Where did 5 million workers go?

There are 5 million workers missing in the United States of America.? There were about 164 million people in the labor force before COVID and there are about 159 million people in the labor force today.

Usually when the labor force contracts it is due to demand shortfalls; companies don’t need the workers because the demand isn’t there.? Today is different, this is a supply side issue; the demand is there but workers are not applying.? Where are all the workers?

In March and April of 2020 we lost 25 million jobs as businesses reacted to strict COVID lockdowns.? Since then we have added jobs slowly and steady with demand for workers continually outpacing supply.? And now 18 months later we are still 5 million workers short. Even with over 10 million job openings, nearly 8 million people officially Unemployed and millions more not in the labor market.?

The default answer many give is that due to increased social safety net payments people are sitting on the sidelines enjoying a break.? There is little to no data to support this point of view, starting with the simple truth that people don’t want handouts, they want to work.? There are many factors that are actually driving the labor shortage and they fall into four broad buckets: Retirement, Immigration, Child Care and the always popular Other category.

Increased Retirement - Over the last decade we saw about 2 million people retire annually, but during COVID we saw large increases.? Some retired due to increased savings from a buoyant stock market, some retired due to the increased risk of COVID to those of retirement age.? In a normal year retirements mostly get offset as new workers enter the workforce.? However due to the acceleration we have had nearly 2 million excess (not replaced by younger workers) retirements over the last eighteen months and this trend is continuing.

Migration Flows - The US labor force usually adds millions of workers every year through the Naturalization of new citizens (about 1 million/year), the Green Card Program (about 1 million/year) and various work visas (about 7 million but this is usually replacing the previous year’s visa holders).? COVID slammed shut most borders and they have been very slow to reopen.? Our best estimate is with visa holders leaving and a reduction in naturalizations, green cards and new visas, we have lost nearly 3 million workers over the last eighteen months.

Child Care - This seems to be a compounding effect of the Migration shortfall.? Many people who rely on childcare have not been able to go back to work despite a desire to return to employment.? If the choice is returning to work or leaving a child unattended, that’s not much of a choice!? This aspect of the labor force shortfall is very difficult to estimate but our best guess is that about five hundred thousand to a 1 million workers have not been able to return to the workforce due to a lack of childcare.

Other - There are many other factors that keep people from returning to the workforce.? Low wages for still dangerous work is certainly an issue.? Drivers, cooks and many other essential workers died at a disproportionate rate from COVID and their co-workers are scared to return.? And general fear of COVID is still a major employment factor for many communities, regardless of the type of work. The truth is with a labor force as large and varied as ours there are rarely simple, clear and consistent explanations for most trends.? There may be up to 1 million workers that for various Other reasons have stayed out of the labor force.

So between retirement, migration, childcare and others we have found more than our 5 million “lost” workers.? Will higher wages drive them back?? Will decreased risk from COVID?? Will increased access to childcare?? Hopefully all will contribute and we can get more and more Americans back into the workforce and close this gap.?