Where Will Tomorrow’s Workers Come From?

With the unemployment rate still coming down from its double-digit heights, few people in the U.S. are talking about what may be one of the biggest economic problems in our future: a labor shortage.

In fact, however, one of the main reasons the unemployment rate has fallen faster than many analysts predicted is that the number of people seeking work has declined. Bloomberg recently reported that overall participation in the workforce is now at its lowest point since 1984, when women were still being fully integrated into the labor market.

Part of the reason is not economics, but demographics. This year, the babies who were born in 1946, right after World War II ended, are turning 65. Over the next 18 years, a quarter of the current population, those born between 1946 and 1964, will hit traditional retirement age. The baby boom has become a retirement boom.

At the other end of the spectrum, the U.S. birth rate hit its lowest point in at least a century last August. In response to the report, Andrew Cherlin, a sociology professor at Johns Hopkins University, said there was no need to worry about “birth dearth” because the birth rate in the U.S. was “still higher than the birth rate in many wealthy countries and we also have many immigrants entering the country.”

We may be better than some places, but that is not really the point. The important questions are whether we are as good at attracting and developing workers as we need to be, and whether our policies are going to help us get better or are make us worse.

Japan and Germany both offer examples of what can happen to us if we don’t do a good job of meeting our labor needs .

Unlike the U.S., Japan has already started to shrink, and its population decline is likely to continue picking up speed in the near future. Already, a quarter of Japanese are 65 or older. But instead of preparing the next generation of leaders, Japanese companies, driven by rigid hiring policies and cultural norms, are shunting young people into poorly paid, dead-end jobs while sheltering older employees.

Given the scarcity of good jobs open to young workers, intense competition has put an end to the experimentation and risk that could otherwise spur entrepreneurship. The country that gave us the Walkman is becoming irrelevant in the era of the smart phone. The society that virtually perfected the “salaryman” offers neither job security nor advancement opportunity to today’s youth.

Toshihiro Nagahama, chief economist at Dai-Ichi Life Research Institute in Tokyo, told Bloomberg, “Many of Japan’s youth have become part of a lost generation that can’t find full-time work or get paid the amount they deserve. This means more workers are missing out on the chance to gain the skills they need.”

Standard & Poor’s recently pointed to problems ahead for Japan by lowering its sovereign credit rating for the country from AA to AA-, three levels below the highest grade. The agency mentioned the country’s lack of a “coherent strategy” to address its deficit and the possibility that its future population may not be able to support the burden of its debts.

In the U.S., the recent recession was particularly hard on young people, who in many cases had job offers snatched away by companies trying to protect existing staff. I have written about how high minimum wages and tough restrictions on unpaid internships conspire to rob new workers of the opportunities they need to build job skills. Fortunately, America’s traditional emphasis on innovation has led many young people here, unlike their Japanese counterparts, to turn to entrepreneurship as a way to enter the business world. Japan has no answer to Google and Facebook’s global success. Still, we would do well to remember that honoring seniority comes at the expense of opening jobs up to those who will have to hold them in the future.

Germany, like the U.S. and Japan, faces an aging population. Employers in certain fields already struggle to find enough workers. Dana Russow, the director of a nursing home in southwest Berlin, told The New York Times, “It’s not easy finding qualified staff to take care of the elderly.” The Federal Association for Information Technology, Telecommunications and New Media, Germany’s leading high-tech industry organization, says its members are short 28,000 qualified workers.

Considering its reputation as a well-run country with high average salaries and a very good social welfare system, Germany should have no problem attracting highly skilled workers. However, until recently, it took a critical view toward immigration, erecting numerous obstacles on the theory that an influx of foreign-born workers would take jobs from Germans.

Germany, together with its neighboring Austria, plans to implement new immigration measures on May 1 to try to attract workers from Eastern Europe. But it may be too late. While Germany was busy keeping people out, talented workers from the eight East European countries that joined the European Union in 2005 flocked to countries that made immigration easy, like the U.K., Ireland and Sweden. Even though Germany is currently outperforming those countries, it remains to be seen how many of those ambitious workers will want to uproot themselves for a second time within a decade.

Our misguidedly restrictive immigration policies could put us in the same trap Germany fell into. Yet, instead of seeking to attract people who offer creative talent or exceptionally hard work, many U.S. lawmakers continue to work to lock out those perceived competitors to American workers, and to express the protectionist sentiments that Germany is trying to put behind it.

