September 01, 2003

That Giant Sucking Sound is Getting Louder

Blogging is lite the U.S. markets are closed for Labor Day. Fittingly, let's take a closer look at the labor market. First, here's the key paragraph : "Longer-term, as the baby boomers retire, the erosion of workforce loyalty will become an even bigger problem for corporate America. By 2012, more people will be leaving than entering the workforce," said Marc Drizin, loyalty specialist at Walker Information, a research firm in Indianapolis. 'The biggest challenge for our economy over the next 50 years will not be a shortage of jobs; it will be a shortage of labor,' said Martin Regalia, chief economist at the U.S. Chamber of Commerce, an association with affiliates representing some 3 million firms nationwide. Of course, companies have been cutting wages, benefits and positions not to alienate workers but to stay in business, Regalia said. In a tough economy, they must keep prices low enough to be competitive while still rewarding investors." The first assumption in the article is that boomers will retire on schedule...not if they don't have the money they won't. You may see the average retirement age go up--especially if the government starts means testing Social Security benefits. But even if the boomers do retire on schedule, the assumption here is that corporate America will fill those jobs by hiring other Americans. It may not happen. First, allowing your workforce to get smaller through attrition (not filling vacancies caused by retirement) is a low-cost way of downsizing without paying high unemployment compensation. You can get smaller and more productive the natural way--with a smaller workforce. Let's assume, for a second, that each baby boomer retirement leads to one vacancy that will be filled. Who is to say it won't be filled by foreign labor? And I'm not talking about immigration. I'm talking about outsourcing. The great boomer retirement may lead to an exodus of jobs from the U.S. to places where the labor is cheaper. How extensively this happens depends on the type of job, of course. You can't outsource, for example, a dental hygienist. But there's no reason you couldn't outsource all the back-office record keeping and billing, is there?


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