Market sees blue collar shortage
Study: Shortfall may impact labor costs, inflation and Fed.
A surprise shortage of blue collar workers is changing the contours of the U.S. labor market, boosting their pay, narrowing wage inequality and drawing more women into those jobs.
The shortfall is being driven by a shrinking supply of manual and low-pay service workers as the labor force becomes more educated and less willing to take on such jobs, according to a new Conference Board study.
“The divergence between blue collar and white collar supply is going to persist and even become bigger through 2030,” Gad Levanon, chief economist for North America at the New York-based research group and one of the authors of the report, said in an interview.
That is likely to keep upward pressure on labor costs in such industries as construction, transportation and accommodation and food services. It also has implications for inflation and for the Federal Reserve as Chairman Jerome Powell and his colleagues try to sustain the 9-1/2-year-old expansion without overheating the economy. Unemployment at 3.7 percent is the lowest since 1969.
“The acute shortage of talent in the blue collar space is very, very pronounced,” said Peter Quigley, executive vice president at Kelly Services Inc., a staffing company with branches in all 50 states.
Manufacturers and other companies with physically demanding jobs are finding it tough to fill those positions when baby boomers retire. “It’s harder and harder to attract younger people into those jobs, either because they’re pursuing education alternatives or the stigma associated with light industrial work,” Quigley said.
The supply of lower-skilled workers is also being squeezed by growth in the number of Americans who’ve claimed disability benefits and dropped out of the labor force. Exacerbated by the opioid epidemic, that’s much more concentrated in the population without a bachelor’s degree, the Conference Board report says.
Tighter restrictions on immigration are also playing a role and will continue to do so, said Moody’s Analytics’s Chief Economist Mark Zandi. Many of those foreign workers are lower-skilled and in industries such as construction and farming.
Automation and off-shoring were expected to devastate demand for industrial workers and depress their pay, especially when compared with their more educated counterparts. But that hasn’t happened, at least so far, according to the Conference Board: Blue collar and low-pay services jobs have grown as rapidly as total employment since the economy began recovering in June 2009.
For much of this expansion, manufacturers and other companies have been slow to ramp up capital spending and step up automation.
That’s been reflected in the slow growth of productivity: Output per hour worked has risen at an annual average rate of 1.2 percent since the recession ended in June 2009, well below the 2.2 percent post World War II pace.
Companies may also be approaching the limits of how much of their operations they’re willing or able to outsource. “We’re probably in the third and maybe fourth cycle of outsourcing,” Quigley said. “Most of the large companies, if they were going to outsource, they’ve already done it.”