WASHINGTON (AP) — As America’s job market rebounds this summer and the need for workers intensifies, employers won’t likely have a chance to relax anytime soon. Worker shortages will likely persist for years after the fast-reopening economy shakes off its growing pains.
Consider that the number of working age people did something last year it had never done in the nation’s history: It shrank.
Estimates from the Census Bureau showed that the U.S. population ages 16 through 64 fell 0.1% in 2020 — a scant drop but the first decline of any kind after decades of steady increases. It reflected a sharp fall in immigration, the retirements of the vast baby boom generation and a slowing birth rate. The size of the 16-64 age group was also diminished last year by thousands of deaths from the coronavirus.
A year earlier, in 2019, the working age population had essentially plateaued.
It’s not entirely clear how population patterns will unfold once the pandemic fully fades. But even if the working age population resumes growing, it will almost certainly do so at an anemic pace. A continuing drop in that population, or even a tepid increase, would pose a problem for the economy. A healthy economic expansion has always depended on robust population growth to fuel consumer spending, justify business expansion and drive corporate earnings. Without a sizable influx of new workers, growth could stagnate.
Still, some economists foresee a silver lining for individuals: Fewer people of working age could compel companies to compete harder to hire and retain employees. And that could mean higher pay, better opportunities and other inducements to keep and attract workers, a trend already evident in the June jobs report the government released Friday. Average hourly pay rose a hefty 3.6% compared with a year ago, faster than the pre-pandemic pace.
“The workers would be doing better than the economy as a whole,” said Manoj Pradhan, the founder of Talking Heads Marco, an economics research firm, and formerly an economist for Morgan Stanley.
If wages were to rise sharply, it could also help narrow the vast inequality that has increasingly divided the most affluent Americans from everyone else and left the lowest-income households struggling to afford rent, food, child care and other essential expenses.
With population growth sluggish, economic expansion would hinge on whether companies could make their workers more productive. An increase in productivity, often made through investments in labor-saving technology, could further raise pay.
Still, over time, economists worry that sluggish population growth could mean less consumer spending and a less dynamic economy.
“Workers generate innovation and ideas — they invent things,” said Kasey Buckles, an economics professor at the University of Notre Dame. “When you have a dwindling working-age population, you have fewer people doing that.”