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Demographic Drought and the Great Resignation – How are they related?

America’s current labor shortage is an early symptom of a much larger and more profound problem.

Conventional wisdom says that the Great Resignation was caused by COVID-19. However, it’s more accurate to describe the pandemic as a catalyst for forces that were already working to transform the American economy from within. While the emergency situation created by covid certainly sped things up, the true cause of today’s unprecedented labor crunch has much deeper roots.

While it may be tempting to chalk up the resignation of 77 million employees in 2021 and 2022 (so far) to some sort of covid-fueled aberration that will eventually fade away, the truth is much more alarming. The turnover tsunami that we’re living through today is merely the warm-up act for a much larger and more consequential workforce transformation: the Demographic Drought. This term refers to a confluence of powerful trends that are causing America’s working population to shrink in relative and perhaps even absolute terms. Today’s Great Resignation is merely the opening phase for this Demographic Drought, and the Demographic Drought is simply a new normal that employers will need to live with for literal generations to come.

This phenomenon is a systemic, inescapable change in the constitution of the American labor pool that is fueled by social, economic, reproductive, and political factors beyond the control of America’s business community. Although the effects of this decline in the labor force have recently been highlighted by the pandemic and its aftermath, it is by no means a new issue.

In fact, this shrinking workforce has been a burgeoning, imminent threat to the economy for decades and is projected to continue for the remainder of this century. Businesses who accept this reality today will have a leg up on those who choose to bury their heads in the sand.

Additionally, it is important to note that this problem does not discriminate by industry or geographic region, so this truly is an issue that has the potential to affect any and all employers. Some of the most visible contributing factors to the Demographic Drought today are highlighted below:

  • There are more people leaving the workforce than entering it – With millions of baby boomers leaving the workforce since 2020, declining American birth rates, and early retirements becoming more common, there is a large gap in the number of new workers versus those exiting the labor market.
  • The gig/independent worker economy – fed up with poor working conditions and low pay, millions of non-exempt workers are opting out of conventional jobs in favor of independent employment.
  • Social changes brought on by the pandemic have created dramatic shifts in attitudes around work – new expectations around flexibility, culture and wellbeing are increasingly playing a decisive role in employment decisions.
  • The political climate – short term incentives in the American political system make the country less capable of addressing long-term, systemic problems such as the demographic drought and accompanying labor shortage.

Due to these issues and many others, America’s labor woes are here to stay. Although the storm of the demographic drought has been brewing for quite some time, it appears that a confluence of unusual circumstances instigated by the pandemic prematurely kickstarted the terminal phase of our national workforce shortage. With that in mind, it is important for forward-thinking employers to develop a proactive approach to combat this long-term problem.

Addressing current retention issues, creating a strategy for moving forward, identifying ways to use technology to close any needs gaps, and developing an employer of choice culture are just a few ways that progressive companies can insulate themselves from the effects of the demographic drought. By planning ahead and preparing for an ongoing worker shortage, organizations can work to create a resilient, dynamic strategy to address this issue head on.

To learn more about the Demographic Drought and what businesses can do to prepare, check out this podcast: America’s Demographic Drought and the War for Talent

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