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By DANIEL T. LAYZELL

Will future labor demand fit supply?

The jobs and the workforce of Illinois and America will be much different in the 21st century than they are today. The more global economy predicted for the future will test whether this new labor force will be able to compete with other countries. Economic, demographic and social trends indicate that the state and nation may not be prepared for that future.

Global economic competition requires that the labor supply fits labor demand, or in other words that the workforce be prepared to fill the jobs available. Analysis of available data indicates that there is a poor degree of fit between current and projected Illinois labor demand and labor supply. National trends reflect the same problem.

As we move into the 21st century the ability to compete in the global marketplace will increasingly be measured by the labor force's ability to manipulate technologies. Ensuring this will require that workers receive ongoing education and training as technologies evolve and become more efficient.

The major shift occurring within the Illinois and U.S. economies is from jobs producing goods (manufacturing) to jobs providing services (retail trade, education, health care, general government, finance and real estate, etc.). This shift is predicted to continue. "[S]ervice industries will create all of the new jobs, and most of the new wealth over the next 13 years," according to the 1987 report. Workforce 2000, done for the Indianapolis-based Hudson Institute. A May 1989 report by the Council of State Governments set national employment growth in the service industries at 14.1 percent for the period 1984-1988 while national employment growth in manufacturing was only 3.4 percent. In Illinois for the same period, employment in the service industries grew 11 percent and manufacturing employment grew 2 percent, according to the council.

Illinois projections for its workforce are consistent with the Hudson Institute's forecast. Projections to 1999 indicate that service sector employment in Illinois will grow by 25 percent while manufacturing sector employment will decline by 8 percent, according to the Illinois Department of Employment Security (IDES). The same IDES report forecasts that approximately 770,000 new jobs will be created in Illinois during the period 1982-1999 and that two-thirds of these new jobs will be in the service industries.

What exactly are the new jobs and what kind of labor force is needed to fill them? Robert Reich, a Harvard economist, writing in the New Republic, classifies current jobs into three broad categories. They are (1) symbolic analysis services, which are based on the manipulation of data, both quantitative and qualitative, and include investment bankers, research scientists, educators and lawyers; (2) routine production services, which involve repetitive tasks as one step in a sequence of steps in producing a finished product and include manufacturing-type jobs and increasingly jobs involving the electronic storage and retrieval of information; and (3) routine personal services, which involve routine repetitive consumer service work and include sales clerks, janitors and domestic help.

Because of the high level of training required, symbolic analysts are in high demand, and Reich predicts that they will be in higher demand in the future. On the other hand, the demand for routine production services has declined and is likely to continue to decline. The majority of people holding these jobs have only a high school education. Reich notes that the majority of the new businesses and new jobs in America come from routine personal services, and that demand is likely to increase over


. . . approximately 770,000 new jobs mil be created in Illinois during the period 1982-1999 . . . two-thirds of these new jobs will be in the service industries
time. Like routine production services, these jobs employ relatively unskilled, uneducated individuals working at repetitive tasks, however, unlike routine production services, these individuals come in direct contact with the consumer of their product.

Between now and 1995, most job openings expected in Illinois will fall into the categories of symbolic analysis services or routine personal services, according to information published by IDES. These positions include economists, mathematicians, medical technologists, and sales and stock clerks. Of every

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100 new jobs, as many as 57 may require a high school diploma and another 35 may require some level of college, according to the Illinois Occupational Information Coordinating Committee.

Table 1 Illinois population groups, projections to 1999
(1980 base year)

Age cohort

Percent change

16- 19

-23.6

20-24

-27.8

25-34

- 9.6

35-44

48.4

45-64

15.9

65 +

19.8

Source: Bureau of the Budget.

In the future then, there will be demand for both the highly skilled and the unskilled worker in the growing service industries. Many economists note that the global economy's increased competition will demand greater productivity. Increased productivity means that workers must perform a wider array of tasks than before, which in turn requires a higher degree of flexibility and adaptability among workers. In short, future labor demands at all levels will be such that "the new jobs . . . will demand much higher skill levels than the jobs of today," says the Hudson Institute's report.

