The New Workforce

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The New Workforce

At least conceptually, the American workforce is at a major transition point:

  • More and more Boomers are reaching the standard retirement age.
  • Xers are poised to move increasingly into top management slots.
  • Millennials are graduating from universities and filling a large proportion of mid- and lower-level jobs.

At the same time, unemployment has been consistently hovering near 10 percent, even as companies report record profits. This is driven by the nature of productivity growth in the 21st century. Three main factors can be linked to the increase in productivity.

  • First, rapid adoption of information technology has created a shortage of technically-skilled personnel and a surplus of unskilled labor. As we've explained in prior issues, technology has always created new and better jobs, in the long run. But in the short run, jobs are often lost because those jobs become obsolete.
  • Second, the practice of off-shoring labor to countries where it's cheaper is lowering costs for businesses even as it eliminates the need to hire domestically. This is also unlikely to lead to a long-term net reduction in domestic employment. Here's why. When companies are more productive, they can price their goods more competitively. It's a myth that companies simply turn productivity into larger profit margins. Typically, they use that productivity edge to remain or become price-competitive. Lower prices allow consumers to buy more goods — and more goods being sold means more jobs up and down the whole distribution and manufacturing chain.
  • The third factor affecting productivity is that after cutting payrolls to the bone, companies ask the remaining salaried workers to do more and more. To this point, workers have accepted this greater workload, simply happy to still have a job after seeing co-workers let go. However, workers are burning out and becoming more and more dissatisfied. In the long run, this can't last, and companies need to be prepared for the coming change — the dawn of the new workforce.

By this stage in previous post-war recoveries, employment had already reached new highs. So, what's different this time? Obviously the productivity surge has combined with off-shoring to answer a big part of that question. But it's not that simple. Today, most companies are afraid to hire, and most entrepreneurs are afraid to risk launching start-ups because of the uncertainty about what's coming next.

But, it's not a fear of what may or may not take place in the marketplace. That's always been an unknown, which businesses have accepted...

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