Focus on building the best possible community. If you are great, people will notice and opportunities will appear.
paraphrased from Mark Cuban
Okay, I admit that the title of this blog post is a bit of a stretch, but I wanted to get your attention.
The truth is, what has historically made you successful in economic development will conspire to cause you to fail going forward. The world dynamics have changed and you need to change with them to help your community get on (or stay on) a path to sustainable economic prosperity. I just finished reading Mark Lautman’s book – When The Baby Boomers Bail: A Community Economic Survival Guide, and interviewing him for a podcast. Mark’s perspective is well worth paying attention to.
Mark makes a great case that demographics are having a profound impact on the way economic development really works and as a result, the profession needs a new business model. Thanks to the aging baby boomer population the historical approach of focusing on job attraction and expansion is no longer going to serve your community well. For the first time in our Nation’s history, there will be a shortage of skilled workers to backfill job vacancies created by retiring baby boomers. The competition is shifting rapidly from attracting/creating job opportunities to becoming a community that can compete for skilled labor. Companies are increasingly making site selection decisions based on a location’s ability to supply and attract the needed skilled labor. Never before has it been more important for economic development professionals to collaborate with colleagues in community development, workforce development and education.
How Big Is The Baby Boomer Gap Problem?
I decided to surf the Internet to try and get a handle on just how big a challenge the economic development profession is actually facing. Mark Lautman does a nice job summarizing it in his book. But, I want to get a broad-based perspective. Here are some soundbites that provide a look at the magnitude of the problem.
- There are 77 million baby boomers in the workforce who will be retiring in unprecedented numbers.
- US employers will need 30 million new college-educated workers by 2020. But, fewer than 23 million will graduate from college in the next 10-years.
- By 2018, the US may have 4 million more jobs than workers to fill them.
- When Boomers retire, they take with them institutional knowledge and skills. Rebuilding that knowledge and skill base can be time-consuming and expensive.
- All else equal, fewer workers means less economic growth.
- Companies are paying a tax on two fronts. They paid to hire and train employees, and now they will pay for the loss of experience and knowledge.
- As aging baby boomers begin retiring, the effects on the overall economy and on certain occupations and industries will be substantial.
- Professional occupations have a disproportionate number of older workers, particularly those requiring post-graduate degrees. The top 3 impacted occupations are airline pilots, management analysts and teachers.
- By 2018, all but the youngest baby boomers will be of retirement age.
- The Baby Boomer population could redefine our notions of later life stages by challenging expectations regarding part-time work, leisure, volunteerism, family roles and structures, and continuing education and skills development.
- Many U.S. companies and nonprofits have not trained, prepared, or secured sufficient numbers of mid-level managers to fill the executive ranks nationally. A talent pool shortage among those with executive quality potential significantly affecst the level of competitiveness of U.S. industries and the quality of service from the national public and nonprofit institutions.
- As boomers retire, expect wide-ranging effects: not only do retirees produce and contribute less in an economic sense, they tend to spend less as well — not a recipe for economic growth.
- The problem won’t just be a lack of bodies. Skills, knowledge, experience, and relationships walk out the door every time somebody retires—and they take time and money to replace.
- The mass migration of baby boomers into retirement will leave millions of open positions with only a fraction of qualified internal or external talent remaining with the capabilities to fulfill these roles. Organizations that are lucky enough to fill these roles will probably overpay to do so while those who can’t (or provide inadequate replacements) run the risk of losing their competitive advantage in the marketplace.
- As the Baby Boomers retire, immigration flows change, and the number of young people entering the labor force declines, the number of new jobs needed to maintain pre-recession employment norms will decline.
- Every person who will be hired in the next 25 years has already been born.
- In the US, the economic dependency ratio is increasing.
- In 2050, there will be 1.5 people outside the work force for every 1 inside.
It is kind of mind blowing. Clearly the dynamic is shifting and companies need to get access to skilled labor simply to remain globally competitive let alone to support any expansion plans they may have.
Are CEOs And Their Boards Concerned About This Problem?
The short answer is yes. Almost every CEO I speak with tells me they really don’t need the help of local economic development professionals to create jobs. They need help in getting access to skilled labor to fill current and expected jobs openings created by retirements.
But, rather than rely on my straw poll let’s take a look at the findings from Area Development’s 28th Annual Survey of Corporate Executives.
“Historically, highway accessibility and labor costs have ranked as the top factors in our Corporate Survey respondents’ location decisions. However, this year, those factors were outranked by availability of skilled labor, which is considered “very important” or “important” by 95.1 percent of the respondents and is in 1st position. Manufacturers’ and other firms’ need for skilled labor is becoming increasingly pronounced and has been well documented. An aging worker demographic, along with a lack of interest in manufacturing careers among young people, has put the issue at the top of site selectors’ priorities. A new study from ThomasNet.com says this is “a ticking biological clock” for the manufacturing sector. This is confirmed by the fact that more than 70 percent of the survey respondents say high unemployment rates are not making it easier for them to find the labor they need. More than 70 percent also say the unemployed are primarily lacking advanced skills, e.g., machine tool programming, advanced welding, etc.”
The fact that 95% of survey respondents now rate availability of skilled labor as the top priority suggests they are beginning to feel the pain and are now worried. having been in the private sector myself, I can tell you there is nothing worse than investing the time/money to find a candidate with the right skills for a job opening only to have the candidate reject a job offer because he/she doesn’t want to live in the community. It is really a double whammy because you know that candidate will end up in a competitive company operating in a community more aligned with his/her interests.
What Can You Do?
It is time to shift your focus to designing and deploying strategies that make your community a desirable place to retain and attract skilled labor. Retain the baby boomers who want to work as consultants or part-time (Mark Lautman’s third bedroom concept). Support their needs. Find ways to make your community one where people want to reside.
I advocate shifting your focus from serving CEOs to viewing community residents as your client. Understand how easy/hard your community makes it for residents to achieve their American Dream and make decisions to lower any barriers. In short, become an American Dream Community. If people can more easily achieve their American Dream by living in your community they will want to stay and/or move there. Make it easy for those right employee candidates to say yes to a job offer from a company doing business in your community. make it very difficult for people living in your community to decide to relocate elsewhere.
Does This Mean jobs Are Unimportant?
Of course not. It simply means that as a profession the scope of work needs to broaden. It means taking a more collaborative position with the other organizations in your community that contribute to the solution. It means aligning and synergizing the efforts so that collectively your community wins. It will mean EDOs need to develop stronger collaboration and strategic planning design/deployment skills. But, this is not an impossible challenge.