In a previous article, we noted that there will be a skilled labor shortage in the United States. It’s an odd prediction because the United States (and the world) is recovering from the worst recession in almost 90 years and we are used to reading stories about the “labor participation rate” and the inaccuracies in the employment statistics. But a skilled labor shortage is coming; the evidence is mounting and this prediction will become the focus of mainstream media stories within the next two years.
The questions to explore are: why there will be a labor shortage, where the shortages will be most acute, and what to do about it.
The most important reason for a skilled labor shortage is the aging of the United States population, with baby boomers retiring and leaving the full time work force. The wave of retirements started in 2011, and for the next 18 years, approximately 10,000 people per day will reach the retirement age of 65 years old. While it is true that many people will not retire on the day that they turn 65, it is equally true that they will eventually retire and each day that they work after the age of 65 is a bonus. Many boomers will retire gradually – first working part time, then occasionally consulting and eventually, finally, going fishing or golfing or traveling.
The boomers are the largest demographic group in the United States, and with their decades of experience and accumulated knowledge, become important to their companies. Boomer employees have greater responsibility, more information, and form the collective institutional memory for many companies. Their retirement will create a vacuum in many companies that will be difficult to fill.
The aging of the baby boom generation will have another effect beyond their transition from the active workforce. As people age, their consumption of health care and leisure activities increases. Those areas of the economy will attract younger people who would otherwise consider becoming – well, title examiners. Demand (and wages) for nurses, respiratory therapists, operating room staff, home health care workers etc., will rise; also for golf professionals, fishing boat captains and beach lifeguards.
There are other factors which will contribute to the skilled labor shortage in the title insurance industry: innovations in the economy and the glamor of the innovative areas will be attractive to many workers; the desire to work in larger, metropolitan areas rather than rural areas; the reindustrialization of America, particularly with the emergence of 3D manufacturing technologies; the reduction in energy costs in the United States making America an attractive destination for high energy using industries; the deferred maintenance of our national physical infrastructure (falling bridges, pot holed roads, airports without enough runways).
All these factors lead to an inescapable conclusion – the US economy is going to have healthy growth and a skilled labor shortage. But – what about the low labor participation rate? Aren’t there enough people waiting to take the jobs that will be created?
The economic crisis was a result of the collapse in housing and construction industries. The people most affected were construction workers – masons, plumbers, electricians, heavy equipment operators. In order to switch careers from construction work to – oh, let us say title plant maintenance or title examination – the workers require retraining. The wage rates for non-construction work are frequently less than construction work. A title examiner makes less money than a heavy equipment operator. Faced with lower paying jobs, many construction workers are simply waiting for that industry to pick back up. The construction industry will eventually pick up as new houses are built and the government begins to spend money to rebuild the country’s infrastructure, but the workers will be older and many years closer to retirement. Time lost is time lost.
How can title companies combat this?
Our industry is geographically diffuse; there is a title agency in literally every town, many times as an adjunct to a local law office. A typical method of recruitment in our industry is to hire high school and college students during their summer holidays and if they work out, to add them as permanent employees when they graduate from college. This method of recruitment relies on:
Each of these traditional reasons will face challenges.
As a labor shortage develops, wage rates will rise. Industries where worker effort results in higher returns (high value added industries), will be able to pay higher wages. The title insurance industry will have to either raise prices or lose potential employees to other industries.
The title insurance industry has no formalized training programs, other than a few electronic lessons from ALTA. There are no college courses or vocational school training programs for the title insurance industry. Title agencies spend 18 months training a new recruit in their methods; if those employees routinely transfer to other jobs during or soon after their training is completed, the title companies will be faced with a crisis. Title companies cannot afford to train people again and again, only to lose them to other jobs.
Many people have close ties to their home towns and want to build their lives in those towns. Their families live there, and their spouse may be from there. All things being equal, smaller towns may be able to compete for their own children. But – all things will not be equal. Larger urban areas offer much more for adventurous young people, and companies in higher productivity industries will be able to attract staff with better salaries and benefits. Inevitably, many who would have stayed home won’t.
What is the title insurance industry to do?
If a skilled labor shortage is developing, many title companies will have to look at outsourcing parts of their work load so that the remaining employees can take care of their customers and make sure that the outsourcing company hasn’t overlooked critical information.
If, as we believe, title companies will be forced to outsource parts of their work load, and if it is a national trend, there will be competition to engage competent outsourcing companies. But – that is the subject of another article, another time.
Please, contact us to learn more.