Conference Papers Upjohn Research home page 2013 Demographics, Skills Gaps, and Market Dynamics Randall W. Eberts W.E. Upjohn Institute, eberts@upjohn.org Citation Eberts, Randall W. 2013. " Demographics, Skills Gaps, and Market Dynamics." Presented at National Association for Business Economics (NABE) Economic Measurement Seminar, Washington, D.C., July 30, 2013. http://research.upjohn.org/confpapers/64 This title is brought to you by the Upjohn Institute. For more information, please contact ir@upjohn.org.
Demographics, Skills Gaps, and Market Dynamics Randall Eberts W.E. Upjohn Institute for Employment Research, USA July 30, 2013, Washington D.C. W.E. Upjohn Institute 1
Outline Focus on the question of possible labor shortages Long term: Baby boomers retiring raising the question of enough skilled workers to replace them Short term: Employers complain they can t find enough qualified workers Long Term Employment Projections Educational needs projections Educational attainment projections Short term Evidence of Skill Gaps Market Dynamics W.E. Upjohn Institute 2
Population Trends Population is becoming: Larger Older More diverse with respect to race and ethnicity Birth rates expected to continue to fall Death rates steady but expected to increase slightly in later years Immigration as share of net population increase continues to rise and will overtake natural population increase as a share by 2032 W.E. Upjohn Institute 3
Projected Population and its Components, 2015-2040 0.8 390,000 0.7 380,000 Share of net change 0.6 0.5 0.4 0.3 0.2 370,000 360,000 350,000 340,000 330,000 320,000 310,000 Population (1000s) 0.1 300,000 Natural 0 290,000 Net immigration 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 population Source: U.S. Census Bureau, Population Division, Release Date: December 2012 W.E. Upjohn Institute 4
W.E. Upjohn Institute 5
Education attainment and population change 45% 40% Hispanic (17.1%) % Population change 2010-2020 35% 30% 25% 20% 15% 10% 5% African American (13.5%) Asian and Pacific Islander (6.3%) White (65.0%) 0% 0% 10% 20% 30% 40% 50% 60% 70% -5% % Bachelor's Degree or Higher Source: Census; bubble size reflects share of population W.E. Upjohn Institute 6
Total Employment 16 and over and Age Components 0.250 160000 0.200 0.150 0.100 0.050 140000 120000 100000 80000 60000 40000 20000 16-24 25-29 30-34 35-39 40-44 45-49 50-54 employment 16 and over 0.000 1986 1987 1989 1991 1993 1994 1996 1998 2000 2001 2003 2005 2007 2008 2010 2012 0 Source: BLS, selected years, 5-year moving averages W.E. Upjohn Institute 7
Labor Force Participation Rate by Age, selected years 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 or higher Year 1980 Year 1990 Year 2000 Year 2010 Source: BLS, selected years W.E. Upjohn Institute 8
Long-Term Demand and Supply Projections: Putting together the parts Demand for skills (educational attainment) Demand for jobs by occupations (BLS projections) Skills requirements of occupations Educational requirements (BLS, O*NET, Job Openings) Current and in the future (examine educational attainment of job holders over time) Adjust for multiple job holders Convert jobs to workers Supply of skills (educational attainment) Population trends by race/ethnicity, gender, age group Educational attainment by race/ethnicity, gender, age group Convert population to workers (labor force participation rates) W.E. Upjohn Institute 9
BLS Occupation Projections 1 2 3 4 5 6 Population and labor force GDP and its components Consumers final demand for products and services for each industry Output by industry Industry employment: projected using productivity and hours Staffing patterns: projected using qualitative and quantitative analysis W.E. Upjohn Institute 10
Education Requirements BLS (MLR, Sommers and Morisi, April 2012) New BLS education categories provide information on the typical path to enter an occupation Defined as the typical level most workers need to enter; could be multiple paths Examined educational attainment of younger workers (18 to 29) Used O*Net, based on a survey of workers in the occupation and industry experts Interviewed persons who were knowledgeable about education and training requirements W.E. Upjohn Institute 11
Education Requirements O*NET (U.S. Department of Labor) Provides required level of education on 950 occupations in US economy Asks incumbent worker If someone were being hired to perform this job, indicate the level of education that would be required Education and training information provided through a survey of targeted job incumbents W.E. Upjohn Institute 12
