Older workers helped fuel recent U.S. growth. Can it
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[April 24, 2019]
By Howard Schneider
MILWAUKEE, Wis. (Reuters) - As a record-breaking economic
expansion nears the decade mark, people like Marty Groth may determine
whether it is forced into a lower gear.
Not long ago, the 60-year-old Groth found himself out of a job and
considered retiring on a pension built over a career of maintaining
computer servers and printers.
Instead, he returned to school to update his computer skills and will
soon join a Wisconsin labor force that is decidedly short of workers.
"I could retire now if I wanted," Groth said. "But I am thinking, I like
Over the last three years, around 3 million Americans over 55 joined or
rejoined the workforce, federal data show. The addition of these older
workers not only contributed to economic growth, experts say, but helped
stop a national decline in the share of adults working or looking for
The trend may have run its course. After adding 5 million new and
returning workers of all ages from 2016 to 2018, the U.S. labor force
shrank during the first three months of this year. (Graphic:
From healthcare to manufacturing, companies in places like Wisconsin are
taking longer to hire as they struggle to find workers; some have
delayed projects, others have become more willing to hire ex-convicts
and less experienced workers bypassed when labor markets were looser,
local officials say.
Blue-collar workers are putting in more hours, data show, while overall
labor productivity is increasing. Nationally, wages are rising.
The upshot, according to policymakers, business executives and labor
experts interviewed by Reuters, is that the labor market may be nearing
Over a long enough period, labor shortages can spark investment and
raise productivity as companies retool. They can also improve
opportunities for minorities with unemployment rates higher than those
But in the short run they pose a drag.
"Any employer, if they are willing to raise wages enough, at some point
will get all the workers they need," said Gad Levanon, chief economist
at the Conference Board and author of a recent report on labor market
constraints. "But it is coming at a higher cost... Projects that were
profitable in a lower wage environment are not profitable anymore."
DEALING WITH IT 'DAY IN AND DAY OUT'
The corridor connecting Chicago to Milwaukee is a testament to the
long-running economic expansion.
This is not the Wisconsin of pastures and dairy farms, but a landscape
brimming with fulfillment centers and factories. A new interstate lane
will allow autonomous trucks to deliver supplies for a high-tech plant
being built by China's Foxconn.
But the combination of low unemployment and an older population puts
Wisconsin at the leading edge of where the country's workforce as a
whole is heading.
It is also a political battleground state, meaning the health of its
economy will likely have consequences for the 2020 presidential
election. Democrats will hold their convention in Milwaukee next summer.
Wages in Wisconsin rose 5 percent in 2018, compared to around 3 percent
nationally, and the unemployment rate hit a record low 2.9 percent for
several months in 2018 and again in February.
As chief economist at the Wisconsin Department of Workforce Development,
Dennis Winters keeps close tabs on the state's hiring. The labor
shortage, he says, "is real, and people are trying to deal with it day
in and day out."
Sarah Condella, senior vice president for human resources at Exact
Sciences Corp, is among them.
She joined the Madison-based company in 2012 when it employed 50 people
and oversaw its growth to roughly 2,000 workers as doctors expanded use
of its colorectal cancer test.
Along the way, Exact Sciences lifted starting pay to $15 an hour,
roughly double the state's minimum wage. It added perks like bus passes
and flexible shifts and has plans for food service at its expanding
[to top of second column]
Marty Groth, who decided to retrain and remain in the workforce
rather than retire after being laid off as he approached the age of
60, attends training at the Milwaukee Area Technical College in
Milwaukee, Wisconsin, U.S., March 28, 2019. REUTERS/Howard Schneider
Still, it has more than 400 vacancies, and the time to hire entry-level workers
has grown from fewer than 30 days to around 45. Finding them requires radio ads,
billboards and other tools not typical for a life sciences company.
It is a story repeated across Wisconsin.
Banking officials say deals are being delayed because supply chains are clogged
and service companies booked, nipping the financial sector's potential.
Half of respondents to a survey by the Wisconsin Manufacturers & Commerce trade
group cited labor shortage as the top issue facing companies and the state,
ahead of healthcare and regulation. A majority said they planned to increase
wages at least 3 percent as they add headcount this year.
Coupled with productivity, the number of people working is the core reason
economies expand, and the expected slow growth of the labor force a main reason
why Federal Reserve officials and others expect the U.S. economy will cool.
SEEKING: EX-CONVICTS, RECOVERING ADDICTS
Scott Jansen, chief operating officer of Employ Milwaukee, said his work is an
exercise in finding anyone available.
A semi-trailer packed with advanced machine tools now tours state prisons so
inmates can be released with an in-demand skill. In Milwaukee, his agency works
through churches and community groups to contact the homeless, the less
educated, immigrants and others who might be reluctant to appear at a government
It is a reversal from the years following the economic crisis, when employers
had their pick of applicants, and workers often took jobs for which they were
overqualified. Millions were simply sidelined. (Graphic:
Today, Jansen said, employers are more willing to adapt job requirements to
disabled workers, and more open to hiring those hardest hit during the financial
crisis, like ex-convicts and those coping with addiction.
Throughout his 20s, Lee Baumann said he bounced between idleness and marginal
jobs as he battled opioids. After training as a computer technician he was hired
by Northwestern Mutual and is now a senior technical analyst.
"That life took me away. Three years of solid use," Baumann said. A recent
promotion raised his pay to $20 an hour, and he is saving to finish his
Nationally, the labor force participation rate for prime-age workers like
Baumann between the ages of 25 and 54 reversed a long decline around 2013. It is
now near the peak hit in the 1990s.
It was largely people like Groth, the 60-year-old who is back in school, who
padded the workforce. According to the Bureau of Labor Statistics, that over-55
age group was the only one whose participation rate grew from 2006 to 2016.
A recent study by economist Jay Shambaugh and others for the Brookings
Institution concluded the decision of so many older workers to remain in the
workforce, or rejoin it, was the main reason the U.S. participation rate
stabilized at around 63 percent.
But even that group cannot be relied upon: Some 226,000 over-55 workers left the
labor market in March, the most in nearly three years.
Even if people like Groth are motivated to work a bit longer, they will
eventually leave. Wisconsin will see that frontier first. The share of state
population over 55 jumped from 26 percent to over 30 percent from 2010 to 2017;
the share 65 and over, a traditional retirement plateau, jumped from 13.6
percent to 16.4 percent, according to census data.
"Adding more workers is a big part of getting GDP to grow," Shambaugh said. With
an aging population, choices by those like Groth are "a big part of your growth
over the next decade."
(Reporting by Howard Schneider; Editing by Dan Burns and Paul Thomasch)
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