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Economic Developers: Your New Job is to Find People.

Updated: Feb 16, 2023

February 15, 2023

Remember HQ2? Neither do I.

Just five years ago, the ultimate achievement for any economic developer was to land Amazon’s HQ2. Mayors, governors, and every serious economic development agency bent over backwards to catch the attention of the nation’s fastest-growing firm. Securing tens of thousands of Amazon’s high-tech, high-paying jobs would boost the prosperity of the region and solidify the reputation of the victorious governor, mayor, and agency for years to come.

But today, the only thing that’s remarkable about the HQ2 decision is how far removed it seems and how totally irrelevant it is nowadays. In half a decade, the world has been upended, and the entire economic development narrative has been flipped. What used to be about jobs has now become about talent.

After all, who actually talks about attracting new corporate headquarters or building office space? Imagine a governor, mayor, and economic developer touting their efforts to bring a major employer and tens of thousands of new jobs to the region. They’d be crushed by every local CEO trying to find people for their talent-starved businesses.

Talent Shortages are the New Normal

Much like the pandemic, we all wonder when talent shortages will be over so we can get back to how things once were. But while pandemics fade, the talent shortages we are experiencing today will be with us for the long haul. When you consider the data (as we will do here), demographic droughts are the new normal, and we’ll have to learn how to cope with having too few people for all the work that needs to be done.

Naysayers will just say that the next market correction will fix the problem. After all, the Great Recession of 2007-2010 created huge layoffs and made it relatively easy for firms to find talent. And given all the turmoil that we’ve put ourselves through for the past three years, we’re due for an economic stomach flu. Experts think that a recession will cure the pandemic hangover. But we need to consider the fact that demand for labor remains as high as ever, and the addition of over 500,000 new jobs in January has many stumped. Even as many tech firms scale back and let people go, overall hiring across the nation is still full speed ahead. Note: while tech companies are letting people go, if you look at the massive amount of hiring they have done over the past 10 years, the recent scale back is more of a correction than a regression.

What gives?

The honest truth is that the pandemic didn’t cause this problem—the problem was already here. We just didn’t see it. The pandemic (and really our response to it) just made the problem so pronounced that it’s impossible to gloss over anymore. When you consider the evidence, it’s clear that our nation’s available labor supply is not what it used to be, and most sectors’ businesses (sensing how hard it is to actually find qualified and willing candidates) aren’t about to let the talent they have go. The new waves of hiring are driven by retail, healthcare, construction, manufacturing, logistics, administrative assistance, business services, and IT. These largely non-remote industries are all in desperate need of people and are working hard to win back the labor they lost due to disruptions.

How and why did things change so quickly? How did our response to the pandemic accelerate this problem? And why won’t the market return to normal anytime soon?

Summarizing the Demographic Drought

Earlier this year the US Chamber of Commerce reported on America’s labor shortage. Their study repeated the arguments presented in Lightcast’s (then Emsi’s) 2020 report, the Demographic Drought. The basic summary is that the economy and society must begin to adapt to not having enough labor as a result of a global demographic shift. The shift was inevitable, but because we all were so used to many years of high talent supply, it was easy to ignore the cliff. And when we responded to the pandemic with draconian shutdowns, we failed to account for how they would essentially drive the bus right off of that cliff.

Here is what happened.

Problem 1: The Exit of the Baby Boomers

According to Pew, the rate of Baby Boomer retirements doubled in one year (2019-2020). When businesses were forced to close or go entirely remote, millions of 50- and 60-year-old workers, who were still very much in the workforce, called it quits. The Baby Boomer generation is the richest and largest generation to ever live. They are 76 million strong and have amassed some $68 trillion in wealth.

Baby Boomers have been the driving force in the labor market for many years, and when the government shut things down, it was easy for them to lock down and to stop working altogether. Over three million exited in one year, and that rate isn’t slowing down. The problem here relates to the fact that the economy wasn’t ready for their mass exodus. But it’s happening faster than anyone would have thought, and now there isn’t much we can do to stop it.

Overnight, thousands of businesses lost experienced employees, many of whom had senior management positions that are hard to fill.