The changing geographic location of business will also affect labor demand. At one time, almost all business and industry was based in central cities. However, a recent trend that will continue into the 1990s is the increasing suburbanization of American business. As more individuals choose to move away from the problems of the city, businesses have followed, concentrating wealth and jobs in the suburbs. In the Chicago metropolitan area, two-thirds of the income goes to houses in the suburbs, and 50 percent of Chicagoland residents live and work in the suburbs, according to demographer Harold Hodgkinson. There is no reason to think that this trend will change any time soon.

The composition of the future labor supply will be determined by demographic trends. One major demographic trend affecting both Illinois and the rest of the U.S. is the aging of the population (see table 1). "Babyboomers" are getting older, and a decline in birthrates over time has caused the population to be skewed toward the middleaged and elderly. As these age cohorts represent those of the available workforce, it is evident that the potential labor supply in future years will also be older. If these projections are accurate, 100 percent of the growth in the available labor supply between 1980 and 1999 will be accounted for by those age 35 and older.

A second demographic trend has been called the "feminization of the workforce." Over time, the labor force participation of women has increased dramatically due to delayed marriages and declining birthrates, as well as enlarged professional opportunities for women. Nationally, the labor force participation rate of women increased from 33.9 percent in 1950 to 53.0 percent in 1983, according to data from the U.S. Department of Labor. In Illinois, female labor force participation grew from approximately 50 percent in 1980 to 55 percent in 1986 and is expected to hit 60 percent by 1999, according to IDES data and projections. For Illinois, 71 percent of the projected labor force growth between 1980 and 1999 will be accounted for by women, according to IDES.

Table 2
Illinois minority groups, percent growth in population and labor force projections to 1999
(base year 1980)

Population Labor Force

All minorities

36.0

57.0

Blacks

17.0

34.0

Hispanics

75.0

103.0

Source: Bureau of the Budget.

A third demographic trend is the growing minority population and its increasing participation in the labor force. Nationally, minorities will account for 29 percent of the new entrants into the workforce between now and the year 2000, according to the Hudson Institute study. This is twice their current share. Bureau of the Budget projections for Illinois suggest that during the period 1980-1999, the minority share of the state's population will increase from 22 percent to 29 percent, while IDES projections suggest that the minority share of the labor force will increase from 19 percent to 26 percent. The majority of these minorities live within central cities. Hispanics account for the largest share of the growth in minorities. By the year 2015, Hispanics will surpass blacks as the largest minority in the country, according to a recent article in Business Week. This also appears to be the trend in Illinois (see table 2).

A final demographic trend that will affect the future labor supply is growth in the number of immigrants. Nationally, the number of immigrants has grown steadily since the end of World War II with the majority since the 1960s coming from Asia, Mexico, Latin America and the Caribbean, according to the U.S Census Bureau. About 600,000 immigrants are expected to arrive in America between now and the year 2000, according to Workforce 2000. Nearly all will participate in the labor force; that is why they came. In Illinois, the labor force participation rate for all Illinoisans in 1980 was 64.3 percent while the labor force participation rates of the four largest immigrant groups in Illinois (from the Philippines, Mexico, Korea and India) were all higher than that and most were above 70 percent, according to 1980 census data.

If the changing economy determines future labor demand and changing demographics determine the composition of the labor supply, then the crucial predictor of the fit between demand and supply is the skill level of the workforce. One important measure is the number of high school dropouts present in a population. In 1985, 14.3 percent of all 18- and 19-year-olds were high school dropouts. For whites, blacks and Hispanics the rates were 13.8 percent, 17.3 percent and 30.6 percent, respectively, according to data from the National Center for Education Statistics (NCES). For Illinois, 22.2 percent of all students who entered high school in 1983 had dropped out by 1987, according to the 1988 report, Our Future at Risk issued by the Illinois Joint (State Board of Education/Board of Higher Education) Committee on Minority Student Achievement. For whites, blacks and Hispanics, respectively, the rates were 15 percent, 43 percent and 46 percent.