After President Obama promised in his State of the Union speech to “address the millions of undocumented workers who are now living in the shadows,” Rep. Lamar Smith, R-Texas, declared, “While more than 14 million Americans are desperately looking for work, seven million illegal immigrants have jobs in the U.S. The president should put American workers first and enforce immigration laws to make scarce jobs available for those legally authorized to work in the U.S.”

In his speech, Obama paid particular attention to the “talented, responsible young people” who would have been protected by the ill-fated Dream Act. The bill, which Obama didn’t mention directly, would have provided amnesty after two years of college or military service to those brought to the U.S. as children. It died in the Senate in December.

In addition to deporting “illegal” young adult immigrants, whose only crime has been to live with their parents while they grew up, the U.S. also makes it difficult for foreign students to legally stay after they earn their degrees. We thus send away the very people we ought to be working to attract.

American history is a history of immigration. Foreign-born Americans built our railroads, dug our mines and harvested our crops. Alexander Graham Bell, a Scot, gave this country a lead in telecommunications that it has retained for more than a century. European scientists, fleeing that continent before World War II, cemented our place as a superpower by giving us the lead in physics and, later, in aerospace.

Yet our history is also a history of xenophobia and exclusion. Laws and quotas have discriminated against Irish, Asians, Italians, Jews and many others. And, of course, the Africans who never had the choice not to become Americans did some of the hardest, most backbreaking work in this country, under the most atrocious conditions. Our national story is not one of a placid melting pot; it is one of a simmering cauldron, boiling with struggle and resentment.

Now, however, if we want to remain prosperous, we will have to get over our fears of competition and become a meritocracy. We have to treat talent and labor like any other commodity, to be developed domestically and imported from abroad as the situation dictates. Democrats will need to get past their union-inspired fears of cheap immigrant labor, and some Republicans have to get beyond their xenophobia. Prosperity, as at least these Republicans ought to know, is not a zero-sum game.

We know what the future looks like if we don’t manage our workforce issues. It looks like Germany and Japan, and it isn’t especially pretty.

About Larry M. Elkin 525 Articles

Affiliation: Palisades Hudson Financial Group

Larry M. Elkin, CPA, CFP®, has provided personal financial and tax counseling to a sophisticated client base since 1986. After six years with Arthur Andersen, where he was a senior manager for personal financial planning and family wealth planning, he founded his own firm in Hastings on Hudson, New York in 1992. That firm grew steadily and became the Palisades Hudson organization, which moved to Scarsdale, New York in 2002. The firm expanded to Fort Lauderdale, Florida, in 2005, and to Atlanta, Georgia, in 2008.

Larry received his B.A. in journalism from the University of Montana in 1978, and his M.B.A. in accounting from New York University in 1986. Larry was a reporter and editor for The Associated Press from 1978 to 1986. He covered government, business and legal affairs for the wire service, with assignments in Helena, Montana; Albany, New York; Washington, D.C.; and New York City’s federal courts in Brooklyn and Manhattan.

Larry established the organization’s investment advisory business, which now manages more than $800 million, in 1997. As president of Palisades Hudson, Larry maintains individual professional relationships with many of the firm’s clients, who reside in more than 25 states from Maine to California as well as in several foreign countries. He is the author of Financial Self-Defense for Unmarried Couples (Currency Doubleday, 1995), which was the first comprehensive financial planning guide for unmarried couples. He also is the editor and publisher of Sentinel, a quarterly newsletter on personal financial planning.

Larry has written many Sentinel articles, including several that anticipated future events. In “The Economic Case Against Tobacco Stocks” (February 1995), he forecast that litigation losses would eventually undermine cigarette manufacturers’ financial position. He concluded in “Is This the Beginning Of The End?” (May 1998) that there was a better-than-even chance that estate taxes would be repealed by 2010, three years before Congress enacted legislation to repeal the tax in 2010. In “IRS Takes A Shot At Split-Dollar Life” (June 1996), Larry predicted that the IRS would be able to treat split dollar arrangements as below-market loans, which came to pass with new rules issued by the Service in 2001 and 2002.

More recently, Larry has addressed the causes and consequences of the “Panic of 2008″ in his Sentinel articles. In “Have We Learned Our Lending Lesson At Last” (October 2007) and “Mortgage Lending Lessons Remain Unlearned” (October 2008), Larry questioned whether or not America has learned any lessons from the savings and loan crisis of the 1980s. In addition, he offered some practical changes that should have been made to amend the situation. In “Take Advantage Of The Panic Of 2008” (January 2009), Larry offered ways to capitalize on the wealth of opportunity that the panic presented.