Education Requirements Web job postings A large number of job openings are posted on the internet Measure is more like BLS in determining the pathways to the occupation (minimum education requirement) Several companies have devised search engines to spider the web in search for job postings Burning Glass (and others, such as the Conference Board) have developed algorithms to reduce duplication Use Burning Glass to glean the educational requirements stated on job postings by occupation W.E. Upjohn Institute 13
Education Attainment American Community Survey (U.S. Census) Household survey of sample of US households Provides actual education level of individuals holding jobs in each occupation W.E. Upjohn Institute 14
O*NET designation Comparison of BLS and O*Net Education Designation (Number of occupations) LT HS HS Some college no BLS designation Assoc. Degree BA MA Doctora te or professi onal less than high school diploma 0.441 0.056 0.143 high school diploma (or GED or HS equivalence cert. 0.505 0.713 0.143 0.136 0.027 Post-secondary certificate after high school 0.032 0.056 0.143 0.068 0.022 Some College courses 0.011 0.034 0.051 0.016 Associate's 0.065 0.143 0.424 0.022 Bachelor's 0.011 0.104 0.429 0.288 0.815 0.118 0.040 Post-BA certificate 0.005 0.059 Master's 0.034 0.076 0.588 0.120 Post-Master Certificate 0.029 First professional requires at least 2 years 0.040 Doctoral 0.016 0.176 0.400 Post-doctoral training 0.029 0.400 # occupations 93 356 7 59 184 34 25 W.E. Upjohn Institute 15
Comparison of BLS and O*Net Education Designation (Number of jobs) % educational attainment LT HS HS Postsec non- award BLS Designation Some college no Associate BA MA Doctorat e or professio nal LT HS 9445 6732 0 12 169 273 18 2 HS 17249 24768 0 61 1072 2086 94 4 Postsec non award 0 0 0 69 1520 0 0 0 Some college no 8573 20266 0 25 1081 3741 179 11 Associate 2351 7066 0 70 1602 2089 128 15 BA 3321 12228 0 19 416 12412 638 191 MA 498 2834 0 3 101 6021 1008 238 Doctorate or professional 137 578 0 3 101 1053 217 911 median annual wage 21359 37518 35617 36682 65515 66482 61737 95571 number workers 41,561 74,473-259 5,957 27,674 2,281 1,372 W.E. Upjohn Institute 16
Projected Growth in the Demand for Education Requirements 25.0% % change from 2010 to 2020 20.0% 15.0% 10.0% 5.0% 0.0% Actual BLS ONET Burning Glass Based on BLS Employment projections 2010-2020 and various sources of education requirements W.E. Upjohn Institute 17
Projected Supply and Demand for Education Year 2020 HS or less Some college Associate s Bachelor s Master s Doctorate /professional Total Supply 59548 44437 16096 34795 13622 5338 173837 Demand BLS 97100 7603 9123 24981 2338 5112 146257 O*NET 83464 14957 3431 34176 4203 2284 142515 Burning Glass 2010 Actual 65702 16618 42118 18305 142743 55871 34667 13993 29639 11546 5255 150970 Source: Supply, extrapolate Neumark et al. 2011 from 2018 to 2020 Demand, BLS (Sommers and Morisi, MLR, April 2012) O*Net (U.S. Department of Labor) Actual (ACS, U.S. Census) Note: Number of workers in 1000s W.E. Upjohn Institute 18
Supply minus Demand for Education, Projection to Year 2020 HS or less Some college Associate s Bachelor s Master s Doctorate /professional Total BLS -37551 36834 6973 9814 11285 226 27581 % diff -63.1% 82.9% 43.3% 28.2% 82.8% 4.2% 15.9% O*NET -23915 29480 12665 619 9420 3054 31323 % diff -40.2% 66.3% 78.7% 1.8% 69.1% 57.2% 18.0% Burning Glass -6153-43916 -7232 656 31095 %diff -10.3% 72.6% -21.1% 4.81% 17.9% 2010 Actual 3678 9770 2103 5156 2077 83 22867 %diff 6.2% 22.0% 13.1% 14.8% 15.24% 1.56% 13.2% Source: See previous slide W.E. Upjohn Institute 19
Projected Supply and Demand for Education, Year 2020 Share of total number of workers HS or less Some college Associate s Bachelor s Master s Doctorate /professional Supply 0.343 0.256 0.093 0.200 0.078 0.031 1 Demand BLS 0.664 0.052 0.062 0.171 0.016 0.035 1 O*NET 0.586 0.105 0.024 0.239 0.029 0.016 1 Burning Glass 2010 Actual Total 0.460 0.116 0.295 0.128 1 0.370 0.230 0.093 0.196 0.076 0.035 1 Source: See previous slide W.E. Upjohn Institute 20
Supply Share minus Demand Share HS or less Some college Associate s Bachelor s Master s Doctorate /professional BLS -0.321 0.204 0.030 0.029 0.062-0.004 O*NET -0.243 0.151 0.069-0.040 0.049 0.015 Burning Glass 2010 Actual -0.118 0.232 -.095 -.019-0.028 0.026 0.000 0.004 0.002-0.004 Source: See previous slide W.E. Upjohn Institute 21
Summary The projections point to a shortage in 2020 of: Workers with BA s O*Net and Burning Glass Workers with Doctorate or professional s could be in short supply when measured as share of projected workforce in 2020 (BLS and Actual) but in terms of numbers of workers a slight surplus in 2020 Workers with only a high school (BLS and O*Net) Some of this shortage may be due to how multiple job holders are factored into the projections W.E. Upjohn Institute 22
