Varying Reasons for Labor Shortages

Nobody wants to return to the recessionary days when large numbers of people were seeking job openings that didn’t exist. But neither is it good when employers cannot find workers to fill job openings—and this is happening in the labor markets for some occupations. The reasons vary.

One example is the market for airline pilots. Republic Airways Holdings, a regional carrier, last year reduced its fleet of 243 aircraft by 27 because of a lack of pilots. It expects to continue such cuts at least through the first half of next year.

Part of the blame for these cuts, according to Republic, belongs to new FAA regulations. One regulation raises the minimum number of hours of flight experience for most commercial passenger pilots. Another adds to the amount of rest time required for pilots, reducing their productivity.

But the Air Line Pilots Association says that the main reason for the shortage is the low pay that regional airlines are offering. In 2014, ALPA reported that for first officers, the starting pay averaged a mere $21,285. The association says that many pilots lost jobs because regional carriers went out of business, and these pilots would be glad to return if the wages were commensurate with their level of professionalism. Foreign carriers are offering much sweeter compensation packages.

A 2014 report (PDF) by the Government Accountability Office cites several additional factors. Reductions in defense spending have diminished the number of retired military pilots available for equivalent civilian jobs. Pilot jobs in general aviation (non-passenger flights) have experienced cutbacks, thus reducing opportunities for new pilots to accrue flight experience. And collegiate pilot-training programs are attracting fewer students in recent years—perhaps because of low pay in the industry. Thus there is concern that the pipeline of future pilots will not be able to provide the workers needed to replace those who retire because of age limits.

A completely different set of dynamics affects the labor market for agricultural workers, where shortages are also expected. Recently, a few states have passed laws making it easier for police to demand proof of immigration status and making it harder for businesses to hire workers who lack documentation. Citizens and immigrants with legal papers have not taken the place of these displaced workers, leaving many farmers without a way of bringing in crops. The American Farm Bureau Federation expected 2012 losses of as much as $9 billion as unpicked crops rotted in the fields.

However, a get-tough policy on undocumented immigrants is not the only factor contributing to the shortage of agricultural workers. In fact, many observers of this job market predict that even reform of the immigration system—which is stalled in Washington—will not solve the problem. Mexico, the source of most of our agricultural workers, is improving its education system and diversifying its economy—including expansion of its own agriculture industry— thus providing more opportunities for its people to find good jobs at home.

Two other occupations facing worker shortages are truck drivers and pizza delivery drivers. Manufacturers are expecting to have trouble finding skilled workers in the near future.

Worker shortages usually cause employers to bid up wages for the limited number of willing and able workers. None of the present shortages seems likely to reach the extreme that leads to dangerous inflation, and a modest amount of wage growth would be welcome in the present economy. Another response is for employers to apply appropriate kinds of automation, such as harvesting machines, and this usually creates good-paying jobs in fields such as engineering, programming, and machine maintenance.

The economy never reaches perfect equilibrium between supply of and demand for workers, and the current worker shortages are much less damaging than the job shortages of the recent recession years.

A Third Look at My Predictions

In 2012, I did a retrospective analysis of predictions I made in 2009. Three years later, it’s now time to take yet another look. The original predictions consisted of occupations that I selected to include in the book called Great Jobs in the President’sStimulus Plan (JIST, 2009). My goal was to identify occupations that were likely to benefit from the proposed economic stimulus and that would do well once the economic recovery built up steam. It turns out that many of my recommendations were poor advice for the short term, but on balance my picks were good advice for the long term. And I’m okay with that. Occupational choice (as opposed to job choice) should be a long-term decision.

Understand that at the time I wrote Great Jobs in the President’s Stimulus Plan, I had access to only an incomplete picture of what would be in the stimulus plan that eventually became law as the American Recovery and Reinvestment Act. President Obama had not even been sworn in when I delivered the manuscript to the editor. During the subsequent months that it took ARRA to work its way through Congress, political horse-trading resulted in considerable changes to the plans originally outlined by the president-elect’s economic advisors—the plans that I used in researching the book. In the introduction to the book, I warned about the limitations of my predictions.

But I also noted that the stimulus plan was designed to do more than just reopen the jobs that had been lost.  One important goal was to create jobs in sectors of the economy that would anticipate the directions where the American economy needed to go to remain competitive in a global job market. Therefore, the promise of these “great jobs” was not just a matter of short-term employment but also the potential to be good long-term choices. And when measured for the long term, based on the most recent job-market projections, my recommendations still hold the promise of success.

Let’s look at the record in detail, measuring my predictions against actual changes in the workforce between May 2009 and May 2014. (The BLS issues estimates of workforce size for May of each year. May 2009 was the latest May before the stimulus could start to influence the economy; May 2014 is the latest May for which figures are available.)

In Great Jobs in the President’s Stimulus Plan, I selected eight industries that the ARRA was designed to promote: construction; education; energy; health care; management, scientific, and technical consulting services; manufacturing; scientific research and development services; and wholesale trade. I identified 300 occupations that are important in these industries and that had reasonably good outlook projections. This set of 300 included some occupations (such as Technical Writers, Sales Engineers, and Industrial Truck and Tractor Operators) that are not closely linked to any of the eight industries but are important across industries. These 300 occupations, taken from the O*NET-SOC taxonomy, represent 267 unique SOC occupations for which it is possible to obtain workforce statistics.

Now let’s look at the scorecard of how my picks performed during the recovery. The baseline for comparison is 3.4 percent. That is, the workforce of all occupations grew by 3.4 percent between May 2009 and May 2014. My set of 267 SOC occupations, the “great jobs,” grew by an overall average of only 2.5 percent—in other words, did a bit worse than the workforce as a whole.

It’s interesting to note which industries grew better than others. The jobs I picked from the management, scientific, and technical consulting services sector actually shrank by an average of 1.2 percent. The education jobs grew by only 1.6 percent; the construction jobs by 2.5 percent; and the wholesale trade jobs by 3.4 percent. The other industry groupings of jobs in the book grew faster than the workforce-wide average of 3.4 percent. Most notably, the energy jobs grew by 7.8 percent and the manufacturing jobs by 8.2 percent.

But recall what I said earlier about how the stimulus plan was designed to boost the sectors of the economy with the best prospects for long-term growth, and about how occupational choice should be based on long-term prospects. For the long term, the baseline is 10.8 percent—that’s how much the workforce as a whole is projected to grow between 2012 and 2022, the latest forecast available from the BLS. Against this baseline, the occupations I chose for the book score much better. The 267 unique occupations in the book have average projected growth of 13.6 percent over this long term.

In fact, of all the industries into which I grouped the occupations, only one is projected to fare worse than the average for all occupations: wholesale trade. The occupations that I chose from this sector are projected to grow 10.7 percent (one tenth of a percent slower than the baseline). My picks in all the other industry groupings are projected to grow faster. The occupations I picked in two industry groupings have especially rosy outlooks: In scientific research and development services, the occupations are projected to have 20.1 percent growth; in health care, 25.2 percent.

One lesson to take away is that it can take many years for an economic stimulus policy to take full effect, and it can also take many years before an individual’s career choice turns out to be a good one. Before making a choice, learn about the long-term economic trends for the occupation. And while you’re at it, don’t look only at the economic trends. Also consider the trends in work conditions.