In 2007, however, the national unemployment rate averaged just 4.6%. This suggests the presence of tight labor market conditions that are related to long-running demographic trends. The oldest members of the baby-boom generation will reach 60 years of age by the end of 2006, and every year thereafter, more of the 76 million persons born between 1946 and 1964 will move into their early 60s, when most workers traditionally have retired. The slowdown in the supply of labor that employers have begun to encounter has led them to worry about how much harder it will become to hire replacements for baby-boomers as more of them reach the retirement phase of their lives during the coming decades. However, even industries in which total employment is projected to decrease might need to replace employees who retire from particular occupations. Public administration also appears to have many baby-boom dependent occupations. Thus, many industries throughout the economy are very dependent on baby-boom workers and seemingly face the prospect of tightening labor market conditions as these individuals move toward the typical retirement ages. Employers with older workforces that seek not only to replace all baby-boomers exiting occupations critical to their operations, but also to increase employment in those fields, could face especially intense competition for labor in the short run. An actual shortage of labor is unlikely in the long run, however, because businesses can be expected to raise wages, thereby
prompting some pension-eligible baby-boomers to continue working, enticing those outside the labor force (e.g., discouraged workers) to enter, or those employed part-time to increase their work hours, encouraging individuals qualified for jobs that are in particularly high demand, but who are employed in other fields, to change positions, and motivating youngsters attending school and unemployed persons, among others, to prepare for these now more lucrative occupations. An "Adequate" Number of Workers

An underlying assumption of the labor shortage scenario is that, in order for the U.S. economy to continue growing, companies must have more workers on their payrolls in the future than at present. Proponents of this viewpoint essentially are arguing that the rate of economic growth is closely and directly linked to the pace of labor force growth. The U.S. economy generally has been able to expand faster than the labor supply, however, by more efficiently utilizing the available pool of workers. The Supply of Labor Domestically and Internationally

			The Baby-Boom Generation in "Retirement"

Another assumption underlying the labor shortage scenario is that members of the baby-boom generation will sharply curtail their involvement in the labor force once in their 60s. Companies have asserted that amending the law to permit in-service pension payments would make them more willing to provide phased-retirement arrangements. The much smaller cohort that immediately followed the baby-boomers into the workforce is not the only source of replacements for retirees, however. Employers continue to urge Congress to reexamine the H-1B visa program to enable them to bring into the country greater numbers of skilled guest workers. Businesses similarly have turned to temporary and immigrant labor to fill jobs in other occupations when U.S. workers are deemed to be in short supply (e.g., landscape laborers and nurses).
The unemployment rate in 2007 averaged just 4.6%, which is low by historic standards and suggests the presence of tight labor market conditions that are related to long-running demographic trends. The oldest members of the baby-boom generation turned age 60 at the end of 2006, and every year thereafter, more of this large birth-cohort will move into the ages when workers traditionally have retired. Consequently, the business community in particular has asserted that the future supply of labor will fall short of employer demand and that U.S. economic growth and competitiveness would be put in jeopardy.
Based upon a CRS analysis of the current employment patterns of baby-boomers across industries and occupations and of occupational employment projections within industries, many industries throughout the economy (e.g., insurance, manufacturing, mining, public administration, real estate, transportation, wholesale trade, utilities) appear to be highly dependent on baby-boom workers and to face the prospect of tightening labor market conditions as more of them move into the traditional retirement ages. Baby-boom dependent industries that seek both to replace all boomers who retire from occupations critical to their operations and to increase employment in those fields could face the most intense competition for workers in the near term (e.g., educational services and health care services).
An actual shortage of workers is unlikely in the long run because companies can be expected to take various actions in response to the accelerating slowdown in labor force growth—although it appears few have yet done so. A key assumption of the labor shortage scenario is that firms must have more workers in the future than at present for the economy to continue to grow. Proponents of this viewpoint thus are asserting that rates of output growth and labor force growth are closely and directly linked. But, the economy historically has been able to expand faster than the labor supply by more efficiently utilizing the available pool of workers.
Another assumption underlying the shortage scenario is that baby-boomers will sharply curtail their work activity once in their sixties. The degree to which older persons participate in the workforce already has risen due, in part, to changes that Congress made to the Social Security retirement system and age discrimination law. Some have urged Congress to make further modifications to encourage more older individuals to continue working and more employers to hire and retain them. Similarly, Congress has been urged to further amend immigration law to permit more foreign labor to be brought into the country to fill jobs for which U.S. workers are deemed to be in short supply.
Additionally, those who assert that the need to replace retiring baby-boomers will result in a shortage of workers usually consider only the labor supplied by the baby-bust generation. This 45 million birth-cohort, which immediately followed the 76 million baby-boomers into the labor force, is not the only source of replacement workers: the 72 million members of the echo-boom began to enter the workforce during the 1990s. Access to foreign labor through offshore outsourcing, in addition to guest worker programs, also is often overlooked in the context of shortages.