6 March 2023

What is driving current labour market shortages and how older workers could help

By Joop Schippers

Many countries are struggling with worker shortages right now as companies in the US, UK and the EU all struggle to fill job vacancies.

This is often attributed to pandemic-related phenomena such as the ‘great resignation‘ or ‘great reshuffle‘, when many people left or changed jobs to improve their work-life balance. Long-term sickness also plays a role in countries like the UK.

But the underlying reason for these mounting shortages is the combination of a decline in workers aged 35 years and under and an ageing workforce. This may sound like the same thing, but it isn’t.

Falling birth rates in many countries since the 1960s have meant that fewer young people are now entering the labour market to fill the vacancies left by the outflow of baby boomers. This trend is happening at different times in different countries.

But broadly speaking, it means that the labour force growth seen in many countries, decade after decade since the start of the Industrial Revolution, is gradually coming to an end.

This confronts employers – and society as a whole – with a completely new situation. Such shortages in the labour market are something with which they have no experience.

It also carries the risk that (parts of) society will grind to a halt due to a lack of staff, for example, in healthcare, childcare, public transport, the police and many other sectors that are essential for the proper functioning of a country.

Technology (artificial intelligence or robots) will probably relieve this pressure over the long term. But an obvious short-term solution is the better deployment of older employees.

Life expectancy is still increasing every year in many countries and almost everywhere in Europe, but there has not been a similar rise in people staying in the labour market for longer across all of these countries. Even if older people want to continue to contribute to the labour market and society, research shows they can feel discriminated against when applying for new jobs or even in their current positions.

Why older workers might find it hard to get hired

So why is it so difficult for older people to find a place in a labour market that is calling out for more workers? The explanation is twofold.

In the first place, many directors, HR managers and department heads grew up – like much of the world – in a society in which old was largely synonymous with ‘worn out’. This kind of ageism applies not only to companies, but also to the television and movie industry, politics and sport, among other areas.

The idea that an older person should be replaced with someone younger can even be the case in countries where as much as a quarter of the population is over 65 years old. Such a deeply ingrained and widespread habit does not simply disappear and is also difficult to prohibit by law.

A second, perhaps more concrete reason, is that employers – sometimes quite rightly – believe that older workers tend to have outdated knowledge and skills. If someone has done the same work for years, they could be very good in a particular niche.

But if that niche is a specific machine that hasn’t been updated in decades, for example, when it breaks down, they may quickly find themselves sidelined because they have not learned how the 2022 equivalent works.

And while many older people want to build the necessary knowledge and skills to work this new machine, others may be less enthusiastic. Even then, research shows that employers can be reluctant to invest in new knowledge and skills for older employees. They might wonder how long the organisation will benefit from these investments.

Lifelong learning and development

The troubling issue here is that investment in lifelong learning and development is not standard throughout people’s careers. Participating in training may be seen as a kind of bonus for employees who perform well (a few days out of the office with like-minded people, for example) or a repair of a serious shortcoming or mistake by an employee – a punishment rather than a reward.

Workers should instead be given regular opportunities to refresh well-worn knowledge and acquire new skills throughout their careers. This prevents employees from becoming obsolete towards the end of their careers and seeing their chances of employment drain away.

Organising this would require intensive cooperation between employers, unions and the government. Probably neither party would be able or willing to make these investments entirely on their own.

But it is essential to prevent future generations of older people from being sidelined, even as companies cast around for ways to combat labour market shortages.

Even with a large-scale training offensive for older workers, it will not be easy to break the tradition that employers prefer younger workers. Establishing some good examples now could help to accelerate this process, providing older employees with a new lease of life in their careers and helping to ease the labour shortage in countries around the world.The Conversation

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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Joop Schippers is Professor of Labour Economics at Utrecht University.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.