You Decide: How Can We Fix the Labor Market?

Downtown Raleigh, east of campus.


By Mike Walden

Today’s labor market raises several concerns.

The first is the continuing “labour shortage”. The percentage of adults who are working or looking for work — called the “labour force participation rate” — has recovered significantly from its trough during the pandemic, but it has not fully recovered. If the same labor force participation rate that existed before the pandemic were applied today, there would be more than 2 million more adults in the labor force nationwide and 46,000 more in North Carolina. .

The second concern is the possibility that the labor shortage will only get worse in the future. Declining birth rates lead to slow growth in the country’s population and labor force. North Carolina is in better shape due to the large number of people continuing to move into the state from other states. But even with this interstate immigration, North Carolina’s core workforce – considered adults between the ages of 25 and 54 – is expected to grow by less than 1% per year in coming years.

The final concern is skills. Will the education and training of our workforce be sufficient to provide workers with the skills needed for future jobs? This question is all the more important as the nature of jobs and the skills required for those jobs are rapidly changing as technology plays a greater role in shaping the economy.

The good news is that the total number of jobs in North Carolina is actually 6% higher today than immediately before the pandemic. However, this job growth is 25% less than the state’s economic expansion over the same period, which translates to two job openings for every unemployed worker.

One of the ways businesses across our state have responded to labor shortages has been to dramatically increase wage rates. Since the last month before the pandemic at the start of 2020, the average wage rate in North Carolina is up 17%, in fact slightly higher than the total inflation rate over the same period of 15%.

Interestingly, the sectors with the highest wage gains are those with moderate to low pay scales, including leisure/hospitality, personal services and construction. These sectors increased their wage rates between 22% and 25% between the beginning of 2020 and the end of 2022. But while construction saw its workforce increase by 8%, jobs in leisure/hospitality only increased by 3% and jobs in personal services rose only 4%.

There is an important lesson to be learned from these results. Although sectors such as leisure/hospitality and personal services have increased their wages significantly, this may not be enough, especially in a growing state like North Carolina, where jobs in the highest paying sectors are growing and where labor supply will continue to be tight. Companies in these sectors will have to decide if they can afford to pay even more. If the answer is “no”, then we could see companies turning to technology to replace humans in performing work tasks.

Nationally, college enrollment is expected to decline over the next few years. With a downward trend in the number of high school graduates in North Carolina, there is concern that the number of students in our state may also decline. Along with lingering concerns about tuition fees and student debt, the role of colleges and universities in training future workers may be about to change.

Indeed, with the potential need to retrain thousands of workers for the new skills needed in the post-pandemic economy, universities and colleges may be motivated to step up and expand their program offerings to adults between two professions.

These programs will likely be much shorter than the traditional four-year degrees common in higher education. Many mature students will have family and other responsibilities that require rapid retraining. Degree programs will therefore be shortened to meet this need. The result could be that future universities will no longer be dominated by students aged 18-24. “Middle-aged” may ultimately be the common description of prospective college students.

Let me conclude by being very futuristic. While current labor market issues are likely to drive changes in businesses and educational institutions, advances in interactive technology can create entirely new ways of education and work.

The pandemic has caused an explosion of computer technology for learning and interacting. During the pandemic, Zoom classes and meetings offered ways to learn and meet without personal contact. Although not as prominent as during the peak of COVID-19, “zooming” continued after the pandemic due to its convenience and cost advantages.

A big downside to Zoom is the inability to directly interact with other people like company colleagues, other students, and instructors. Yet futurists say it’s only a matter of time before technology overcomes this limitation. In the comfort of your home, the technology would create duplicates of yourselves – called “avatars” by some – that would provide a sensory experience to you from a distant location directly. It’s as if you were there! Such a capability could improve both learning and working, even over long distances. Versions of this technology already exist.

The workforce issues we see today can be a bridge to new ways of learning and working in the future. Decades from now, people may look back and consider our present methods of education and work to be extremely primitive. Is it exciting or scary? You decide.

Walden is William Neal Reynolds Professor Emeritus at North Carolina State University.


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