MIKE WALDEN COLUMN: How can we fix the job market?
Published Tuesday 17 January 2023 8:42 am
There are several concerns about today’s job market.
Mike Walden
The first is the persistent “labor shortage”. The percentage of adults who are working or looking for work — known as the “participation rate” — has recovered significantly, but not fully, from its low during the pandemic.
If the same employment rate were applied today as it was before the pandemic, there would be more than 2 million adults nationwide and 46,000 more in North Carolina.
The second concern is the possibility that labor shortages will only get worse in the future. Lower birth rates lead to slow growth in the country’s population and labor force.
North Carolina is in better shape due to the large number of people who continue to move into the state from other states. But even with that interstate immigration, North Carolina’s core labor force — viewed as adults ages 25 to 54 — is projected to grow at less than 1% per year for the years to come.
The final concern is about skills. Will the education and training of our workforce be enough to provide workers with the skills they will need for future jobs? This question becomes even more important as the types of jobs and the skills required for those jobs are changing rapidly as technology plays a more prominent role in shaping the economy.
The good news is that the total number of jobs in North Carolina today is actually 6% higher than it was immediately before the pandemic. However, this job growth is 25% less than the state’s economic expansion over the same period, resulting in two job vacancies for every unemployed person.
One way companies in our state have responded to the labor shortage has been to raise wage rates significantly. Since the last month before the pandemic in early 2020, North Carolina’s median wage rate has risen 17%, slightly higher than headline inflation over the same period of 15%.
Interestingly, the sectors with the highest wage increases were those with moderate or low wage scales, including leisure/hospitality, personal services and construction. These sectors increased their pay rates by between 22% and 25% from early 2020 to late 2022. But while construction jobs grew by 8%, leisure/hospitality jobs increased by just 3% and personal services jobs by a modest 4%.
An important finding emerges from these results. While sectors like leisure/hospitality and personal services have raised wages significantly, that may not be enough, especially in a growing state like North Carolina, where jobs in higher-paying sectors will increase and labor supply will remain tight. Companies in these sectors must decide whether they can afford to pay even more. If the answer is no, companies may turn to technology to replace humans in completing work tasks.
Nationwide, college enrollments are expected to decline in the coming years. With a downward trend in the number of high school graduates in North Carolina, there are concerns that college enrollment in our state could also be falling.
Coupled with ongoing concerns about tuition and student debt, the role of colleges and universities in educating future workers could change.
With the potential need to reskill thousands of workers in new skills needed in the post-pandemic economy, universities and colleges may be motivated to step up and expand their adult in-career program offerings.
Such programs will likely be much shorter than the traditional four-year degrees common in higher education. Many adult students have family and other commitments that require rapid retraining.
Courses are therefore being shortened to meet this need. The result could be that future universities will no longer be dominated by students aged 18-24. “Middle age” may ultimately be the common description of future college students.
Let me close by being very futuristic. While today’s labor market challenges are likely to lead to changes in business and education, advances in interactive technology may create entirely new ways of both learning and working.
The pandemic caused an explosion in computing technology for learning and interaction. Zoom classes and meetings provided opportunities to learn and meet face-to-face.
Although not as prominent as during the peak of COVID-19, “zooming” has continued due to its convenience and cost benefits.
A major disadvantage of zooming is the inability to directly interact with other people, such as company colleagues, other students, and faculty. However, futurists say it’s only a matter of time before technology overcomes this limitation. The technology would create duplicates of you – referred to by some as “avatars” – from the comfort of your own home, giving you sensory experiences directly from a remote location. It’s like you’re there! Such a capability could improve both learning and working, even over long distances. Versions of this technology already exist.
The work problems we see today can form a bridge to new ways of learning and working in the future. Decades from now, people may look back and think that our current methods of education and work are extremely primitive.
Is that exciting or scary?
You decide.
Mike Walden is a William Neal Reynolds Distinguished Professor Emeritus at North Carolina State University.
