Adapting to the "perpetual labor shortage" isn't a choice.
Since World War II, corporate America has enjoyed an abundance of talent. That’s all changing. In this post, we’ll discuss what’s happening and its consequences.
The Decline of Supply
Paradoxically, the number of prime-age workers (people 25-54) IS growing but many of them are starting new businesses. New business formation numbers continue to reach record highs, meaning that this cohort is making the labor shortage worse. Instead of working for someone else, they too are now competing for talent.
But that’s not all. Thanks to COVID and the pandemic lockdowns, workers 55 and over have opted for early retirement while immigration (both skilled and unskilled) has declined. Taken together, these two factors add up to an additional deficient of four million workers.
Simply put, the number of organizations that need a steady supply of talent (the demand) is going up at the same time that workers (the supply) are going down, and neither trend is likely to reverse anytime soon.
If demographics are destiny, then what economist Marianne Wanamaker calls the “perpetual labor shortage” will last for decades.
Managing the Shortage
The big “so what” here is that bargaining power is swinging back towards the worker and, in order to survive, companies will have to improve how they lead.
Bad Management’s good ole’ days of boring job descriptions, drawn-out interview processes, subjective hiring and goal setting, nonexistent development, indifferent exploitation of information asymmetry, subjective performance evaluations, and little to no wage growth have finally come to an end.
And why are they ending? Because talented workers want them too! Workers are realizing that they don’t have to tolerate incompetent, backward managers anymore. They can go work for someone who’s halfway decent at leading or, if they can’t find that person, they’ll become their own boss. The irony is so rich - maybe if all those crappy managers were team players, adaptable, and hustled, the Great Reshuffle wouldn’t be a problem?
Some of these executives and leaders will complain about how hard it is to find people and some of them have legitimate gripes. But the vast majority of businesses, particularly those that compete directly with companies who do recognize that they’re working in a new world, will fight these changes tooth and nail. And they’ll be wasting their energy. I get it, change is hard, and holding yourself accountable is even harder.
But make no mistake, change is incumbent on leadership. You may not like that, you may think that’s unfair, but the labor market doesn’t care about your feelings and has no incentive to change. The power has shifted. Recruiting good people is a sales game now, and what you're selling is how you lead.
I’ll be discussing how to adjust to this new paradigm a lot more around here. In the meantime, please understand that the decades-long abundance of talent has come to an end. It’s now up to you and your team to adjust. RIP good times for bad managers.
