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Don’t blame Gen Z: How effective leaders work around the baby bust

By John M. Bremen | June 12, 2024

Despite significant drops in the 45 to 54 and 16 to 24 age groups, forward thinking leaders use work schedules, benefits, new sources of talent and other strategies to ensure sufficient talent.
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Future of Work

Declining birth rates and their impact on businesses have made headlines recently. Effective leaders know this is not a new phenomenon and have been planning and taking action for years.

We reported in November 2021 that a demographic perfect storm was brewing in developed labor markets long before The “great resignation” was a thing, reducing talent availability at both the leadership and entry levels of organizations.

Today, as large swells of Baby Boomers retire and Millennials move toward mid-career roles, talent shortages among Gen X and Gen Z workers continue even though the great resignation has subsided. The impact is especially pronounced in the U.S., the U.K., Canada, France, Germany and the Netherlands.

The expectation was that Gen Alpha (the children of Millennials) would help repopulate labor markets. Yet birth and fertility rates have continued to decline in many countries. For example, in the U.S., the CDC reported fertility rates decreased annually from 2014 to 2020. Following a brief increase from 2020 to 2021, the rate decreased the next two years, reaching a historic low in 2023. Other countries, including the U.K., Canada and France report similar trends.

WTW’s analysis of U.S. Census and Bureau of Labor Statistics data show the impact of lower birth rates: While the U.S. labor force grew overall from 2010 to 2020, it shrank during that time period for two key age groups: 45 to 54 (the historical leadership talent pool) and 16 to 24 (the historical entry-level talent pool).

Then the pandemic reduced immigration in many countries and drove down labor force participation (the proportion of the working-age population that is either working or actively looking for work), creating an even greater talent shortage. While overall immigration rates and labor force participation largely recovered as economies emerged from the pandemic, the 2030 labor force for age groups 16 to 34 and 55 to 64 is expected to be even smaller than in 2020, and because of low birth rates, the problem will not self-correct any time soon.

Even if a post-pandemic baby boom were to begin in 2024, it would take until the 2040s for the next generation to reach the workforce.

Effective leaders have anticipated this trend for years, taking the following actions:

  1. Plan. Upon learning of upcoming talent shortages, effective leaders conducted comprehensive workforce planning exercises to determine their forward-looking talent needs and how to address gaps.
  2. Tap and retain older workers. In the U.S., the highest growth age group in the labor force from 2010 to 2020 was 65 and older, followed by those 55 to 64. Effective leaders tap late-career workers for “post leadership” roles that leverage deep expertise and provide opportunities to mentor earlier career workers in a more flexible work environment, allowing for the pursuit of other interests in parallel. They also provide phased retirement programs to enable additional flexibility and retention.
  3. Engage emerging economies for sources of talent. Effective leaders tap talent from emerging markets and embrace “right shoring” operational deployment strategies. Growth in education and available workers in India, China, Brazil, Philippines, Mexico, Indonesia, Vietnam, Turkey, Poland and other countries creates hiring opportunities.
  4. Leverage contingent workers. When permanent workers are difficult to find, effective leaders continue to use contingent workers to help fill skill and resource gaps.
  5. Accelerate the use of robotics and AI. Effective leaders know that robotics and AI are not about replacing jobs. Technology is enabling a new world of collaboration between humans and machines, improving skill sets and filling skill gaps.
  6. Focus on culture and employee experience. Effective leaders know that employees often join and stay in organizations with differentiated culture, values, purpose and employee experience. Effective leaders also create diverse and inclusive environments that help attract a broader employee base.
  7. Emphasize flexibility. According to a WTW survey, companies expect over half of their employees to work either remotely or hybrid in three years, compared with only 15% before the pandemic. Effective leaders have learned that providing workers with the flexibility to work where and when they want generally creates access to wider talent pools. They also know in-person workers prefer employers with flexible shift schedules, work styles and other elements of the work experience.
  8. Provide nontraditional skill development. Effective leaders offer an array of professional development opportunities, including partnerships with educational institutions and governmental bodies to expand employees’ skills and be more attractive to current and potential employees.
  9. Transform pay and benefits. Effective leaders know that yesterday’s pay and benefit programs will not work for tomorrow’s workforce. Recent WTW research reports that employees most often cite pay, core benefits and work flexibility as top reasons to join and stay with an organization. Effective leaders ensure that pay is competitive and fair. They pay for critical skills in a changing world of AI and digitization, and they modernize short- and long-term incentive plans tied to performance. They also continue to modernize and personalize health benefits, savings and retirement plans, and prioritize wellbeing.

Effective leaders use an expanding portfolio of approaches to address demographic-based labor market challenges.

A version of this article originally appeared on Forbes on May 23, 2024.


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