Workforce Factors Affect Economic Development Strategies

Pam Sornson, JD

It’s not just the chaos caused by the pandemic, social concerns, and climate upheavals driving California’s urgent need to reinvent and reinvigorate its workforce. Economic experts seeking solutions to the challenge must also consider the rate of migration out of the state, a slowdown of immigration into the state, and California’s already aging population, as well as trends in the nature of the workforce in general. Rebuilding the economic foundations that have been lost while building fresh infrastructure for future industrial and economic growth will require collaboration among all of the state’s varied sectors if California is going to achieve in the future what it’s accomplished in the past.

Birth, Death, and Migration …

For decades, California’s booming population has fueled its equally booming economy. The end of World War Two triggered a ‘baby boom’ as returning GIs began building their futures and their families. In 1946, California’s population stood at just over 9.5 million. By 1960, that number had almost doubled to over 15 million. Now, in 2023, the state’s population has exploded to ~39 million, with both boomer babies and a thriving influx of immigrants powering state-wide economic growth for almost 80 years.

That constant population growth is slowing, however, and the state now has more job openings than it has available workers. As of June 2023, there were more than one million unfilled job positions in California, the highest number of occupational vacancies in the country. Several factors contribute to the low number of potential workforce participants:

Californians are leaving. While the population has been declining in the state for at least two decades, just since 2010, ~7.7 million people moved away. Only 5.8 million moved into the state during that period, leaving a net population loss of ~1.9 million. The pandemic, social concerns, and environmental issues caused another exodus of 407,000 between July 2021 and July 2022, a record net outflow.

Birth rates are down. Since 1992, the rate of births per 1,000 people has been steadily dropping and has now reached its lowest level in 100 years. Thirty years ago (1992), the state added 613,00 new babies to its yearly census. In 2021, that number had dropped to just 420,000.

Fertility rates are down, too. California calculates that each woman needs a birth rate of 2.15 children over her lifetime to maintain its current population levels. Today, that birth rate has dropped to just 1.52, dropping the state’s birth rate rank from 17th to 43rd among all the states.

Death rates are up. The number of aging Californians is rising as the ‘Boomers’ reach retirement age and beyond. In fact, the state’s over-60 crowd is the fastest-growing subset of the overall population, and by 2030, experts project that seniors – almost 11 million of them – will make up a full 1/4 of the state’s entire population. And, of course, they’re dying at a faster rate than younger populations, too. California’s ‘crude death‘ death rate per 100,000 jumped from 6.5 in 2013 to 8.1 in 2022, pacing an annual rate of 2.7%.

The consequence of these population metrics – birth rates, death rates, and the population exodus – is that the number of available workers has declined and will continue to do so. That challenge will continue to plague the state’s economy, too, as government figures predict that its total population will remain stable (stagnant) at around 40 million through at least 2060.

… And a New Perspective on Why and How Workers ‘Work’

The shortage of workers in the labor force has also rearranged the dynamic between employer and employee. The pandemic was especially impactful on this reality. Many workers quit their jobs because of COVID concerns, and when others stepped into their roles, they asked for higher compensation to reflect their new significance to the company. In other instances, people whose jobs were deemed ‘essential’ now recognized their true value to the organization and began asking for enhanced compensation to reflect that status. Dubbed the ‘Great Reshuffling,’ the phenomenon continues to roil the labor force as workers seek better – and better paying – occupations rather than leave the workforce altogether.

Contractions and Consequences

The lack of a fully functioning workforce is felt throughout the state, as individual businesses and entire industries restrict growth to accommodate the absence of employees willing to take on that effort. Several sectors, in particular, have been hard hit, and their losses extend into the communities they serve.

Transportation – The pandemic’s impact on the global supply chain industry was palpable to virtually everyone. Disruptions that began during that period, however, are still in effect, both in California and the rest of the country. Labor shortages impede the transportation sector as companies struggle to find truck drivers, couriers, skilled technicians, and warehouse personnel. According to the federal Bureau of Labor Statistics, this downward employment trend has reduced the nation’s logistics workforce by 3,000 to 4,000 in just the last year.

Healthcare – A recent (2022) survey by AMN Health revealed that 85% of the healthcare facilities they questioned reported labor shortages primarily in their rosters of allied healthcare professionals – sonographers, dental hygienists, and radiology technicians, to name just three. Adding to that stress is the reality that approximately 46% of those same facilities were losing staff due to burnout and overwork. When experienced professionals are replaced – by necessity – with less experienced or temporary replacements, then the quality of care provided also often suffers.

Retail trade and the hospitality industries are also still smarting from labor losses. In the retail sector, brick-and-mortar store operators have lost the most financial ground, both in profits (because more people are shopping online) and in staffing (fewer people are willing to work those hours at that pay rate.) In hospitality, 87% of survey respondents acknowledged that they are still having difficulty finding the workers they need. Hotels are stuck with excessive vacancies because they can’t find the necessary housekeeping staff to keep them open. Perhaps most alarming: 96% of respondents in the restaurant sector reported labor shortages across their enterprise, from servers and cooks to supply chain deliveries.

The participants and attendees at the 5th Annual Future of Work Conference, hosted by the Economic and Workforce Development division (EWD) at Pasadena City College (PCC), will address these concerns and more during the October 26th event. The day’s goal is to highlight both the challenges and opportunities that California is facing as it works to rebuild its flagging economy. Join us to add your perspective.