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An Employment Anomaly: How The Talent Gap Affects the Employment Participation Rate

Last week, Schaffer Associates Chairman Jim Schaffer traveled to the Florida Building Material Association Convention and Trade Show in Orlando, FL to participate in a panel discussion on the New Age of Industry. During that discussion, a topic of interest was how the talent gap is affecting the employment participation rate. Below is a summation and further elaboration of his remarks on this topic at the convention.

While the nation’s unemployment rate is at 5.1%, there are over 94 million people not working, resulting in the worst employment participation rate (defined as the number of individuals who are either employed or actively looking for work) in 38 years. Despite that incredibly high number, companies are still having trouble hiring talented workers. Why? The answer lies in several factors contributing to the talent gap, which in turn is keeping the employment participation rate at its worst point in almost four decades.

Schaffer AssociatesWhen we consider all of the factors that make an individual fully qualify as “unemployed,” true unemployment is actually closer to 10.3%. This number is important because it includes would-be employees that are considered discouraged workers who have withdrawn from the labor force. Additionally, the declining rate of labor force participation is not a new problem. In fact, there has been a steady decline since 2000. And the reason for this is itself complex and multifaceted.

We are currently seeing a mass exodus of baby boomers as they retire. For years, economists have been predicting this event and have theorized over its impact on our workforce. Now, it’s happening en masse. Meanwhile, the younger generation is staying in school longer, seeking additional degrees, and on average delaying its entrance into the workforce. This is especially true for women, who are extending their education more often than men.

Statistics plainly show that obtaining government assistance – whether it be unemployment insurance or disability insurance – delays a worker’s reentrance into the workforce. Some individuals are also hampered by the fact that some employers are reluctant to hire older workers, millennials, the long-term unemployed, or untrained individuals.

There is an ever-apparent lack of adequate training in STEM (science, technology, engineering, and math) and other skill sets across all sectors of the labor force. Additionally, those laid off during the recession fell behind on job skills while they were out of the workforce and continue to do so.

Finally, aspects of our nation’s immigration policy are contributing to the problem. Currently, the legal nonimmigrant workers’ H-1B visa program is capped at 65,000 per year. That cap eliminates a number of highly skilled and, in some cases, STEM-trained foreign workers that would be a boon to our economy.

In sum, this trend has very serious implications for our economy. Economists anticipate a 2-2.5% growth rate as long as we are working with these kinds of numbers, demographics, and economic frameworks. But in the end (and as a practical matter for the boots on the ground employers), we are left with a lot of open jobs and no one – or next to no one – to fill them. We need to do a better job of training our workers and encouraging labor force participation if we want to see an appropriate rate of growth for our businesses and economy. And businesses need to partner with organizations like Schaffer Associates to help them navigate this employment anomaly.

Schaffer Associates


Schaffer Associates is an executive search firm specializing in talent acquisition for the hardware, home improvement, building materials, and consumer products industries. As premier executive recruiters with expert focus on your industry, we help you HIRE SMART. Contact us today for help with your officer-level or mid-management level search. 

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