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The Workforce Supply Myth
Why some organizations are failing to see the trend of a contracting supply of workers for their critical positions
Conventional wisdom has many believing that labor in the U.S. is abundant. This seems logical since in 2010, alone, we have had a pool of unemployed workers hovering around 14 million or approximately 10% of the workforce. The trouble is, conventional wisdom in this case is misleading and many executives are at risk of not having a workforce of “the right workers, with the right skills, in the right jobs, at the right time.”
Talent Strategy Advisors recently completed a three and a half year study of labor market data, from January 2007 through June 2010 to determine the truth behind the abundant labor claim. Figure 1 shows that the number of unemployed workers has been building for some time. In fact, during 2010, the U.S. economy has averaged 14.1 million unemployed workers during each of the first six months.
With this many unemployed, it seems reasonable to accept that the economy has an ample supply of workers. Yet, when data one level below the macro-economy is examined, a different story begins to unfold.
For example, in June 2010, 85% of the unemployed workers were from 25% of the economy’s occupations [Figure 2]. What this means is that while the recession has had an impact across many sectors, its negative results have varied greatly. Figure 2 supports the claim that a portion of the economy has not been as impacted as most would believe.
So, if only a portion of the U.S. economy’s occupations is being significantly affected by the recession, what is happening within the remaining 75% of the jobs?
To answer this question, we searched for occupations with an unemployment rate at or below 6%, and found that a startling 46% of the U.S. economy’s occupations meet this criteria.
This is very significant because at a 4% unemployment rate, a workforce is considered to be fully employed: a state where everyone who wants a job, has a job. With nearly one out of every two occupations at or near full employment, it seems the U.S. workforce is signaling an early warning alarm that some occupations are in jeopardy of having, in fact, too few workers. Looking at the combined data of this group of occupations which are at or near full-employment, labeled Group A in Figure 3, we see that this trend has been building for some time [Group B is the remaining occupations in the economy not in Group A]. It is our claim that while the recession has increased the number of workers in Group B from its lay-offs, it has been the slow-down in hiring that has contributed to the small unemployment growth in Group A. The recession hasn’t solved the talent shortage for the Group A occupations – it is only delaying it [Group A Occupations listed on final page of the report].
Now, when we further examine Group A occupations, we see two concerning trends. These occupations have a higher percentage of workers, age 55 and older [Figure 4] …
and a lower percentage of younger, Generation Y workers, born between 1980 and 2000 [Figure 5].
Our conclusion is that while the U.S. economy has a large number of unemployed, these workers are from a small occupational segment of the workforce. In fact, 46% of the U.S. occupations have an unemployment rate of 6% or less. Since almost one out of every two occupations is at or near full-employment Talent Strategy Advisors recommend:
Executives take precautionary attraction and retention actions, regardless of whether or not their organization’s workforce is growing. Turnover in a Group A occupation will likely result in an extended search period for a replacement worker. If the occupation is a critical position to the organization, the impact becomes more severe because of the occupation’s direct contribution to the organization’s bottom line.
25% of U.S. occupations
85% of the unemployed
Talent Strategy Advisors
Talent Strategy Advisors is an internationally recognized workforce and talent management organization. We help companies compete more effectively with solutions that create the right workforce for the right jobs at the right time. Our next generation strategy and operating toolkit, knowledgeable research analysts and experienced executive advisors create compelling and differentiating workforce strategies for organizations like yours.