Ethnic/Racial Makeup of Specific Locations is Likely to be an Important Determinant of Future Labor Shortages

12 Nov. 2012 | Comments (2)

Every day over the next 18 years, nearly 10,000 baby boomers will reach retirement age and must be replaced by younger workers. While nationally there may be enough young workers in the labor force to fill these positions, in many states, these incoming workers are significantly less educated than retirees and may not possess required skills. Such gaps in education levels between younger and older co-workers reveal the causes of significant talent shortages looming in the near future.

Table 1 compares the share of the labor force between younger (25-34) and older workers (55-64) who possess a bachelor’s or higher-level degree. In some states, the older worker is more educated than the younger worker, and in other states, the opposite is true. States where the older worker is more educated than the younger are most likely to experience significant labor shortages within the next decade.

 

Table 1 - Differences in the share of the labor force with a BA among young and older cohorts for selected states

 

State

Percent with BA 25-34

Percent with BA 55-64

Cohort difference

New Mexico

23%

38%

-15%

Utah

28%

37%

-9%

Arizona

26%

33%

-7%

Maine

29%

36%

-7%

Vermont

36%

42%

-6%

Colorado

37%

43%

-6%

California

32%

38%

-6%

Texas

28%

33%

-6%

Nevada

23%

28%

-5%

Idaho

25%

30%

-5%

Florida

27%

32%

-5%

Washington

33%

37%

-4%

Georgia

31%

34%

-3%

Michigan

30%

32%

-2%

Maryland

41%

43%

-2%

Virginia

39%

40%

-2%

Tennessee

29%

30%

-1%

Connecticut

41%

41%

0%

North Carolina

31%

31%

0%

Wisconsin

31%

31%

0%

Indiana

29%

29%

0%

Missouri

32%

31%

1%

Ohio

31%

30%

1%

New Jersey

42%

40%

2%

Illinois

39%

35%

4%

Minnesota

39%

35%

4%

Iowa

33%

29%

4%

Pennsylvania

37%

32%

5%

Massachusetts

50%

44%

6%

New York

44%

37%

6%

Source: 2010 American Community Survey

 

Why do some states face a significant gap, while others do not?

A state’s demographic characteristics help to answer this question. For example, states where the older workforce is more educated than the younger hint at the driving force behind the talent shortages. These states include a large minority population, with a specifically large proportion of Latinos.

Excluding the Asian population, minority populations share two characteristics that exacerbate the education gap between the younger and older aged worker. The first is demonstrated in Chart 1: Younger minorities are much less likely to have a bachelor’s degrees compared to the white population.

The second characteristic is demonstrated in Table 2: Younger minorities comprise a much larger proportion of the workforce within their own age group than the older generation.

Both of these characteristics are especially large for the Hispanic population. The percent of young Hispanics with a BA is 23 percentage points lower than the young, white population. The share of Hispanics in the workforce aged 25-34 is 21% higher than the share of Hispanics aged 55-64.

The result is most clear in New Mexico, where the younger workforce, comprised of the lowest share of whites (35.5%) and the largest share of Hispanics (50.9%), drives a 15% educational gap between the young and the old. Other high educational gap states, such as Utah, Arizona, Colorado, California, Texas, and Nevada, tell a similar story.

While changing demographics can explain why most of these states are at risk of talent shortages, there are still large education gaps among predominantly white states. For example, Maine and Vermont, two low density, northeastern states, face a large negative educational workforce gap, despite having a population that is 95% white. There are also states, such as New York, that show positive education gaps, despite a growing Hispanic and minority population. The cause of this particular phenomenon is still not clear to us.

In sum, the ethnic/racial makeup of specific locations is likely to be an important determinant of future labor shortages. Companies should take this into account when forecasting and planning recruiting needs in different locations. In our next blog, we will investigate in which specific occupations are minorities most under-represented, and, in turn, may undergo the most significant talent shortages.

Chart 1  - Percent with BA by age and racial/ethnic group

 

Source: 2010 American Community Survey

 

Table 2 - Share in the labor force for young and older cohorts and selected states

Source: 2010 American Community Survey

View our complete listing of Labor MarketsDiversity & Inclusion, and Talent Management blogs.

  • About the Author: Gad Levanon, Ph.D.

    Gad Levanon, Ph.D. Gad Levanon is director of macroeconomic research at The Conference Board, where he also leads the labor markets program. He also serves on The Demand Institute™ leadership team. Levanon create…

    Full Bio | More from Gad Levanon, Ph.D.

  • About the Author: Jamie Mitchell

    Jamie Mitchell Jamie Mitchell is a research analyst intern in the economics department at The Conference Board. Mitchell is an economics major in his junior year at Dartmouth College. At Dartmouth, Mitchell is a mem…

    Full Bio | More from Jamie Mitchell

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  1. Josh Kessler 0 people like this 14 Nov. 2012 11:39 AM

    Interesting article. To get a better understanding of the shortage of educated workers, it would be interesting to know the total numbers of workers in these two age brackets, not just the percentages.

    Of the states where a higher percentage of older workers are educated than younger workers, the majority are experiencing immigration booms (NM, AZ, CA, TX, etc.). The immigrants tend to be (1) young and (2) less educated than the overall population. That could skew the percentages without substantially altering the required number of educated workers.

    For example, if 100 of the 250 people in the 55-64 bracket have BA's (40%) compared with 150 of the 450 people in the 25-64 bracket (33%), you have a gap of 7%. However, the population of younger people is much higher, so you actually have 50 more educated employees in total to fill the same number of jobs requiring BA's. As an Arizona resident, I see this first hand.

  2. Gad Levanon 0 people like this 20 Nov. 2012 01:28 PM

    Thanks Josh. This is a good comment and looking at the totals does change the picture somewhat. We'll update the table in a future blog.
    Gad

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