U.S. Labor Shortage Looms: Who Will Do the Work?

Demographic and labor market trends in the U.S. point to an ominous scenario. The nation potentially faces a shortfall of millions of workers in the decade to come—especially in the critical health care sector—due to a projected reduction in workforce participation.

The U.S. Bureau of Labor Statistics (BLS) projects that 6.7 million jobs will be added to the economy by 2033. However, the number of workers available to fill those jobs is expected to be constrained by an ongoing wave of retiring Baby Boomers, slowing population growth among working age adults, and immigration levels coming up short of what’s needed to maintain employment growth.

Although the number of Americans ages 16 and older is projected to increase by 16.4 million people by 2033, that’s 5 million less than the increase that occurred in 2013-2023. On top of that, there are already hundreds of thousands of open jobs without people to fill them for reasons such as a mismatch of skills and some people deciding not to take part in the labor force. 

While employment is projected to grow 0.4% annually through 2033, population growth isn’t expected to keep up because the largest increase is projected among older people, who are less likely to work. As a result, there will be a continued decline in the labor force participation rate, dropping from 62.7% in August 2024 to a projected 61.2% in 2033, says Kevin Dubina, an economist in the BLS Office of Occupational Statistics and Employment Projections. 

The situation is expected to worsen as industries such as health care will see demand for workers skyrocket in the years ahead. On the other hand, some occupations will continue to be thinned out by advancements in technology and changing consumer habits.

“The news is not comforting,” says Ron Hetrick, senior economist at Lightcast, a labor market data analytics firm in Moscow, Idaho. “The most acute shortages of workers will arrive in under a decade, and the industries hardest hit are among those our society relies on most.”

There’s a caveat, however. While the BLS “does the best they can to give us projections based on recent trends—and they have been fairly accurate on average—there’s no way to capture everything that will happen over a decade,” says Harry Holzer, professor of public policy at the McCourt School of Public Policy at Georgetown University in Washington, D.C., and former chief economist for the U.S. Department of Labor during the Clinton administration. “So, these projections need to be taken with some caution.”

Related: Attracting and Retaining Older Workers to Your Workplace

Workforce Participation Squeezed at Both Ends

Population aging, which occurs when the birth rate falls while life expectancy increases, has been a long-term trend in the U.S. and around the world for decades, explains Justin Ladner, senior labor economist at SHRM. 

“The fact that the population continues to age comes as no surprise, though I think its rapid pace in recent years has caught people off guard,” he says.

Older people are less likely to work, and the retirement of the Baby Boomer generation—an enormous demographic of 76.4 million that has dominated the workforce since the 1970s—is in full swing,” Holzer says. “Over the next decade, that will likely accelerate to include later members of that group born in the late 1950s and early 1960s.” 

The pandemic accelerated Baby Boomer retirements, which were already on course to be more disruptive than those of previous generations, both because of the unprecedented size of the generation born between 1946 and 1964 and the contrasting smaller size of the generations that followed.

“This steep rise and fall of U.S. birth rates means we no longer have enough young people to replace millions of Boomer retirees,” Holzer says. 

The most acute shortages of workers will arrive in under a decade, and the industries hardest hit are among those our society relies on most.—Ron Hetrick

Making matters worse, labor force participation of younger people ages 16 to 24 has been declining for years, and the rate for the all-important prime-age cohort of 25 to 54 has stalled, driven by fewer men working than before, Dubina explains. Men’s prime age participation rate has been trending down since the 1950s, with some of the decline—especially since the 2000s—potentially attributable to fewer available manufacturing jobs, he says.

“The problem isn’t that men make up a smaller piece of the pie, it’s that they are opting out of the pie entirely,” Hetrick says. “Gen X, Millennial, and Gen Z men do not participate in the labor force at anywhere near the rates that prior generations once did. Millennials now outnumber living Baby Boomers, but fewer Millennial men are choosing to get jobs.” 

That said, women’s prime-age participation rate increased during the second half of the 20th century, recently reaching a new peak in 2023.

A Structural Problem

A major dilemma is that the demographic transition taking place in the U.S. and other highly industrialized societies is structural, not cyclical. The prime factors that affect population growth, and, ultimately, labor force participation, are native-born fertility rates, which fell in 2023 to their lowest point in a century, and immigration. What happens with immigration depends on government policy, making it a big unknown. 

“Growth in the workforce will absolutely depend on immigration,” Ladner says. “According to the Census Bureau’s main population projection for 2023-2100, the prime-age population will grow slowly until the mid-2040s and decline thereafter. However, this projection depends heavily on immigration levels. In the no-immigration scenario, the prime-age population is essentially already in decline; under the high-immigration scenario, this population would continue to grow through 2100.”

‘The Perfect Storm’

The BLS has consistently projected health care to be the largest and fastest-growing industry over the next decade, driven by both the aging population and a higher prevalence of chronic health conditions. This escalating demand will shine a spotlight on the long-standing shortage of health care workers in the U.S. 

“Health care had its challenges before the COVID-19 pandemic, but the pandemic really stressed the industry,” says Dan Lezotte, a partner in Mercer’s U.S. Workforce Strategy and Analytics Practice.

Health care employers haven’t kept up with wages since the pandemic, he adds, and competing employers in other industries offer more pay or scheduling flexibility to attract nurses and medical assistants. Mercer projects a deficit of more than 100,000 health care workers in the U.S. by 2028, particularly primary care physicians, advanced practice providers (mostly nurse practitioners and physician assistants), and nursing assistants—the latter of which is projected to have a shortage of more than 73,000 nationwide, the largest of any health care occupation. 

“It’s tough to compete with other industries as health care systems are under tremendous cost pressure,” Lezotte says. “It’s the perfect storm.”

