#059: Demographics – Why there is such a shortage of workers

2020 first time in seventy years, people leaving and joining the workforce have reached the balance point. Ten years from now, more people will be leaving the workforce than entering.

Dave Young:

Welcome to the Empire Builders Podcast, teaching business owners the not-so-secret techniques that took famous businesses from mom and pop to major brands. Stephen Semple is a marketing consultant, story collector, and storyteller. I’m Stephen’s sidekick and business partner, Dave Young. Before we get into today’s episode, a word from our sponsor, which is, well, it’s us, but we’re highlighting ads we’ve written and produced for our clients. So here’s one of those.

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Dave Young:

Welcome to the Empire Builders Podcast. Dave Young here alongside Stephen Semple. Stephen told me we’re not going to talk about any particular business today, but we’re going to talk about some trends that pretty much affect all businesses. So this is sort of a break from the usual format, and I think it’s an important one. We’ve had a couple of these along the way. What’s on your mind today, Stephen?

Stephen Semple:

COVID and supply chains and all this other stuff. We’ve seen this dramatic shift. There’s been some weird stuff going on. Some of this is forever change, some of this is temporary change, and some of it is masking what’s really going on. What I want to refer to on that is this whole mass resignation scenario and the shortage of workers that has been caused by COVID.

Stephen Semple:

I want to explore this a little bit more deeply because what I believe is there’s a deeper, longer-term trend businesses and employees, we all need to be aware of, government, government policy, businesses, employees. This is going to affect all of us. From a business perspective, the business that figures out how to work in this environment wins long term. That’s why this is important, and I think it’s being missed. So I’m going to take you through a little bit of a history ride here to build this case, so bear with me for a moment. If we go back to the 1950s, population in the United States was basically 160 million people. If we looked at… I’m just using 60 to 70 as a proxy for people leaving the workforce, and I’m using 20 to 30 as a proxy for people entering the workforce.

Dave Young:

You’re talking about age.

Stephen Semple:

Age, correct, in terms of the age of the population. I know that’s not 100% accurate, but it’s a pretty good proxy. In 1950, we had about 4% of the population leaving the workforce, and we had about almost 8% of the population entering the workforce. So demographics alone was growing our workforce. Plus, we know in the 1950s, substantial immigration because, for example, by 1960, the population grew by 30 million people. Now, part of that was birth rate, part of that was immigration, but that is massive population growth growing from 150 million to 186 million. That’s big growth in 10 years. Again, at that point, if you looked at it, it was about 3.5% of the population leaving the workforce and over 6% of the population entering the workforce. Again, 1960s, workforce is expanding in size.

Stephen Semple:

Now along comes to the 1970s, population has grown from 150 million to 205 million. Again, big growth due to immigration as well as birth rates. And we’re facing the same thing. In the 1970s, we have about 3.5% of the work population leaving the workforce, and at this point, we have almost 8% of the population entering the workforce.

Dave Young:

The Baby Boomers are coming of age.

Stephen Semple:

Baby Boomers are entering the workforce. Now we move forward to the 1980s, and that trend continues. Baby Boomers are entering the workforce. We have almost 9%, a little bit over 9% of the population entering the workforce, and we’ve got around 4% leaving. Plus, we have another trend behind us in the 1980s. Both late ’70s and through the ’80s, the workforce is changing from primarily men to women entering the workforce. Again, dramatic expansion in the size of the workforce.

Stephen Semple:

We hit the 1990s. This trend starts to slow down a little bit. We have again about 4% leaving, and we’ve got about 8% entering. But what’s starting to slow is immigration and the last of this real trend of women entering the workforce. But still, 1990s, the workforce grows. We hit 2000. So in 2000, again, we’ve got about 3.5% of the population leaving the workforce. We’ve got about 7% entering. But here’s the interesting thing is we’re getting kind at the end of the Baby Boomers pushing into the workforce. Because when we hit 2010, we still have 7% population entering the workforce, and we have about 3.5% leaving. Still workforce is growing 2010, but here’s where things get really interesting. We hit 2020. For the first time in 70 years, the amount of people, due to demographics, leaving the workforce and entering the workforce is balanced.

Dave Young:

Oh, wow. Okay.

