Workforce Shortages: Beyond the retirement crisis Back »

A crisis is looming: the baby boomer generation is reaching retirement age. Fears of their mass exodus from the workforce paints the headlines of many media outlets across the country.

Many of these stories are missing a significant historical event underlying challenges our businesses and organizations are experiencing: the demographic transition. The image below shows the different phases of the demographic transition. Because of the absence of modern medicine and sanitation, Phase 1 is marked by high rates of births and deaths. As modern medicine and sanitation emerged, the number of deaths declined, especially in the children age 1 to 4 (94% decline in the past 75 years). Phase 3 is marked by a significant decline in births. The hallmark of Phase 4 is low death and fertility rates.


Image Source: Population Bulletin: The World at 7 Billion

We are aware that more people are living longer and families are smaller. But the significance of smaller families is often overlooked. Since the 1970s, fertility rates have oscillated slightly above and below the 2.1 replacement rate. In fact, PRB reports the North American fertility rate to be 1.8 in 2015.

Phase 5 is hypothesized to include a decline in fertility so significant that the population pyramid becomes severely inverted, meaning there are more older people than younger people. As a result, not enough young women are available to have babies to achieve the 2.1 replacement rate. In short, the number of deaths greatly exceeds the number of births, leading to a decline in the total population.

Low rates of births and deaths suggest that the United States is in Phase 4. To date, Phase 5 is still hypothetical as no country has yet to arrive at a point where the number of deaths exceeds the number of births.

Why is the demographic transition essential to addressing workforce shortage issues? For the majority of human history, the number of younger people greatly exceeded the number of older people. As a result, a large reservoir of young people were available to fill positions as people became ill, disabled, or withdrew from the workforce. That is no longer true.

Table 1. Younger than 25 in the United States

Age 1900 1940 1970 2014
Under 5 12.1% 8.0% 8.4% 6.4%
5 to 9 years 11.7% 8.1% 9.9% 6.5%
10 to 14 years 10.6% 8.9% 10.3% 6.6%
15 to 19 years 9.9% 9.4% 9.4% 6.8%
20 to 24 years 9.7% 8.8% 7.9% 7.1%
Total Under 25 54.0% 43.2% 45.9% 33.4%
 

By 1970, all of the baby boom generation babies were born. In fact, the oldest of the boomers was 24 years old. While the number of births that took place from 1946 to 1964 was impressive, it did not return us to 1900 age composition when more than half of the population was younger than 25. What’s more, low birth rates since the mid-1970s has reduced the proportion of the population under age 25 even more.

We no longer have a large pool of young people available. Workforce shortages will remain a concern for industries across all sectors of the economy. We must expand our human resource strategies to include the retention and recruitment of older workers. This article is an introduction to a series of articles on the subject of strategies for long-term recruitment and retention of employees.

Additional Articles in the series:


Additional Readings:

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