Labor Shortage

On one hand there are arguments suggesting significant labor shortage in rapidly ageing populations of developed countries that is also blamed for shifting of industries to places with labor abundance. On the other hand, we also have rising unemployment rates in developed world, particularly after the recent financial crisis, which negates labor shortage argument. Which is more relevant?

LABOR SHORTAGE has become an issue of hot debate these days. It is an issue faced in the whole of developed world, but the nation where it generates the greatest heat is the United States. The debate has strong arguments, and both sides must be heard before any opinion is formed about them.

ARGUMENTS SUGGESTING LABOR SHORTAGE

Many experts have been propagating the theory that United States is going to face severe labor shortage in coming years due to aging population and changing demographic profile. The primary reason forwarded for this situation is that the baby boomers, those born between 1946 and 1962 will soon be retiring and the next generation, often referred as baby-bust cohort that is currently aged between 23 and 37 years, is actually smaller in number by almost 16% compared to its predecessors. This will mean a significant labor shortage.

It is also argued by some that as economy grows the demand for labor will actually grow, while the supply will be falling in view of demographic changes, so the shortage of labor will actually be even more severe. A third argument can also add that due to aging of population, the consumers will continue to grow while workforce will shrink. Rising consumption will raise the demand while the falling workforce will lead to fall in supply.

Implications of Labor Shortage

One important deduction drawn from the projection of labor shortage is that the United States need more workforce to maintain the economic growth it is used to. This becomes a standard argument to liberalize entry of immigrant workers. In addition, it is also an...