Without reforms, America's employment prospects are bleak

Without reforms, America's employment prospects are bleak
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The American workforce is expected to face multiple headwinds over the next decade, including an aging population, greater automation and continued stratification by skill levels and educational attainment. These challenges — made clear in the Bureau of Labor Statistics recently issued employment projections for America in 2026 — highlight the need to promote greater economic mobility through policies that range from labor law to land-use regulations.

There long have been warnings about American workers' diverging economic prospects, with middle-skill occupations hollowed-out from the twin disruptions of technological innovation and globalized markets. The BLS report reminds us that American labor markets also must deal with an aging population that will further slow rates of gross domestic product growth and labor-force participation. By 2026, 24.8 percent of the labor force will be aged 55 and older, in contrast to 22.4 percent today and 16.8 percent in 2006. This demographic shift also will put greater strain on America’s pension systems and harm geographic mobility rates, as younger Americans stay close to aging family members.

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Increased automation will continue to play a major role in American labor markets over the next decade. The BLS expects a further decline in the total number of jobs in occupations highly subject to automation, such as data-entry roles and office clerks. They also expect the retail sector to be hit hard by both automation and online shopping, with a net decline in cashier positions and only a 0.3 percent increase in industry employment. If the projections are right, the negative impacts that have hit the middle-skill sector of the labor market will begin seeping into the lower-skilled occupations, particularly those that do not require social skills and can be automated.

 

The report also predicts a further polarization in labor market outcomes, particularly for higher skilled and educated workers who are more productive as a result of technological change. Workers with graduate degrees will see the largest job growth over the next decade, followed closely by those with only a bachelor’s degree. Middle income jobs will grow about 50 percent less than jobs in either the higher or lower ends of the spectrum. Lower paying jobs will grow partly due to the aging population, who will require more personal caretakers.

Not all of the projections are doom-and-gloom. Five of the 10 fastest-growing occupations projected by BLS — several of them in the health care industry — require a high school or associate degree to enter. The labor force participation rate, while expected to be lower in 2026 than today, is projected to fall more slowly than in the previous decade and will be driven primarily by the aging population. GDP is projected to grow at two percent annually, which would be a better performance than in the last 10 years, when we struggled to hit 1.4 percent annual growth.

There also is growing appreciation for the malignant effects that entrenched interests and regressive policy can have on broad-based economic growth, making it harder to deal with these underlying economic changes. To reduce the negative impacts and transition costs associated with automation, we will need reforms to land-use regulation and labor law. Land use regulations and zoning laws have driven up the cost of housing and limited geographic mobility, hampering worker’s ability to adapt by moving to areas with better prospects. Labor markets are ossified by occupational licenses and noncompete agreements, often for the very non-college-educated workers whom BLS projections show will be most affected by these troubling trends.

While there will always be a premium for highly skilled and educated workers, this polarization can be cushioned by ensuring that certain opportunities are available to everyone early in life. Educational opportunities and internships, critical to establish a foothold in today’s workforce, are often disproportionately obtained by the upper-middle and upper classes through preferential treatment, regardless of merit.

Additionally, cultural and policy change to encourage greater numbers of men to enter traditionally female-dominated fields would help a particularly hard-hit population of workers who have been unable to adapt to these economic changes. For example, 70 percent of physician assistants and 80 percent of home health aides are female, which also happen to be some of the fields BLS projects to be the fastest-growing over the next decade. A more equitable distribution of work across gender lines would help working-class men while also giving greater opportunity to women entering fields populated mostly by men.

Reports like the BLS projections often have the aura of inevitability, particularly when they reinforce our existing perception of the problems in front of us. Instead, we should view this report as an opportunity to tackle many of the barriers that make it harder for our historically tenacious workforce to adapt to a rapidly changing economic landscape.

Garrett Watson (@GS_Watson) is a project manager with at the R Street Institute (@RSI), a nonprofit that supports limited government in Washington, D.C.