Problem 2: Labor Force Participation Rates

As Baby Boomers exit the workforce, unprepared businesses are scrambling to replace them. But the pandemic response created another problem. Labor force participation (the amount of prime-age workers willing to work) took a nosedive. School shutdowns forced parents (often women) to leave the labor market to care for their kids. The decline in female labor force participation was and is an often-discussed issue. Further, and perhaps more significantly, the decline in male participation is even more difficult to deal with.

US Chamber of Commerce, 2023

This is because male labor force participation hadn’t fully recovered from the housing meltdown of 2007-2010. And when shutdowns occurred in 2020, many trade-based businesses that employ mostly men (maintenance, security, construction, manufacturing, logistics, etc.) lost their ability to do business and employ their workers. To help, the feds stepped in with massive spending programs that pumped trillions into American bank accounts. Economic impact payments, unemployment compensation, child tax credits, and emergency rental assistance flooded the market. Businesses received small business tax credits, emergency capital investments, and payroll protection payments. And while all of this helped pad the wallets of workers and businesses during lockdowns, it did much to exacerbate the already bad LFPR problem.

Fraud went through the roof, and the easy money meant that many people, who would otherwise be working, didn’t need to work for a very long time. Many still have not come back. As businesses started to open again, it was very difficult to get people back because many of them were making more money via the assistance programs than they would have made if they had returned to work. This absolutely gutted areas like the trades.

In addition, three other long-term trends keep driving male LFPR down:

  1. Fewer men are getting married and buying homes. This means that they do not need to hold regular employment. More and more men are opting for part-time employment.

  2. Addiction. Opioids and internet addiction are also keeping huge numbers of men out of the market.

  3. Boomer wealth. Many men below 30 are still dependent on their parents.

Today only 67% of prime-age men are working. Back in the 1950s that number was closer to 90%.

Problem 3: Childlessness

The final (and perhaps biggest) problem of all is the fact that our nation has been far below the replacement rate (2.1 children per childbearing woman) for the past 50 years. The average Baby Boomer grew up with three or four siblings. Since the 1970s, though, the average American child has grown up with zero siblings or just one. Essentially, we stopped replacing ourselves and are now starting to feel the impact of that shift. Shortages of labor will become common for the rest of our lives.

If you don’t believe it, look at nations like Japan, Russia, and much of Europe. Low birth rates and population decline are their top economic concern and have been for years. Once that trend starts, there is very little you can do to reverse it. The U.S. has been able to deal with it as a result of immigration. But we should note that most nations (except for the MENA and sub-Saharan African regions) are experiencing lower birth rates, which means that they will be sending out fewer immigrants.

The World is Experiencing a Dramatic Decline in Births

What can economic developers do?

The simple answer is that EDOs should be working on ways to help their regions’ businesses cope with this long-term problem. After all, there’s really only one way to solve the labor shortage problem. And if you guessed “have more people,” that solution wouldn’t work unless there was a big national mind shift (starting today) and we jumped 20+ years into the future. Not likely! Immigration could also help, but most people don’t realize that most other nations, including the top three for immigration (Mexico, China, and India), are also experiencing shortages and will likely be sending fewer people to the U.S. over time. The final solution is robots. But the robot solution still seems far off, and every time we create new tech, that tech seems to create a new set of challenges that just creates more labor needs.

The best thing we can do today is to work on strategies that dampen the impact of the demographic drought.

And because the top issue facing pretty much every region and business today is labor, the economic development profession has a big role to play. It’s remarkable to see just how quickly EDOs have had to migrate from the demand side of the equation (aka winning HQ2) to having to figure out how to cope with the supply side of the problem (finding people for local businesses desperate for talent). Increasingly, EDOs will be being tasked with helping a wide array of companies and industries that can’t find talent.

If this seems like a challenge to you, here are a few places to start.

1. Focus on early talent

Increasingly EDOs will need to focus their efforts on cultivating and developing talent pipelines. And this means starting earlier in the game and getting to people while they’re still in high school and college. Early talent makes sense because they still haven’t decided on an education or career path yet. And if economic developers can play a role in their decisions, it means more talent will be willing to stay local and to consider regional employers.