Stephen Semple:

We’ve reached a tipping point. For 70 years, combination of immigration, women entering the workforce, and demographics, our workforce grew every decade. We were adding more supply of people. All of a sudden 2020 hits and the world freaks out, because where have all the people gone? Well, where all the people have gone is we haven’t grown the workforce. We have not grown the workforce. Where did all the people go? What makes this particularly interesting, because demographics, we can look forward 10 years, 20 years, 30 years, guess what happens? Our workforce starts to dramatically shrink. Ten years from now what will happen is we are going to have about over 6% of the population leaving the workforce, and we’re going to have less than 6% entering the workforce. It’s a tiny shrinkage, but it’s a shrinkage nevertheless. If we move forward another 10 years, it gets even more pronounced. Because the other part is, birth rates are really low right now.

Dave Young:

Yeah, they are. My wife and I had four kids, and I don’t think any of our four kids are going to have their own kids.

Stephen Semple:

Well, they say you need 2.1 children per household to maintain the population, and I think our birth rate is like 1.6 right now.

Dave Young:

Nobody’s having these big families anymore.

Stephen Semple:

Correct, and we’re seeing this trend in a lot of places. So the challenge is, as employers, what we’ve been used to being able to do is find people. It’s always hard finding the right person, but the supply of people coming into the workforce was always greater than the people leaving. And that’s done, and that’s done for a long time. So this whole idea of this mass resignation and when the COVID payments go away, the workforce is going to return. No. This is permanent. This challenge of finding people is absolutely permanent, and I think that that’s going to create a couple of major trends.

Stephen Semple:

First one is we’re going to see people put in automation even if it’s more expensive. Automation to date has been done to lower costs. Automation is going to be done to give capacity. We already see this in the construction business. There’s these machines now that’ll lay bricks automatically. Guess what? They’re more expensive than hiring a bricklayer. But guess what? Companies are using them. Why? “I don’t have any bricklayers, and I got to get this damn building finished, or I don’t get paid.”

Dave Young:

They don’t think to just pay bricklayers more and train some more. It’s “Let’s find a machine.”

Stephen Semple:

Well, the thing is you can train some more, but that doesn’t solve my problem today, and there just are none. So yes, what you’re going to have to do is steal people away from your competition, which means pay them more, treat them better. One of the conversations I find hilarious today is people saying, “I’m going to bring my employees back to the office.” Yet, the Gallup Survey show overwhelmingly the vast majority of people don’t want to. There’s companies that are taking the tack today of saying, “I’m going to force them back.” Guess what? Employees today have options.

Dave Young:

Absolutely, they do.

Stephen Semple:

I was having this conversation with my accountant, and he was saying they’re going to do that. I said, “Be careful. There’s a couple people you’re going to lose if you do that,” and they backed off on it. So automation is going to be put in for capability, not just price savings. Wages are absolutely going to go up. There’s no way to avoid that because of supply and demand. I actually think a significant amount of resources, time, and energy towards recruitment and retention is going to have to be done by companies to the degree where I can see a future where a significant amount of companies, advertising budgets will be shifted to recruitment and retention.

Stephen Semple:

The one that I find that’s interesting is how many of them look at their Glassdoor reviews. The Glassdoor reviews are from former employees. That is going to become as important as your Google reviews. Your social media is not going to be just there to help me attract customers. My social media is going to be there so that perspective employees, because always keep in mind, this is where people go to find things out. They’re going to… “Well, what’s this place really like to work at?” The social media is going to serve a huge role in our recruitment, and we’re going to have to think about recruitment and retention as important an activity as marketing. In order to be an employer to do all this great stuff for employees, yes, you are going to have to be the premium-priced company out there not so that you can make the most profit but so that you can attract and retain the best people. It is going to start becoming a dog fight over employees.

Dave Young:

You’re going to have to do it to survive.

Stephen Semple:

You’re going to have to do it to survive, and if you want to grow, that is going to be one of your major limiters. Like today, when people put together a growth plan, it’s all about marketing. It’s not about, “How am I going to find those seven new employees I need in order to service this?” That’s going to be become in the not-too-distant future, I believe, as important a criteria as finding customers.

Dave Young:

Stay tuned. We’re going to wrap up this story and tell you how to apply this lesson to your business right after this.

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Dave Young:

Let’s pick up our story where we left off, and trust me, you haven’t missed a thing. Where should a business start?

