The Myth of the Coming Labor Shortage

An examination of the conventional wisdom that the economy will face a labor shortage was done in three stages. First, the demand side of the labor market was analyzed. Changes in the skill requirements of jobs from 1973-86 were examined as were those changes anticipated by projections of the Bureau of Labor Statistics for 2000. The conclusion was that skill requirements would rise in the 1990s due to shifts in the occupational structure, but at a modest rate that was significantly less than that for 1973-86. Second, expected trends in labor supply--the quantity and quality of the future work force--were analyzed. Conclusions were that a general labor shortage would not occur simply because the labor force would grow slowly in the 1990s and the changing demographics of the work force would not necessarily produce a serious shortage of adequately skilled workers. A problem with labor force entrants would probably be that the educational system will not have provided an adequate basis for future technological innovation and productivity growth. Third, the study examined recent and expected trends in wages and incomes to assess whether future trends would remedy the labor market problems. The conclusion was that wages would continue their sluggish growth and possibly fall for large portions of the work force. The key policy implication was that the "supply push" approach would not produce desired improvements in labor market performance or productivity. (Appendixes include a description of the methodology, 28 endnotes, and a 52-item bibliography.) (YLB)