If you’ve tried to hire a skilled tradesperson lately, you know how scarce these workers have become. According to Manpower research, roughly 40 percent of U.S. employers report difficult filling jobs because of the lack of labor, particularly in the skilled trades.
As of April 2018, roughly 6.7 million positions remain open but unfilled — a record high. American companies have been creating an average of between 150,000 and 200,000 net new jobs per month in recent years, and labor force growth is just keeping pace.
Among prime U.S. workers — ages 25 to 54 — only 62.7 percent are currently participating in the workforce. Even though the participation rate is rising, the current rate is still below the rates of the last 20 years. Of course, the 10,000 baby boomers retiring each day skew the numbers, but the net result is nonetheless a very tight labor market.
Five Trends Creating a Labor Shortage
Why the shortage? In a recently released report, JLL reviews the underlying issues and the five converging trends influencing labor force participation.
JLL’s report shows that several trends are at work in the U.S. labor force.
- Men missing in action. Among men, workforce participation has fallen by more than 18 percent since 1949. Many lower-skilled men have been sidelined by technology, automation and offshoring, and lack the qualifications for the higher-skilled jobs that are available. Many have simply dropped out of the workforce.
- Women missing in action. Many highly qualified women are temporarily out of the workforce because they are caring for children or aging parents. When women face inflexible work schedules or other workplace obstacles, taking time out for family is often a necessary choice.
- “Credential creep.” As more workers began to acquire college degrees in recent decades, more companies began to require bachelor’s degrees or advanced credentials even for jobs that could be performed by someone with less formal education. “Credential creep” ultimately limits the pool of available applicants.
- Occupational licensing barriers. Occupational licensing requirements can be costly and burdensome in some fields, effectively restricting entry to otherwise capable participants.
- The problem of geography. Increasingly, jobs are growing in the major cities, while the number of unemployed people is growing in rural areas and depressed smaller cities. The high cost of housing in major cities, among other factors, makes it difficult for workers to cross the miles to reach the jobs.
What the Shortage Means for Commercial Real Estate
For the economy as a whole, a labor shortage generally leads to a less-robust economy. It also means reduced productivity as employers wind up hiring workers who lack the optimal skills, experience or training for the work at hand. Those outcomes, in turn, reduce demand for commercial real estate. So, commercial property owners and investors should be concerned about the larger implications of slow labor force growth.
Conversely, if we were better able to match jobs and workers, property owners and investors would benefit along with the rest of the economy. By our projections, national office asking rents would rise by about 5 percent, and the average national office vacancy would fall by roughly 2 percent. National industrial asking rents would rise by roughly 4 percent, and vacancy would fall by about 1 percent. National retail asking rents would rise by roughly 3 percent, and the national vacancy rate would fall by roughly 1 percent.
How to Realign Work and Workforce
How do we increase labor force participation at a faster rate? For starters, state and local governments should invest in upskilling or re-skilling displaced workers by providing more options and financial support for technical and vocational training.
To retain women in the workforce, employers shaping the future of work should adopt policies and workplace strategies that make it easier for women — and men, too — to manage competing priorities. Paid maternity and paternity leave, affordable childcare, equal pay and more flexible schedules could help attract and retain talent.
And, finally, government and industry together could incentivize potential workers to migrate from high unemployment areas to markets with growing economies. Subsidies or tax credits, for instance, could be used to help finance worker relocations.
Many companies, of course, are already taking steps, including creating engaging workplaces for the future of work. In the meantime, this might be a good time to consider learning some carpentry skills.
Ryan Severino is the chief economist at JLL where he manages the economics team and is responsible for global and regional economic research, analysis and forecasting as well as property market forecasting.