Worker shortage not just a pandemic problem in Southern California

Waiting for the car of your dreams? Found that Fast-Food isn’t so fast anymore? On hold for hours waiting to talk with someone about your account? Did you think all of that would go away when the pandemic eased up? It might not be that simple. There are some other basic changes we are facing according to new analysis released by the UC Riverside School of Business Center for Economic Forecasting and Development.

“For several decades there has been a substantial slowdown in the growth of Americans in their prime working years,” said Christopher Thornberg, Director of the Center for Economic Forecasting, and the report’s author. “Whether it’s the missing factory worker, delivery truck driver, or salesclerk, the scarcity of workers is hindering the ability to connect demand to supply and is slowing economic growth.”

There is a worker scarcity “driven by lack of basic, long-term population growth which is the true underlying cause—and a critical future challenge for the economies of the United States, and particularly California.”

The analysis shows long-run population growth of people between the ages of 25 and 54 accelerated dramatically in the U.S. in the 1970s, peaked in the mid 1980s at over 2% growth per year, and then collapsed just as fast, driven by sharp declines in birthrates. International migration into the United States jumped 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 working age people in the nation is 0.2%, one-tenth of what it was 40 years ago.

“This is a long-term demographic problem, not a short-term cyclical one,” said Thornberg. “It is not going to disappear as the COVID crisis fades.”

According to the analysis this national labor shortage is worse in Southern California where housing stock is limit creating a “functional cap on population and labor force growth, degrading affordability and driving workers and businesses to other locations.”

Policymakers and government agencies need to concentrate on increasing labor supply. The report suggested a few ways they can relax labor market regulations to allow employers maximum flexibility in how they hire their workforce:

• Restrictions on gig work and flexible work schedules should be reduced, not heightened as California is currently doing.
• Older employees who wish to remain active in the labor market retirement benefits. should be encouraged and supported by reducing or eliminating potential reductions to existing
• Regulation should shift to allow employers to offer a variety of wage/benefit/training packages depending on worker desires rather than being based on preset publicly mandated minimums.
• Policymakers should relax licensing requirements and staffing rules.

The UC Riverside School of Business Center for Economic Forecasting and Development is the first major university forecasting center in Inland Southern California. The Center is dedicated to economic forecasting and policy research focused on the region, state, and nation.