If we can help businesses (especially the trades) get in front of students (and their parents and teachers) early it will bolster long-term local recruiting strategies and do a lot of economic good. Such a strategy is also far cheaper and more effective than trying to win already-employed talent from other businesses or industries or trying to convince people who don’t want to work to come back into the labor market. It will also be easier to show young people that there are good opportunities local vs trying to convince them to come back once they leave for other regions and businesses.

2. Convene, convene, convene

A good way to help deal with the problem is by getting all the key experts and decision-makers in a room so you can come up with better local solutions. After all, there is no political party trying to stop people from getting jobs, there is no natural disaster preventing people from going to work, there is no alien invasion disrupting society. In many ways the problem is just a failure to communicate.

Economic developers are masters of getting people together. In this case, EDOs can host events to bring the many regional players together so everyone can help deal with labor shortages. Here, we’re referring to school districts, community colleges, universities, industry associations, workforce boards, businesses, civic organizations, churches, and a vast array of other groups that represent lots of people. People want good work, and good work wants good people, but they often struggle to meet. Like a local eHarmony, EDOs can become the place where work and people meet and where these problems get worked on and dealt with.

3. Focus on local

When we look at the national labor shortages, the problem is overwhelming. But if we start to break the problems down at the community level, we can scale the solutions in more intelligent ways. EDOs are in a great position to diagnose the unique driving factors for local labor shortages and to begin to work on solutions. EDOs will be able to understand who needs to be engaged and whom to bring together.

What industries are struggling the most? What are the perceptions of local college and high school students? What about their parents? Do people have an awareness about local opportunities? What are the roadblocks that can be removed? These are all things that EDOs are suited to understand and then to work on at the local level.

4. Technology is your friend

If you are an economic developer, this all might sound a little daunting. After all, your budget and headcount are smaller than the local school district, college, and local businesses. But economic developers can be far more nimble and can use technology in ways that these other groups might not be able to. There is an ever-increasing array of tech out there that will allow EDOs to promote information on local jobs (the demand side) and to network and develop connections with organizations that are training and equipping people (the supply side). If EDOs can employ these technologies to bring people together, they can do much to close down talent gaps.

Companies like GoEducate are in a position to support these efforts. In our new platform, we have developed a way to connect all local educational programs (that are producing local talent) with all local jobs (in need of talent) so that we can begin to match people to the right opportunities. We can also create customized feeds of opportunities so that employers can do a lot more than just advertise jobs. Our platform allows jobseekers and early talent to explore local markets and discover early talent opportunities with companies they may have never heard of before. Such opportunities include internships, apprenticeships, scholarships, mentorships, and more. These opportunities are very appealing to people just getting started in the education-to-work-journey and can be used to build new audiences.

Businesses that pursue and develop audiences via these efforts will have a far easier time recruiting new employees down the road.

So, what would be the equivalent of the HQ2 economic development win in 2023? How about a headline like, “Economic Development Org X helps local manufacturers find and build a relationship with an untapped supply of local talent?” Yes, this might sound cheesy, but if you were to take this idea to pretty much any talent-starved company, they’d be all in and your community would be heading down a path to cope with and manage labor shortages vs just letting them happen with no plan.

About GoEducate

GoEducate is an education to work technology platform that connects people, education and in-demand jobs at the local level. GoEducate is focused on growing early talent, developing skills and building stronger communities with a diverse workforce. The company and its Regional Opportunity Portal platform (ROP) deliver innovative solutions that help organizations identify, nurture and retain top talent regardless of backgrounds and experience through an accessible marketplace environment that provides the resources needed to reach one's full potential.

About the Author

For the past 17 years, Rob Sentz has worked in the area of labor market analytics and the connection between education and work. He has written numerous research papers exploring a wide array of labor market topics. Since 2020, Rob has focused on the impact of the demographic drought on society and how to manage it.

Rob served as the marketing executive at Emsi (now Lightcast) for 15 years where he focused on content creation, building and leading marketing teams, running research projects, and leading events. For the past two years, Rob has worked as an independent consultant, specializing in helping organizations tell their stories in better, more creative, and more compelling ways.

Want to learn more about how GoEducate can help you connect businesses with the people they need? Become a GoEducate partner today, or contact us with the link below!

GoEducate connects educational programs, job postings, and student profiles to help communities address labor market inefficiencies and shortages.

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