What trends are observed in hourly workforce shrinkage statistics over recent years?
The labor force participation rate is 62.7%, down from 63.3% in February 2020 and 67.2% in January 2001. The decline of Americans’ labor force participation is nothing new—fewer and fewer Americans have been participating in the labor force for decades, resulting in a smaller workforce that is expected to continue shrinking for years to come.
In fact, workforce participation remains below pre-pandemic levels. We are missing 1.7 million Americans from the workforce compared to February of 2020.
In 2023, employers added 3.1 million jobs. A strong jobs market is good news; however, many of those job openings are going unfilled because the U.S. does not have enough workers to fill them. If our labor force participation rate today was the same as it was in February of 2020, we would have more than two million more Americans in our workforce to help fill those open jobs.
Moreover, more than 44 million Americans quit their jobs in 2023, and 3.4 million quit in January 2024 alone. However, the hiring rate has outpaced the quit rate since November 2020. This means Americans are seeking – and finding – better opportunities with new employers and in new occupations and industries.
Additionally, despite job openings, the number of layoffs and discharges increased in 2023. Following 2 years of growth, the number of job openings fell for the first time since 2009. Overall, these trends denote a tightening in labor demand. Layoffs are expected to persist into 2025, driven by economic pressures and industry adjustments to technological advancements.
Furthermore, due to breakdowns in the childcare system, the states surveyed missed an estimated average of $2.7 billion annually for their economies. The pandemic created a vicious cycle for the industry; to return to work, workers need reliable childcare, but providers are facing immense challenges themselves.
Between 2019 and 2023, the 10th-percentile real hourly wage grew 13.2%, while lower-middle-wage workers saw a 5.0% increase, and middle-wage workers had only a 3.0% increase. This pace of wage growth indicates a significant shift in the wage distribution, with the lowest-wage workers experiencing the strongest growth compared to previous years.
Moreover, wage compression has occurred since 2019, with low-wage workers seeing exceptional wage growth in stark contrast to the previous 40 years, where their growth was almost negligible. In the most recent period, low-wage workers experienced growth of 3.1% annually, whereas, from 1979 to 2019, they had only 0.1% annualized growth.
The implications of these trends suggest that thoughtful policymaking after the pandemic can ensure that low- and middle-wage workers continue to see improvements in their standard of living. However, the recent gains may be short-lived if policymakers act to curtail the recovery.
How does the hourly workforce participation rate compare across different demographics?
The Labor Force Participation Rate is defined by the Current Population Survey (CPS) as ‘the number of people in the labor force as a percentage of the civilian noninstitutional population.’ This metric is crucial for understanding how different demographics engage with the labor market. Specifically, it represents the percentage of the population that is either working or actively looking for work.
In 2023, the labor participation rate in Qatar amounted to around 89.62 percent, making it the country with the highest labor force participation rate worldwide. The labor force participation rate is the proportion of the population aged 15-64 that is economically active during a specified period.
In the U.S., the labor force participation rate for Black or African American individuals is at 62.40%, which remains consistent with last month and lower than 63.40% from last year. This figure is below the long-term average of 62.56%. Among various race and ethnicity groups in 2022, the labor force participation rate was highest for:
- Native Hawaiians and Other Pacific Islanders: 66.6 percent
- Hispanics: 66.3 percent
- People of Two or More Races: 65.3 percent
Furthermore, the labor force participation rates for fathers show that:
- 93.7 percent for White men
- 93.2 percent for Hispanic men
- 92.9 percent for Asian men
- 88.4 percent for all fathers
Among women, White women had the second highest labor force participation rate at 56.7 percent, followed by:
- Hispanic women: 56.0 percent
- Asian women: 55.8 percent
However, it is important to note that the U.S. labor force participation rate has declined since 2007, primarily due to population aging and ongoing trends that preceded the Great Recession.
What are the main factors contributing to the decline in average weekly hours worked?
The decline in average weekly hours worked can be attributed to several key factors:
- Factors such as unpaid absenteeism, labor turnover, part-time work, and stoppages lead to average weekly hours being lower than the scheduled hours of work for establishments.
- Changes in working time patterns are influenced by various driving factors, including:
- Globalization and business restructuring, which challenge current work organizations.
- The rise of new information technologies.
