As Published in Business 2 Business, January 2004

What's In Store for 2004?

by Ira S. Wolfe

Productivity in the U.S. is up 9.4 percent. What this means is that workers in this country have produced in 2000 hours what it used to take 2188 hours. That increased productivity is equivalent to 24 fewer days needed to produce the same product or service as it did before all the layoffs, downsizing, and business closures.

That's great news for employers who are getting more from fewer people. That's not such good news for the unemployed and the employees working extra hard. A combination of doing more with less and the replacement of activity-driven production with technology and automation have permanently eliminated many jobs.

But that doesn't mean the demand for workers won't increase.

Since 1950 the U.S. population has increased 50 percent. We now have 125 million more mouths to feed and people to service than we did in 1950. Between 2000 and 2030 the U.S. population will grow another 26%. That growth in part will come from new births and immigration. But a significant portion will be a result of people living longer…and longer. The 65 and over segment of the population will grow by more than 80 %.

The need for more workers to serve an expanding population was filled by the 77 million baby boomers who entered the workforce from 1964 until the late 1980s. Women also entered the workforce in record numbers. The participation rate for women working outside their home and in the workplace increased from 34 % to 60 %. And for women ages 25 to 64, the participation rate exceeds 76 percent. This time around we can't look toward women to solve the worker shortage. We already tapped that human resource reserve and the well is dry.

The U.S. is not alone. Nearly every developed country including England, Germany, Japan and Italy just won't have enough young people to take care of their exploding aging populations.

Worker shortages won't go away even if job creation is slower than expected. The problem is that not only don't we have enough young replacement workers, the workers we do have don't have the skills required to do all the jobs available today.

Over 60 percent of all manufacturing jobs in 1950 required unskilled labor. Today, less than 15 percent of all manufacturing positions are unskilled. Even as recently as 1973, blue collar workers represented over 60 percent of the workforce. Shortly, 10 percent of the workforce will be blue collar. The Hudson Institute estimates that by 2006 in the U.S. only 20 % of our workers will have the skills to do 60 % of the jobs.

So what's the problem? We have a growing population that is demanding more skilled services (healthcare and technology) faster than our ability to deliver them. According to the Employment Policy Foundation, the demand for labor over the next decade can outpace supply by as many as 35 millions jobs.

But the coup d'etat, the biggest differentiator of all, is that no population in history has had so many aging people live so long.

In the 1950s, a worker lived just a few years beyond his or her 40 or more years of company service. Today, employees are retiring and living not just 10 or 12 more years, but enjoying an active lifestyle for 20, 30 and even 40 years. That is nearly an entire lifetime compared to our 19 th century ancestors. And who knows with medical advancements how long people will really live in the future.

The bottom line is that jobs will continue to be plentiful for years to come. That brings some really bad news to those business owners and managers that think that an economic recovery is the answer to their prayers. Our businesses, government and communities have not prepared for an aging bubble. They do not have even the faintest hint of an infrastructure or resources to provide all the services required to support the burgeoning “triple A” segment of population - active, affluent, and aging.

The business solution will be a continuing effort to get more output from fewer people. But the need to increase individual productivity comes with a big price.

In a recent study by ComPsych, 86 percent of workers are experiencing job stress and half of them described the stress as “extreme fatigue” or “feeling out of control”. Other studies show that the number of employees calling in sick from stress-related reasons tripled since 1996. Nearly 550 million working days are lost annually in the U.S. from stress-related absenteeism.

And stress increases the already out of control healthcare costs. Up to 90% of all visits to primary care physicians are for stress-related complaints and up to 80% of industrial accidents are due to stress. Combined with the fact that the average elderly American (65 and older) consumes 37 % more health care than the average worker, the cost of healthcare will continue to skyrocket. Paradoxically as employers attempt to shift cost sharing to the workers, health insurance will remain a top benefit used to attract and retain the best and the brightest.

World-class businesses have already figured out that the ways of old have got to stop. Global competition and shrinking profit margins no longer allow employers to tolerate under-performing and poorly performing workers. Best practices dictate that every individual contributor from the boardroom to the maintenance crew must carry his or her own weight. The days of affording the cost of overstaffing to maintain full productivity while continuing to pay for non-performance have long gone.

And that my dear folks is the crux of the problem facing U.S. employees and employers alike. We don't and won't have enough people to fill all the jobs that will be required to provide services and produce goods to a growing, aging and demanding population. And we don't and won't have enough people with the right skills to do all the jobs that even exist today.

Which leads me right up to what's in store for 2004?

1. Job creation will continue. It's pace may vary and different industry segments and geographic areas may experience fits and bursts of activity. But new jobs will be created.

2. With more new jobs available, job-hopping will again become prevalent. Employees continue to indicate their intentions – and looking for a new job is one of them. When the economy improves, they will jump ship. From our own survey at the 2003 Fall Lancaster Chamber Job Fair to a recent report published by the Society of Human Resource Management, Sibson Consulting, Gallup Poll and Monster.com, 83 % of workers plan to look for a new job, including 35 % of top performing corporate employees.

3. Measuring the quality of a new employee and the performance characteristics of existing employees isn't easy but it is a pre-requisite for any business interested in staying competitive and profitable in today's global marketplace.

As best practice companies raise the bar and turn away poorly qualified candidates and employees through highly successful selection practices, other businesses will have little choice but to hire these rejects and proven poor performers or learn how to play ball on the same field with the competition.

4. Business will begin to align hire, retain and promote individuals whose values and competencies align with the objectives of the business. This will require that business owners insist that hiring managers can quantify and measure a company's return on investment from their talent and human resources-related processes. Performance baselines will be established that drive decisions around talent acquisition and workforce management. The soft-side of human resources will be balanced by the hard-side of finance and strategic workforce management.

5. Healthcare costs, retirement benefits, and elder/child care issues will continue to plaque many businesses. Attempts to increase employee contributions will meet resistance as the economy improves and the competition for workers will force businesses to raise the stakes in order to attract and retain workers. Flexible scheduling will be a must to allow workers the opportunity to care for aging parents and young children. Only those businesses that understand the link between individual productivity and company performance and organizational values will have the wherewithal to keep vacancies low and to convert human energy into corporate electricity.

Ira S. Wolfe is the founder of Success Performance Solutions, a consulting firm specializing in employee selection and performance management. Success Performance Solutions sponsors several training programs throughout the year such as CriteriaOne®: Job Benchmarking and Competency Modeling and Managing to Excel for front-line supervisors. For more information about these programs and services, contact Ira at 717.656.4632 or iwolfe@super-solutions.com or visit www.super-solutions.com.