On the positive side, the supply of registered nurses is projected to outpace demand, resulting in an estimated surplus of nearly 30,000 nurses by 2028.  

“The big story a few years ago was the nursing shortage, but that’s changed,” Lezotte says. “There are more nurses coming out of school, and attrition has been turned around.”

However, whether you’re in a surplus or a deficit for health care roles depends on what state or region of the country you are based in. “There’s a big difference between a major metropolitan area and rural areas, but the situation looks a lot better than it did three years ago,” he says. 

While the growth of the health care industry is being fueled by the aging of the Baby Boomers, Holzer says, it won’t grow indefinitely. Eventually, action taken by government and industry to limit out-of-control costs will rein in the health care sector. Until then, however, it will be difficult to meet demand.

“Textbook economics say that employers should raise wages and provide more training in this scenario,” he says. “But there are barriers to how much they can do. It’s a real challenge right now.” 

Health care employers will need to develop strategic plans and innovative tactics for attracting and retaining talent, Ladner says. Such plans should encompass strong compensation and benefits packages, along with creative ways of sourcing talent, redesigning work, and optimizing schedules to include more flexibility.

Growing and Declining Occupations

While health care ranks No. 1 on the list of high-demand professions, computer-related jobs—with one notable exception—are projected to be the second-fastest-growing occupational group by 2033, according to the BLS. 

“The growth of computer occupations is expected to stem from demand for upgraded computer services, continued development of AI solutions, and an increasing amount of data available for analysis,” Dubina says. “In addition, the number and severity of cyberattacks and data breaches on U.S. businesses is expected to lead to greater demand for information security analysts.”

Demand for roles in cybersecurity, software development, IT management, and computer network architecture is projected to increase; however, projections for network and computer systems administrators are expected to decline. Additionally, the number of jobs for computer programmers is expected to fall by 10% over the next 10 years, a new phenomenon introduced by the capability of artificial intelligence to be trained to write code, Ladner says. 

“The variables for AI reducing some jobs,” including programmers, as well as other occupations at risk of automation, “include how advanced AI technology will be, how willing employers will be to adopt those tools, and what kind of regulation will arise to prevent adoption in some cases,” he adds.

The retail trade sector is projected to decline, as e-commerce continues to have a negative effect on in-person sales at retail outlets. “The growth of e-commerce, as well as advances in technology, are expected to limit demand for retail sales workers,” Dubina says. 

As for the HR profession, employment of HR managers is projected to grow 6% by 2033, faster than the average for occupations overall. An average of 17,400 openings for HR managers are projected each year over the decade, resulting in 13,500 net new HR managers being added by 2033.

Tallied separately, employment of compensation and benefits managers is projected to grow just 2% by 2033, slower than the average for occupations overall. 

‘Now Is the Time to Act’

Closing the gap between open jobs and unemployed job seekers will require that employers act, including supporting the expansion of employment-based immigration, providing critical reskilling, reimagining the K-12 and higher education pipelines, and practicing smarter workforce planning.

Immigration Is Essential. Due to a declining percentage of native-born prime-age workers in the U.S., immigration is absolutely necessary to replenish the workforce, Holzer says, noting that “even if there is displacement of lower-wage workers in some occupations, the trends of the declining native population combined with the rise in demand for health care and other workers means that we need more immigration.”

Hetrick agrees, saying that immigration has been the most reliable source of growth in the U.S. labor force and will remain the most important path forward. 

Now is the time to act—not when it’s too late.—Dan Lezotte

“If there aren’t enough workers in your own country, your alternative is to get them from other countries,” he says. “In many respects, foreign-born workers are essentially keeping the U.S. economy afloat right now. Significant portions of the U.S. labor force rely heavily on a steady stream of foreign-born workers, such as in IT, construction, and health care.”

But increasing immigration in any significant way has proven to be politically complex and controversial. Employers can’t make immigration policy, but they can lobby to have policy changed.

Skills Are Currency. Increasing employer reskilling and upskilling is another solution to retaining workers in the labor force. “If current skill sets are becoming obsolete, programs can help workers maintain skills or attain a more competitive skill set to remain working,” Ladner says. “Employers looking for ways to expand their talent pools can also practice skills-based hiring, which focuses on whether the person has the skills to do the job, rather than on a narrow set of generic criteria like educational requirements.”

Related: Tapping Talent From Within

It will increasingly fall on employers to reskill the employees they have “because ‘ready-made’ workers with all the requisite training will be harder to find when they’re fewer in number and in high demand,” Hetrick explains. 

Some health care systems have found success in partnering with local universities and trade schools for training, Lezotte says, “but this kind of effort won’t happen overnight and therefore requires proactive decision making and a planned investment.”

Planning Is Critical. Employers also need to do a better job with strategic workforce planning, Lezotte says. “That means understanding who you will need, how many [people] you will need, and when you will need them.”

While many employers think year to year, “it’s smarter to think three years down the road, understanding the broader labor market and the internal dynamics of supply and demand to pinpoint where the shortages will be for critical occupations due to attrition and expansion of services,” he explains. “Now is the time to act—not when it’s too late.”

Value Is Vital. Ultimately, organizations must continuously upgrade their employer value proposition to attract and retain the people they want in a competitive job market. 

“Employers will have to keep up with compensation, do more skills training, offer more flexible and remote work, and help with child care,” Holzer says.

Flexibility is particularly critical. “Nurses could be offered one day a week at home, working in telehealth, for example,” Lezotte says. “Health care employers are not just competing with each other, but with other industries, especially for support roles.”

Ultimately, the solution to future labor shortages “will not just be any one of these approaches,” Ladner concludes. “It will be a combination of all of them.”