Shortage of U.S. skilled workers by 2020?
By Tom Crouch, CPA, CIA, CISA, and Attorney
Part 7 -- Never Say Never May 26, 2005
People tend to make assumptions based on what they have observed in the past. We have been through thirty years in which there were more skilled labor surpluses than skilled labor shortages. In just a few years, we are expected to see far fewer skilled labor surpluses. Some sources have projected that by 2020 we will have the worst skilled labor shortage since the Black Plague killed a third of the 1348 European population.
This article will address some things most of us never thought that we would see. The need for skilled workers may or may not cause these things to happen.
A. Organization changes
A company might consolidate work groups to ensure there are enough skilled workers to complete the most essential and profitable job tasks. This would be instead of consolidating to eliminate jobs.
A company might discontinue a service or product line out of necessity.
There are too few skilled workers to continue the service.
Previously, the cause might have been discontinuing the service or product because it was no longer profitable.
A company might purchase another company in order to acquire needed
skilled
workers. Previously, companies acquired other companies to increase
productivity and profit, but they generally reduced the total combined
employment levels. In some instances, the acquisitions will be done to
operate and maintain the most profitable business functions instead of
trying to eliminate employees or increase the profitability level.
B. Recruiting and Retaining Employees
Many employers show a strong preference for hiring people under age 35 and rarely hire anyone over 45. Demographic trends indicate that the only worker pool increasing in size will be those over 45. Many employers may find skilled laborers over 45 easier to recruit and retain. A company needs skilled workers to maintain profit; the company might not care about an employee's age.
For example, pharmacists are already in short supply. In one instance,
a
young drug store manager did not like having a pharmacist aged 65, and the
manager harassed the old pharmacist until he retired. The law requires a
pharmacist to be on duty in order for the pharmacy to be open for
business.
In a short period, the drug store manager discovered that replacement
pharmacists were unavailable. Next, the drug store manager contacted the
old pharmacist and offered to rehire him with a signing bonus. Similar
scenarios are likely to happen more often as we move toward the 2010 to
2030
period. Some people have suggested that by 2020 the recruiters will seek
out retirees willing to go back to work.
C. Pay Levels and Pay Changes
Labor shortages usually cause pay rates to increase. The pay rates generally increase in the areas experiencing the greatest shortage so long as the work area is sufficiently profitable. However, for those in the work area, the companies are unlikely to increase the pay rate by the same percentage or the same amount.
The typical company has several pay grades for each job type. Employees
in
higher pay grades and those well above the minimum for a pay grade are
less
likely to require a pay raise to retain their services. The converse is
also
true: the lower the pay grade, the more easily one employer can hire away
employees of another. Thus, an employer's least costly means of retaining
skilled employees is to raise the grade and/or raise the pay rate for the
workers in the bottom half of a pay grade. Since 1970, the bandwidth
(difference between entry pay and top pay) for each pay grade has widened.
The bandwidth will narrow again as we move toward 2020.
A company that must pay more to attract and retain skilled labor, will be forced to evaluate how to fund the cost. Can they pass along the cost increase in the form of a price increase? Will they be able to cut costs somewhere to cover the pay increases? If a company believes they need to attract and retain skilled labor, will they gradually reduce the pay raises and bonuses paid to other employees? If the skilled labor maintains revenue and adds profit to the company, then prudent business owners are likely to figure out a way to attract and retain enough skilled laborers.
D. Other Business Issues
Companies might begin to inquire about manpower planning (see Part 6 in
this
series addressing manpower planning) with their trading partners. Trading
partners include key suppliers, key services providers, and key customers.
If the trading partners encounter operational difficulties due to the lack of manpower planning, it could have a financial impact on the other trading partners.
Auditors and accountants generally focus on past and current
performance.
The emerging skilled labor shortages should provide auditors and
accountants
an opportunity to be more proactive. For example, they can incorporate
into
their processes inquiries and requests related to manpower planning,
transition planning, institutional knowledge documentation, institutional
knowledge transfer planning, and operational documentation and techniques.
These types of issues should enable auditors and accountants to add more long-term value to organizations.
The website references here provide background information for the readers.
- http://isbe.state.il.us/supt_conference/jones.ppt
- http://www.dealconsulting.com/personnel/shortage.html
- http://www.swspitcrew.com/html/july_00.html
- http://www.icdr.us/atreportweb/sec4/attract.htm
- http://www.creditrecruitment.com/pressnews/talent%20_war.htm
-
http://entrepreneurialconnection.com/PrintPage.asp?ArticleText=Skills/module
29/includes/two_Text.asp&ArticlePage=Skills/module29/two.asp - http://www.dom.com/about/speeches/radtke_article.jsp
- http://monsterbytes.monsterindia.com/archive/0604/index.asp
- http://www.apprenticesearch.com/fpWhats_new/katherineharding.asp
-
http://www.kltprc.net/foresight/Chpt_50.htm
Previous articles in the series can be found at:
Parts 1 &
2
Copyright © 2005 by Tom Crouch - This article may be forwarded via e-mail or fax. Also, the article may be reprinted or posted on a web site, so long as the copyright is shown. All other rights are reserved.
Disclaimer: The views expressed in the above article do not purport to represent the views of any professional association or the views of any employer.