Larry served as president of the Estate Planning Council of New York City, Inc., in 2005-2006. In 2009 the Council presented Larry with its first-ever Lifetime Achievement Award, citing his service to the organization and “his tireless efforts in promoting our industry by word and by personal example as a consummate estate planning professional.” He is regularly interviewed by national and regional publications, and has made nearly 100 radio and television appearances.

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1 Comment on Where Will Tomorrow’s Workers Come From?

  1. (1)The above article notes: ‘Dana Russow, the director of a nursing home in southwest Berlin, told The New York Times, “It’s not easy finding qualified staff to take care of the elderly.’”Maybe she should have said: “It’s not easy finding qualified staff to take care of the elderly at minimal wage.” If the pay is good, then I am quite sure she would be innundated with qualified applicants. The author knows this is quite true if he has done any research into the quantities of unemployed and qualified nurses within the city of Berlin.

    (2) Which brings me to the next quotation : “Our [America’s] misguidedly restrictive immigration policies”. With the unemployment hovering near 10 per cent, at least, there is no need to modify, for the benefit of pure profit-taking, which is what the gripe is all about, the current immigration policy. Innovation develops from necessity and not from competition.

    (3) It is also interesting to note that generally those who are bright and educated and who are not Citizens usually take their skills abroad or “back home” where they are better exploited for profit. To assume that immigrants will remain in the USA and contribute to its development when better things can be had elsewhere, is foolishness. This is the 21st Century, people go where the jobs are, and loyalty to the country that has given them an education takes a second place. It is dreary repeating this fact to an author that seems to know much about international trends.

    (4) The reason for the lack of youth in America has a great deal to do with the rise of the education culture, where generally the postponement of having children is encouraged in order for the adults of a society to obtain a better placement in the workforce, whatever workforce that may be. To argue, then, that there are no skilled workers in America is only partly true, and in some pockets of the country it is down right blasphemous to say such things. It would be better to say, as this article, I opine, sublimely points out, that there is simply a developed and demeaning age discrimination going on in the workforce. But perhaps the author doesn’t know this?

    (5) The scandalous required Educational Debt repayment that many people have to deal with obviously prevents many from having families; change this singular element and we would not need to worry about immigration. We would have larger families much sooner. Just ask the millions of young lovers living in bed sits in America because they have such large offensive student loans. Did the author examine this concern? Can innovation flousrish in these onerous conditions? Not possible.

    (6) The author of this article also does not see, or cares not to see, that the country itself requires a population immigration plan that safeguards its own future ecology. The world’s population is now more than a back-page story and the degredation that the size of a population has on its ecology has profoud impact. Money-grubbing and immediate profits seem to be the number 1 drive for the aleration of immigration policies in this article. Rather it should be the quality of living, now and in the future. But the author knows all this, of course.

    (6) Innovation. The author does not know or perhaps holds different opinions on the science of cultural archeology. Rarely does a Nation or people develop everything they utilize to sustain or better their way of living. Often, if not likely, technology is borrowed or adapted from other societies. Fire and lanterns were not reinvented by every country that now uses them. Numbers nor the wheel were reinvented when America was established as a nation. The innovation of numbers and the wheel were copied, adapted. But I do not want to give a history lesson here; the author should know this anyway. So innovation need not be the greatest part of a nations value. And the threat that a nation needs new immigrants to sustain innovation is not true, either.

    (7) The last paragraph is telling: it is merely the insourcing and outsourcing policy taken to its logical conclusion : if such reasoning obtains, then in-sourcing our military when we need it and outsourcing our nuclear defenses to save a couple of dollars, seems just as reasonable.

    (8) To say that America is Xenophobic after stating the fact that America is a melting pot of peoples, is bufoonery, and offensive. It is also offensive to those who have seen more of the world than they like to recall. I opine the author is unseasoned in his experiences with much of the so-called civilized world, although he may have indeed seen much of it from the comfort of a tourist coach. America is far from xenophobic. One needs only to reflect on the Civil Rights America has in place that defends legal immigrants and compare such Laws with any other Nation in Asia or Africa or South Africa, in order to realize that America is not xenophobic.

    (9) When there are many educated workers looking for jobs, well-paying jobs, and the employers are looking for low-end workers who will work for almost nothing, then saying that America needs to import workers because of this lack, is merely crippled thinking.

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