Change in Education Requirements Methodology for education projections assumes education requirements by occupation are unchanged between 2010 and 2020 Is this a fair assumption? Track actual education attainment by age and occupation from 1980 through 2011 W.E. Upjohn Institute 23
Education attainment is trending upward as standard deviation is declining. 13.3 1.9 1.85 13.2 1.8 Years of education 13.1 13 12.9 1.75 1.7 1.65 1.6 Std dev yrs of education 1.55 12.8 1.5 12.7 1980 1990 2000 2005 2006 2007 2008 2009 2010 2011 1.45 years of education Std dev yrs of education Source: Analysis of ACS holding years constant W.E. Upjohn Institute 24
16 Education attainment declines with age while the dispersion of education within occupations increases. 4 14 3.5 Years of education 12 10 8 6 4 3 2.5 2 1.5 1 Std dev yrs of education 2 0.5 0 16-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80+ 0 years of education st dev yrs of education Source: Analysis of ACS holding years constant W.E. Upjohn Institute 25
Weighting does not make much difference in terms of trends or age profile of education attainment 13.3 13.2 13.1 13 12.9 12.8 12.7 12.6 12.5 12.4 12.3 12.2 1980 1990 2000 2005 2006 2007 2008 2009 2010 2011 unwgt wgt 16 14 12 10 8 6 4 2 0 unwgt wgt W.E. Upjohn Institute 26
Except for a catching up period by older workers in the 1980s and 90s, education attainment has remained fairly steady. Education attainment of those first entering the labor force is particularly steady except for the recession period in which poor job prospects may be a factor. 14 13.5 Years of education 13 12.5 12 25-29 55-59 11.5 11 1980 1990 2000 2005 2006 2007 2008 2009 2010 2011 Source: Analysis of ACS for selected age groups W.E. Upjohn Institute 27
Change in Years of Education by Age Cohort from 1990 to 2010 Age/Period 1990-2000 2000-2010 1990-2010 25-29 unwgt 0.020 0.270 0.290 wgt 0.217 0.456 0.673 40-44 unwgt -0.067 0.128 0.061 wgt -0.124 0.396 0.272 55-59 unwgt 0.553 0.290 0.883 wgt 0.864 0.500 1.36 Source: American Household Survey, U.S. Census W.E. Upjohn Institute 28
Short-term Shortages? Seems like growing complaints from employers that they can t find qualified workers Surveys point to shortages New York Fed study concluded that mismatch accounted for up to a third of the 5.4 ppt. increase in unemployment rate during recession Structural changes (decline in construction during recession); lack of mobility due to housing slump; reluctance to hire unemployed workers Question should be can t find qualified workers at such-and-such wage W.E. Upjohn Institute 29
Economics of Labor Shortage Wage S Wo D shortage Supply Demand Workers W.E. Upjohn Institute 30
90 80 70 60 50 40 30 20 10 0 Percentage of employers reporting difficulty filling jobs Japan Brazil Australia US India New Zealand Taiwan Argentina MEXICO Germany Turkey Austria Singapore Poland Sweden Hong Kong Global Average Hungary Colombia France Canada China Italy UK Spain Ireland Source: 2012 Talent Shortage Survey Research Results, Manpower W.E. Upjohn Institute 31
Top 10 jobs employers are having difficulty filling 1. Skilled trades workers 2. Engineers 3. IT staff 4. Sales representatives 5. Accounting and finance 6. Drivers 7. Mechanics 8. Nurses 9. Machinists/machine operators 10. Teachers Source: 2012 Talent Shortage Survey Research Results, Manpower W.E. Upjohn Institute 32
Difficulty finding qualified workers Reasons for difficulty finding qualified workers Lack of available applicants (36%) Lack of technical competencies (36%) Lack of experience (31%) Looking for more pay (19%) Lack of employability skills (15%) Strategies to address difficulty finding qualified workers Provide additional training (37%) Broadening search outside of local region (14%) Focusing on staff retention (13%) Increasing starting salaries (11%) Partnering with education institutions (10%) Manpower Survey 2012 W.E. Upjohn Institute 33
Annual income ($000s) 80 70 60 50 40 30 20 10 0 Income of Full-Time Production Workers (2011 Dollars) 10th 25th 50th 75th 90th 2007 2008 2009 2010 2011 W.E. Upjohn Institute 34
Summary Fastest projected growth is for higher education s master s and doctorate s Still high demand for high school education, leading to projected shortages in workers with only a high school education Slight increase in education attainment, but much could be the result of surplus labor during the recession Employers complain of short-term shortages, which may not be surprising as real wages remain stagnant or are even decreasing W.E. Upjohn Institute 35
Contact: Randall Eberts (eberts@upjohn.org) W.E. Upjohn Institute 36