Slowing US population growth driving labor shortage, UC study finds

Just walk into any store or restaurant in the High Desert, and you’ll likely notice a sign saying “Hiring in Progress” or explaining why they’re understaffed or have reduced hours.

A recent report from the University of California, Riverside shows that the inability to meet consumer and business demand during the COVID-19 pandemic is primarily caused by labor shortages, due to the lack of long-term base population growth.

The new analysis was released Wednesday by the UCR School of Business Center for Economic Forecasting and Development and its director Christopher Thornberg, author of the report.

While fixing the supply chain should be a top priority, labor shortages and population growth are the real underlying cause – and a critical future challenge for the United States and California, according to the report.

“For several decades, there has been a substantial slowdown in the growth of Americans in their prime working years,” Thornberg said in a written statement. “Whether it’s the factory worker, the delivery truck driver or the missing salesman, the scarcity of workers hampers the ability to connect demand to supply and slows economic growth.”

Sharp drop in the birth rate in the United States

According to the analysis, the long-term population growth of people aged 25 to 54 accelerated dramatically in the United States in the 1970s, peaked in the mid-1980s at more than 2% growth per year, then collapsed just as quickly, driven by a sharp drop in birth rates.

International migration to the United States surged in the 1990s, offsetting some of this baby bust, but that too slowed sharply after the turn of the century. Today, the population growth rate of prime-age working-age people is 0.2%, one tenth of what it was 40 years ago.

Thornberg notes that these demographic trends have been seen in data for many years. Yet because it’s the kind of thing that happens incrementally, the issue simply hasn’t been front and center for policymakers or business leaders.

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The massive wave of retirements during the pandemic has accelerated and exacerbated the current labor shortage, but it is not the root cause.

“This is a long-term demographic problem, not a short-term cyclical problem,” Thornberg said. “That’s not going to go away as the COVID crisis subsides.”

As severe as the labor shortage is nationwide, it’s worse in California, particularly Southern California, according to the analysis.

The lack of housing in the state acts as a functional ceiling on population and workforce growth, degrading accessibility and pushing workers and businesses to other locations. Additionally, the state’s population forecast does not paint an optimistic picture of future trends.

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According to the analysis, government agencies and policymakers will need to focus on increasing labor supply and helping employers adapt to a new world where workers are a scarce resource.

In the immediate term, leaders can help in a relatively passive way: they can ease labor market regulations to allow employers maximum flexibility in hiring their workforce.

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Analysis proposals

Restrictions on gig work and flexible work hours should be reduced, not increased as California is currently doing.

Older workers who wish to remain active in the labor market should be encouraged and supported by reducing or eliminating potential reductions in existing pension benefits.

Regulations should change to allow employers to offer a variety of wage/benefits/training packages based on workers’ desires rather than relying on pre-defined government mandated minimums.

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Policymakers should relax licensing requirements and staffing rules.

In the longer term, elected officials and regulators can make a difference in several ways:

► At the national level, Congress can address failing immigration policies and work to allow more people to settle legally in the United States.

► State and local leaders in California can expand housing supply, especially multi-family housing, to slow emigration.

► Policymakers can increase working income tax credits to help workers move from public assistance to lower-paying, lower-skilled jobs.

► Government leaders can subsidize worker training programs offered by employers to enable and encourage low-skilled workers to pursue higher-skilled careers.

► Policy makers can invest in early education and publicly subsidized childcare to help workers (especially women) stay on their chosen career paths while building families.

► The government can provide subsidies and training to help small businesses adopt labor-saving technologies.

The Center for Economic Forecasting and Development at UC Riverside School of Business is the first major academic forecasting center in the Southern California interior.

Daily Press reporter Rene Ray De La Cruz can be reached at 760-951-6227 or Follow him on Twitter @DP_ReneDeLaCruz

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