Older workers helped fuel recent US growth. Can it last?
MILWAUKEE: As a recordbreaking economic expansion nears the decade mark, people like Marty Groth may determine whether it is forced into a lower gear.
Not long ago, the 60-year- old Groth found himself out of a job and considered retiring on a pension built over a career of maintaining computer servers and printers.
Instead, he returned to school to update his computer skills and will soon join a Wisconsin labor force that is decidedly short of workers.
“I could retire now if I wanted,” Groth said. “But I am thinking, I like working.”
Over the last three years, around 3 million Americans over 55 joined or rejoined the workforce, federal data show.
The addition of these older workers not only contributed to economic growth, experts say, but helped stop a national decline in the share of adults working or looking for work.
The trend may have run its course. After adding 5 million new and returning workers of all ages from 2016 to 2018, the US labour force shrank during the first three months of this year.
From healthcare to manufacturing, companies in places like Wisconsin are taking longer to hire as they struggle to find workers; some have delayed projects, others have become more willing to hire ex-convicts and less experienced workers bypassed when labour markets were looser, local officials say.
Blue- collar workers are putting in more hours, data show, while overall labour productivity is increasing. Nationally, wages are rising.
The upshot, according to policymakers, business executives and labour experts interviewed by Reuters, is that the labour market may be nearing its limits.
Over a long enough period, labour shortages can spark investment and raise productivity as companies retool.
They can also improve opportunities for minorities with unemployment rates higher than those for whites.
But in the short run they pose a drag.
“Any employer, if they are willing to raise wages enough, at some point will get all the workers they need,” said Gad Levanon, chief economist at the Conference Board and author of a recent report on labour market constraints. “But it is coming at a higher cost... Projects that were profitable in a lower wage environment are not profitable anymore.”
The corridor connecting Chicago to Milwaukee is a testament to the long-running economic expansion.
This is not the Wisconsin of pastures and dairy farms, but a landscape brimming with fulfilment centres and factories.
A new interstate lane will allow autonomous trucks to deliver supplies for a high-tech plant being built by China’s Foxconn.
But the combination of low unemployment and an older population puts Wisconsin at the leading edge of where the country’s workforce as a whole is heading.
It is also a political battleground state, meaning the health of its economy will likely have consequences for the 2020 presidential election. Democrats will hold their convention in Milwaukee next summer.
Wages in Wisconsin rose 5 per cent in 2018, compared to around 3 per cent nationally, and the unemployment rate hit a record low 2.9 per cent for several months in 2018 and again in February.
As chief economist at the Wisconsin Department of Workforce Development, Dennis Winters keeps close tabs on the state’s hiring.
The labour shortage, he says, “is real, and people are trying to deal with it day in and day out.”
Sarah Condella, senior vice president for human resources at Exact Sciences Corp, is among them.
She joined the Madison-based company in 2012 when it employed 50 people and oversaw its growth to roughly 2,000 workers as doctors expanded use of its colorectal cancer test.
Along the way, Exact Sciences lifted starting pay to US$ 15 an hour, roughly double the state’s minimum wage. It added perks like bus passes and flexible shifts and has plans for food service at its expanding campus.
Still, it has more than 400 vacancies, and the time to hire entry-level workers has grown from fewer than 30 days to around 45. Finding them requires radio ads, billboards and other tools not typical for a life sciences company.
It is a story repeated across Wisconsin.
Banking officials say deals are being delayed because supply chains are clogged and service companies booked, nipping the financial sector’s potential.
Half of respondents to a survey by the Wisconsin Manufacturers & Commerce trade group cited labour shortage as the top issue facing companies and the state, ahead of healthcare and regulation.
A majority said they planned to increase wages at least 3 per cent as they add headcount this year.
Coupled with productivity, the number of people working is the core reason economies expand, and the expected slow growth of the labour force a main reason why Federal Reserve officials and others expect the US economy will cool.
Scott Jansen, chief operating officer of Employ Milwaukee, said his work is an exercise in finding anyone available.
A semi-trailer packed with advanced machine tools now tours state prisons so inmates can be released with an in-demand skill.
In Milwaukee, his agency works through churches and community groups to contact the homeless, the less educated, immigrants and others who might be reluctant to appear at a government office.
It is a reversal from the years following the economic crisis, when employers had their pick of applicants, and workers often took jobs for which they were overqualified. Millions were simply sidelined.