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Major Influences Shaping the US Labor Market

August 26, 2019

Three major influences are shaping the US labor market, including a slower-growing, aging, and more diverse labor force, automation that eliminates manual and repetitive jobs, and fewer lasting ties between employers and workers. The US population is projected to increase to 440 million in 2050, when there are projected to be 185 million white non-Hispanic residents, 100 million Hispanics, 55 million Blacks, and 35 million Asians.

The share of persons in the labor force, people 16 and older are employed or actively looking for work, is expected to decline from 63 percent in 2017 to 58 percent by 2050, largely because of the rising share of elderly persons. Hispanics and Asians are expected to continue to have higher labor force participation rates than whites and Blacks, in part because a higher share are younger. The labor force participation rate of persons 65+ is expected to remain below 20 percent.

The education levels of US workers should increase. In 2017, a third of all workers 25 or older had a BA or more, but there were differences by race. About 38 percent of white adults had a BA or more, 25 percent of Blacks, 18 percent of Hispanics, and 55 percent of Asians. The share of adults with a BA or more could reach 50 percent by 2050, but differences by race are expected to persist.

Automation is likely to reduce the number of routine jobs. Countries with larger manufacturing sectors such as Germany and Japan have a higher share of jobs at risk of being eliminated by automation than more service-oriented economies such as the US and UK. Jobs most at risk of elimination include food preparation workers, construction workers, drivers, and farm workers.

There are likely to be new relationships between employers and employees, as more workers are hired via apps as independent contractors and via staffing firms that shift them from one workplace to another. Governments are grappling with how to help workers to deal with the labor-related risks such as unemployment and injuries that arise when they have few or no ties to a single employer over their working lives.

Two policies have been proposed to cope with faster labor market churn and perhaps more inequality. The first is a universal basic income or UBI that would guarantee all persons sufficient income even if they do not work. Proponents of a UBI suggest taxing new technologies or tech firm profits to generate the funds to provide everyone with a minimum income. Opponents fear that a UBI could reduce the incentive to work among the low skilled.

The second option is to guarantee a public sector job to all persons that pays at least the minimum wage. Proponents argue that guaranteed public sector jobs would ensure that workers would work for their basic incomes. Opponents believe that guaranteed public sector jobs would make it hard for private employers to hire low-skilled workers.

Countries with a higher share of jobs in manufacturing have a higher share of jobs that could be eliminated by automation