A second measure of the skill level of a population is its breadth of knowledge. The American College Testing Program (ACT) is a standard national test

18/May 1990/Illinois Issues


Table 3 Illinois higher education enrollment, percent of total enrollment by race and type of enrollment, fall 1978 and fall 1988

 

Public Universities

Community Colleges

Private Institutions

 

Fall 1978

Fall 1988

Fall 1978

Fall 1988

Fall 1978

Fall 1988

White

78.2

78.7

61.5

71.6

72.0

75.2

Black

11.9

10.5

15.5

14.4

9.9

12.7

Hispanic

2.3

3.4

4.1

8.3

2.0

5.6

Source: Board of Higher Education.

which measures the knowledge of high school students in subject areas such as math, science and English and serves as a predictor of the ability of the student to do collegiate-level work. ACT data for 1987 indicate that the national average score on the test was 18.7 out of a possible 36, according to NCES. For Illinois, the average score for white students was 20.0 while the average scores for black and Hispanic students taking the test were 13.5 and 15.1.

A third measure of the workforce skill level is the percentage of the total population participating in postsecondary education. The most recent comparative data available (1987) ranks Illinois 15th among all states in terms of public community college and university enrollment as a percentage of total population (4.58 percent). Among Great Lakes states, Illinois public higher education participation rate is second only to that of Michigan, according to NCES. These achievements, however, do not extend to all segments of the state population. Over time, enrollments in higher education have remained overwhelmingly white, with slight gains for Hispanics and slight decreases for blacks (see table 3).

Given the previous information on future labor demand and supply within Illinois, what do we know? The data indicate that the shift from a manufacturing-based economy to a service-based economy will continue. Within this service-based economy, demand will be highest for both the higher skilled symbolic analyst and the individual working within the lower skilled routine personal services category. Given the need to boost productivity to compete globally, workers at all levels of the labor spectrum will have to have higher skill levels than workers today. "[V]ery few jobs will be created for those who cannot read, follow directions, and use mathematics," says the Hudson Institute's report. Most jobs will require at least a high school education, and many will require at least some postsecondary education. Further, it is apparent that a majority of the new jobs created will be located outside of central cities.

Illinois' low skill base spawns a severe lack of fit between labor demand and supply. The majority of the state's population growth will be accounted for by minorities, who suffer poor educational preparation and achievement. The fact that minorities are concentrated in central cities will present a logistical problem for those businesses moving to the suburbs. If minorities comprise a majority of our state's labor supply and these individuals are concentrated within Chicago, what will a new employer thinking of settling in the western suburbs do for workers?

This is not a problem indigenous to Illinois. The inability of today's labor supply to meet labor demand is sadly illustrated by the fact that some estimates place illiteracy in the national workforce at over 20 percent and that American industry today spends over $1 billion a year to teach its workers basic skills such as reading, writing and arithmetic, R. Grossman recently wrote in the Chicago Tribune. However, corporate America can only do so much to make up for the deficiencies of our educational system. In short, our state and nation are facing an inability to compete globally because of an underprepared labor supply that shows no signs of improving.

This lack of fit between labor demand and supply presents other problems for society. As the labor demand and supply curves are driven more out of sync, more individuals will find themselves working at low skill/low wage jobs (e.g. routine personal services), leaving the most educated and highly skilled (i.e. the "symbolic analysts") to divide up a larger portion of the total wealth pie among fewer recipients. The increasing numbers of poorly educated, unskilled individuals within the workforce find their wages being driven down due to sheer numbers, while the fortunate few who are highly educated and skilled find their incomes increased due to the relative rarity of their services.

An interrelated policy issue is the "disappearing middle class." Reich reports that between 1978 and 1987 the poorest fifth of working American families became 8 percent poorer and the richest fifth became 13 percent richer, leaving the poorest fifth with less than 5 percent of the nation's income and the richest fifth with more than 40 percent. The fact that the number of working Americans in the poorest fifth grew by 23 percent during this period indicates that more workers are making less money and a smaller proportion of working Americans are acquiring a higher proportion of the nation's wealth. In short, as noted by Reich, "in recent years, working Americans have been traveling on two escalators one going up, the other going down." It is evident that the distribution of wealth would be less skewed if there was greater fit between labor demand and supply. Also, more wealth flowing downward on the income continuum would make for a more geographically mobile workforce which would benefit those employers moving out of the central cities.

The issue is clear: Illinois policymakers must find a way to ensure fit between the state's future labor demand and its labor supply. Because labor demand cannot be altered to fit the labor supply, steps must be taken to alter supply to fit demand. These steps should recognize both the complex factors that contribute to the poor fit and the negative economic and social implications for Illinois should the state fail to adequately address this problem.

Daniel T. Layzell is an assistant director for fiscal affairs at the Illinois Board of Higher Education.

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