1. BLS 1 The challenge of the decade ahead Presentation to the National Association of State Workforce Board Chairs February 25, 2006 Michael W. Horrigan Assistant Commissioner Bureau of Labor Statistics

2. BLS 2 The Challenge of the Decade Ahead  Changing demographics  The difficulty of measuring labor market shortages  A simple alternative – High wage, high growth occupations.

3. BLS 3 The Challenge That Lies Ahead The U.S. economy is entering a period of dramatic demographic change. Projected slowdown of labor force growth. Retirement of the baby boom generation. Increasing diversity of the U.S. workforce. Significantly higher levels of immigration in the last twenty years.

4. BLS 4 The Challenge That Lies Ahead The impending (and current) retirement of the baby boom generation, our slower but more diverse labor force growth, and trends in immigration leads to two critical questions facing the workforce system: Will the U.S. economy face an overall shortage of workers in the next decade and beyond? And even if there is not an overall shortage, will there be a shortage of skilled workers in the U.S. economy?

5. BLS 5 Population, projected 2010 Millions Men Women 12 10 86 8644220 0 85+ 80-84 75-79 70-74 65-69 60-64 55-59 50-54 45-59 40-44 35-39 30-34 25-29 20-24 15-19 10-14 5-9 0-4 Age Source: Bureau of the Census

6. BLS 6 65 and over 55 to 64 45 to 54 35 to 44 25 to 34 16 to 24 Growth in the labor force aged 45- 64 between 2000 and 2010 Projected, in thousands Source: Bureau of Labor Statistics

7. BLS 7 The rate of growth of the civilian labor force has slowed considerably over the last twenty years. Annual rates of change projected

8. BLS 8 The rate of growth of the civilian labor force is projected to slow considerably over the next 50 years Annual rates of change projected

9. BLS 9 Meeting The Challenge Increases in labor force participation rates of older workers. Continued increases in labor productivity. Upgrading the skills of the U.S. workforce (native and foreign born) through education and training.

10. BLS 10 Meeting The Challenge Domestic outsourcing Offshoring Satisfying product demand through trade (imports)

11. BLS 11 Labor force participation rate by sex Source: Bureau of Labor Statistics Percent, 1952-2004 and projected 2004-2014 Total Men Women projected

12. BLS 12 The labor force participation rate of older men declined sharply over the last 50 years Percent Source: Bureau of Labor Statistics

13. BLS 13 Civilian labor force participation rate of men, ages 55-64

14. BLS 14 Civilian labor force participation rate, men ages 65-69

15. BLS 15 The labor force participation rate of women increased sharply for all nearly all age groups over the last 50 years Percent Source: Bureau of Labor Statistics

16. BLS 16 Labor force growth rates of minorities outpaces whites Percent change, 2004-14 Source: Bureau of Labor Statistics

17. BLS 17 Whites remain the largest group of workers Source: Bureau of Labor Statistics Percent of labor force

18. BLS 18 The number of immigrants into the U.S. has increased dramatically over the last twenty years. Source: Bureau of Labor Statistics

19. BLS 19 Population by Nativity and Educational Attainment: 2002 Source: Census Bureau

20. BLS 20 Population with High School Education or More by Nativity and World Region of Birth: 2002 Source: Census Bureau

21. BLS 21 Average annual rate of change Annual rate of growth of output per hour, nonfarm business, comparison of selected business cycle expansionary periods projected

22. BLS 22 Annualized growth rates of labor productivity during recessions Average annual rate of change

23. BLS 23 Business investment and exports show relatively fast growth Source: Bureau of Labor Statistics Average annual rate of change PCEInvestmentExports Imports Government

24. BLS 24 The Challenge of the Decade Ahead  Changing demographics  The difficulty of measuring labor market shortages  A simple alternative – High wage, high growth occupations.

25. BLS 25 Labor market shortages  The label of ‘shortage’ is also highly problematic in terms of the strict measurement requirements for a shortage to truly exist.  The classic theoretical definition of a shortage is the presence of persistent vacancies in the face of rising wages.  The is currently no survey vehicle that measures both job vacancies and the movement of wages over time associated with those vacancies.

26. BLS 26 Labor market shortages  In addition, there are numerous other margins of adjustment that can take place in lieu of / or in addition to / rising wages in the face of increased hiring difficulties.  These adjustments are often the most interesting aspects of labor market activity.

27. BLS 27 Labor market shortages  Examples of these adjustments include: –Increases in the hours of work. –The use of mandatory overtime or mandatory scheduling requirements such as coverage of the graveyard or weekend shifts. –Increased reliance of contract employees, immigration or offshore employment

28. BLS 28 Labor market shortages  Examples of these adjustments include: –Changes in the educational attainment requirements of jobs. –Increased use of contractors, including the use of ‘retired’ self-employed contractors. –Increased use of part-time workers, flexiplace arrangements, hiring bonuses, payment of relocation expenses. –Changes in the use of capital in the production environment.

29. BLS 29 Labor market shortages  Measuring all of these possible responses by firms to increased difficulties in finding workers is extremely difficult.  In many cases, the data do not exist.  From a labor market information and training point of view, many of these possible adjustments are not as highly valued as others.

30. BLS 30 Labor market shortages  For example, assume that we could project that an occupation will be in shortage – and that a firm will react in one of the following ways: –Significantly increase real wages and employment over the next 10 years –Significantly increase real wages for core employees, maintain current employment levels and hire (and fire) contractors in response to changing demand conditions –Maintain or lower current real wages, introduce new automation techniques, and increase the use of both immigrant and contract labor

31. BLS 31 Labor market shortages  These examples represent a spectrum of possible responses. From a labor market information point of view, however, the difficulty of measuring shortages suggests a different strategy: –No matter what other labor market adjustments may be made (increased automation, use of contract labor, etc), can we identify the ‘shortage’ occupations that will experience high real wage and high employment growth?

32. BLS 32 If demand rises by more than supply then employment and earnings increase A B C earnings Employment D1D1 D2D2 S2S2 S1S1

33. BLS 33 Employment and wage growth  Unfortunately, BLS does not project ‘wage growth (nominal or real)’. We only project employment growth by occupation.  One easy to identify alternative is to identify occupations in the base year of the projections that are high wage and are projected to grow faster than average.

34. BLS 34 The Challenge of the Decade Ahead  Changing demographics  The difficulty of measuring labor market shortages  A simple alternative – High wage, high growth occupations by different skill groupings

35. BLS 35 Measuring skills  We also identified 6 educational clusters that are based on the percentages of employees ages 25-44 in each occupation with high school or less, some college, and a Bachelor’s degree or higher.

36. BLS 36 New BLS Data on the educational attainment of occupations % high school% some college% college High school jobs > 60%< 20% High school / Some college jobs > 20% < 20% Some college jobs <20%> 60%< 20% High school / some college / college jobs > 20% Some college / college jobs < 20%> 20% College jobs < 20% > 60%

37. BLS 37 Educational attainment of the number and percent of projected employment change, 2004-2014 Education Level Level (thousands) Percent High school or less 6,922 36.6 Some College 5,246 27.7 Bachelor’s or higher 6,759 35.7 Total18,928100.0

38. BLS 38 High-wage, high-demand occupations, 2004-2014  Occupations with median annual earnings in the top half of the 2004 OES earnings distribution  Occupations that are projected to grow faster than the overall average of 13.0 percent over the 2004- 2014 period.

39. BLS 39 Educational attainment of high-wage, high-demand occupations, 2004-2014. Education Level Level (thousands) Percent High school or less 1,13713.0 Some College2,10424.1 Bachelor’s or higher 5,47962.8 Total8,721100.0