain drain, American companies will want to take some measured steps in order to maintain good relationships with their workforce, most specifically the older, skilled workers. Employers can also plan ahead by establishing an employer of record for retiring employees or contract workers, allowing them to start working quickly in times of shortage.

David Sholkoff leads Human Capital Advisory Services' Organizational Effectiveness group with more than 12 years of experience developing human resources strategies. David specializes in HR information systems, HR functional reorganization/re-engineering and strategy development, organizational design, performance management program design and implementation, change leadership and alignment of human resources programs designed to improve performance and organizational effectiveness.