- Demographic changes.
- Current and future pandemics.
- Climate change.
- Between December 2019 and December 2023, the median number of hours worked fell from 38.4 to 37.7 a week, representing a decline of almost two percent.
- Falls in hours worked are mainly due to a decrease in paid overtime and an increase in part-time working.
- The shorter workweek is also due to employees’ desire for more flexibility, rising wages, job availability, and talent shortages, among others.
- The decline in hours worked particularly affects four main groups:
- Women
- Young adults
- Highly paid workers
- Employees at small businesses
How does hourly workforce shrinkage affect job vacancy rates and employer challenges?
As of late April 2021, there were over 9 million open jobs in the U.S., a record high. Recent reports show that employers across the country are scrambling for ways to fill these open requisitions. While it might sound contradictory, the U.S. is experiencing higher unemployment numbers alongside a labor shortage. Conversations with clients reveal that filling low-wage and hourly positions has been particularly challenging.
Research indicates that minor geographic differences in available talent and open jobs can lead to higher unemployment, even within the same city. Many Americans moved for family and COVID-related reasons in the last year, which implies that recruiting challenges can increase for employers whose job sites have remained static.
Since 2020 alone, real average hourly earnings have decreased by more than 3%. For instance, one organization we worked with had been offering service representatives the same salary of $30,000 annually for the last 20 years. The organization’s CEO was shocked to realize that the current inflation-adjusted salary would be $45,000, leading to an increase in wages to that precise number.
Furthermore, investing in COVID safety is crucial. As long as workers fear the impact of COVID on their health, they will hesitate to return to work. Employers can gain the trust of their workforce by continuously following best practices to reduce exposure and by holding themselves accountable to measure and communicate COVID counts at work.
The number of job vacancies per unemployed person increased by more than four times on average across various economies between 2010 and 2023, and by almost seven times in the U.S. Advanced economies that have thrived due to more robust labor supplies must adjust their strategies accordingly. With the unemployed-to-job-openings ratio remaining under 1 at 0.9, the labor shortage continues to dominate recruitment conversations. For HR leaders, this necessitates a focus on retention strategies to secure existing talent.
Looking ahead, in less than 10 years, more than 85 million jobs could go unfilled due to a lack of skilled workers. With fewer Gen Zers entering the workforce to replace retiring boomers, the U.S. will soon experience an exceptionally shallow labor market.
What predictions are being made for the future of the hourly workforce in the U.S.?
The future of the hourly workforce in the U.S. is expected to evolve significantly due to various factors. Here are some predictions:
- Digital Recruitment: More companies will turn to online job platforms and social media to connect with potential employees. These digital platforms offer a wider reach and more efficient screening processes, allowing employers to quickly identify candidates with the right skills and experience. The integration of AI and machine learning in these platforms will further streamline the recruitment process, making it more data-driven and personalized.
- Shift to Flexible Employment: Workers are increasingly seeking flexible, short-term employment opportunities. In response, businesses will need to adapt their hiring strategies to accommodate this shift. This may include offering more contract-based roles and embracing a more fluid workforce.
- Importance of Flexibility: Flexibility will be a critical factor in attracting and retaining hourly workers. Employees are increasingly looking for roles that offer a better work-life balance. Employers who offer flexible scheduling, remote work options, and a focus on mental health and well-being will be more attractive to potential hires.
- Focus on Learning and Development: The demand for continuous learning and development opportunities is on the rise. Hourly workers will seek employers who invest in their growth and provide pathways for advancement. Offering training programs, workshops, and career development plans will be crucial in attracting and retaining talent.
- Projected Job Growth: Total employment is projected to grow by 6.7 million jobs from 2023 to 2033, driven mainly by the healthcare and social assistance sector. While overall unemployment has returned to pre-pandemic levels, industries relying on hourly workers are still embroiled in a labor crisis, potentially leading to an exodus if employee experience isn’t prioritized.
- Labor Market Strength: In 2025, the U.S. labor market is expected to remain strong as an aging population restricts labor supply growth. Firms will increasingly compete for workers, which may challenge the recent deceleration in wage growth.
In summary, the hourly workforce will likely see more digital recruitment methods, a shift towards flexibility, an emphasis on employee development, and changes driven by demographic factors in the coming years.