Stephen Semple:

I think the low-hanging fruit to start with is actually looking at their social media. If you’re a plumber, for example, it’s really hard as a plumber or HVAC company or one of these businesses to do interesting social media that’s going to attract customers. It’s hard. You can do it. We’ve got some customers who’ve run some really cool, fun social media campaigns, but it’s tough. Social media can absolutely help them show the environment of what it’s like to work there provided it is a good place to work there.

Stephen Semple:

The other thing is you got to start becoming honest. Have you actually created a good, supportive environment to work? You can convey some of that in your social media. You can show the company party. You can have happy employees talking about the place and all of this other stuff. But I think social media can actually give somebody who’s contemplating working for your company a bit of a glimpse inside of what it’s like to work there.

Dave Young:

What social media can’t do is, if you’re running a lousy place to work, this social media strategy’s not going to work for you because people will be honest in social media. People will say things that… You’ll say, “Well, that’s not really fair. You’re being mean to us.” Well, dude, you’re not a good employer. It’s a toxic work environment. Amplifying a toxic work environment with social media is like running good ads for a restaurant known for bad food. It’ll speed up your demise. To me, step one is, man, get better at running a place that people love to work.

Stephen Semple:

You’re absolutely right, David. That’s the reason why I love having these conversations with you. I am making the bold assumption that you’ve got this great place to work-

Dave Young:

You’ve already got a great place to work.

Stephen Semple:

… and that’s the wrong assumption. The other thing you have to stop doing as an owner, because I hear this all the time because I have tons of conversations with people in business and owners in various industries, stop bitching and moaning and whining and complaining that you can’t find people and stop blaming it on a pile of crap that’s not true. This is the reality of the world we’re in. This is the reality of the world we’re going to be in the next 30 years. So as a business leader, this is your challenge to figure out, not bitch about, moan about, and look to somebody else to fix it. Because the businesses that solve this problem and become good places to work and good at recruiting and good at carrying that message out there, frankly, are the ones that are going to win. This is how you win. You win by solving this problem not moaning about it.

Dave Young:

There’s no sense bucking the trend. That’s not happening. These are real numbers. This is going on. You’ve got to start to deal with it.

Stephen Semple:

Yeah. We can’t all of a sudden create 30 year olds.

Dave Young:

No. You also can’t import them via immigration in the current political climate.

Stephen Semple:

The other interesting point on that is, as we’ve seen the traditional areas that we’ve had immigration, as economic prosperity has come to those places, immigration levels have also tailed down. Look, we do not have the same number of people coming from Ireland as we used to. My parents emigrated from Ireland. Why? Because Ireland’s got economic prosperity. Former Eastern Bloc countries, Poland, Czechoslovakia, which Toronto has a huge population of, we’re not getting as many. Why? Because those countries are doing better.

Dave Young:

One reason they’re doing better is because we outsourced a lot of our production to those countries.

Stephen Semple:

Right.

Dave Young:

I think about Mexico has become a better place to live for workers because we’re building cars and air conditioners and all kinds of things in Mexico to bring here. They don’t need to immigrate now.

Stephen Semple:

Here’s the other part of all of this. Even if we started doing large amounts of immigration, we were doing large amounts of immigration before as well as having demographics growing our workforce. So even a large amount of immigration may just get us to flat.

Dave Young:

Yeah, if that.

Stephen Semple:

If that. There’s a challenge out there for employers, there’s an opportunity out there for employees, and there’s a policy challenge when it comes to government programs because of the fact that our workforce is shrinking. But this is what’s going on, and it ain’t going to change.

Dave Young:

For the sake of your business, raging against this, raising your fists in the air and screaming about it isn’t going to help.

Stephen Semple:

Correct.

Dave Young:

[inaudible 00:17:34] for what is and adapt and develop your business into a great place to work and figure out the finances to be a great place to work from the viewpoint of salaries, you’re going to do fine. You’re going to do just fine.

Stephen Semple:

This is your opportunity to win. Companies have figured this out and do a good job on this win.

Dave Young: Thanks for listening to the podcast. Please share us. Subscribe on your favorite podcast app and leave us a big, fat, juicy five-star rating and review. If you have any questions about this or any other podcast episode, email to [email protected].

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