In the coming years, the workforce will undergo the most dramatic changes it has experienced in more than half a century. Understanding that people costs account for some 65 percent of corporate spending, and that workforce optimization has a direct impact on shareholder as well as a company's bottom line, those looming changes will prove critical to the future success of organizations in every sector of the economy, public and private.

Listen to conversations between business owners, managers, HR Professionals even C-Level Executives -- just about anyone involved with the hiring, developing/training, and managing of "people" and one thing is crystal clear:

Today's workforce creates more challenges than anytime in our history!

We are going to address some of these critical changes in this series of three articles and discuss some trends and predictions; effects on your bottom line; what drives these problems; how to reverse these effects that we may all experience in the coming years of THE NEW LABOR ECONOMY.


Skills required by the workforce of The New Labor Economy are changing in virtually all occupations, but one fact is alarming, employees are not obtaining them at sufficient levels and speed. Computer skills, math and science will be in the greatest demand, but far too small a percentage of today's students focus on those areas. Enrollment is down at many technical schools and vocational programs at local high schools are being canceled because of lack of enrollment. This is troubling development because they often do a better job of preparing young people for certain professions than do four-year colleges.

Skill-set requirements vary by occupation, of course, but in the future almost all jobs will require some degree of technical expertise, even those not traditionally viewed as requiring higher-level knowledge. For example, topping the list of employers' key expectations of administrative staff is that they be skilled in new and emerging technologies, according to the International Association of Administrative Professionals, based in Kansas City, Mo. Employers want proficiency in the Internet, intranets, e-mail, online services and a wide variety of PC software. They want administrative staff members who can act autonomously and often remotely, who add value with broader skills beyond the traditional scope of the secretary, and who demonstrate strong interpersonal skills

Study after study has confirmed the existence of a serious skills gap, particularly among the newest members of the workforce. While its impact has been less obvious in some sectors because of the economy's inconsistent growth, the skills gap is real and represents a significant problem for employers. It exists in just about every industry and occupation, and it is getting worse.

The Skills Gap 2001, a study commissioned by the National Association of Manufacturers, conclusively points to the top deficiency identified by respondents, is a lack of basic employability traits - attendance, punctuality, work ethic and so on. That likely reflects the shift in values and attitudes that takes place between successive generations of workers.


For the first time in history, we are faced with four generations overlapping in the workforce. This not only creates communication and interpersonal problems, but defining these four distinct groups is many times at the center of disagreement.

In 1998 "Education Week" defined Generation X'ers as those between the ages of 19 and 30, inclusive. That would mean that they were born between 1968 and 1979. Using that definition, there are about 41 million in the U.S.

But there's even a question about that. In the novel "Generation X," Douglas Coupland defined Generation X as "a group of people born between 1961 and 1972 typified by a college education, dissatisfaction with career opportunities, and pessimism." Consequently, I guess you can be a baby boomer and a Gen-X'er at the same time. Recently American Online had a forum for Gen X-er's, and even they can't make up their mind.

For the purpose of consistency, I refer to the research of Bruce Tilgen, founder of Rainmaker Thinking, Inc. Bruce has authored or coauthored fifteen different books and numerous management-training programs and is considered a leading expert of young people in the workplace.

Generation - Number in Workforce - Percentage of

( in millions) - Workforce

Generation Y (born 1977-1989 - 31.5 - 21% Generation X (1965-1977) - 43.5 - 29.5% Baby Boomers (1946-1964 - 61.5 - 42% Schwartzkopf Generation - 11.5 - 7.5%

(born before 1946)

TOTAL 148 - 100%


2005 Rainmaker Thinking, Inc.Analysis

Early in 2005, the scale tipped once and for all. Together, Generation X and Generation Y now make up a majority of the workforce---50.5%. As this trend continues, the shift away from old-fashioned workplace norms will accelerate. While the percentage of Gen-Xers in the workforce has remained constant since 2001 at 29.5%, Generation Y is the fastest growing segment. In the last four years, Generation Y has gone from 14% of the workforce to 21%; from 20 million workers to more than 31 million. Add to that another 17 million Americans born 1978-1989 who could participate in the labor force, but do not. Over the next five years, roughly 10 million more Gen-Yers will join the workforce (not including immigration). By 2010, Generation Y will outnumber Generation X. Are you prepared to recruit, motivate and retain this super high maintenance generation?


The Future Foundation and SHL has published a white paper that provides evidence that poor people management is costing the US $105 billion per year. "This cost relates only to wasted managerial time, and does not include costs related to overhead, reduced output, poor service quality, or the bottlenecking of tasks. The actual figure is undoubtedly much, much more. Why are organizations wasting money in this way? Because they have not developed effective people management strategies. Let's put it frankly: Underperformance affects everyone's bottom line."

Further evidence that managers may not be communicating effectively with employees was revealed in a study of over 70,000 exit interviews in which employees cited "poor management" as the number one reason for leaving a job.

-- Dr. Jac Fitz-enz, The ROI of Human Capital

(New York: American Management Association 2000) p. 125


According to the U.S. Bureau of Labor Statistics, employee turnover was 20 percent in 2004 and it cost the economy (thatSs you and me, folks) $420 billion in wasted expenses and lost productivity. But according to research from Greg Smith, CEO & founder of Chart Your Course International, "fasten your seatbelts; as they say here in the South, It's fixin' to get a whole lot worse. Why? Three major factors are coming together to contribute to a workforce tsunami in the coming decade. The three factors are 1) an imminent escalation in unwanted employee turnover, 2) an outright decline in the size of the U.S. workforce, and 3) a serious job skill shortage. Organizations that fail to start preparing today will suffer the most tomorrow."

We are faced with a Shrinking, Aging Workforce.The birth rate in the U.S. started declining in the early '70s. Both the U.S. Census Bureau and Accenture Consulting conclude that the workforce will begin to shrink for the first time in U.S. history beginning in the year 2015. (see chart 1) The implications are clear: the competition for qualified employees is going to be fierce, placing more importance than ever on retaining the employees you already have.

Civilian Workforce Aged 20%2B in millions*

-------- # - increase

1950 - 58 - --

1960 - 65 - 12%

1970 - 75 - 15%

1980 - 97 - 29%

1990 - 118 - 22%

2000 - 132 - 12%

2004 - 140 --

2010 est. - 141 - 7%

*U.S. Bureau of Labor Statistics


Research by organizations such as Watson Wyatt and the University of Southern California's Center for Effective Organizations has demonstrated a direct relationship between workforce management practices and a company's bottom line and return on equity, yet few companies devote significant resources to that area. Most organizations don't know if they are over-investing or under-investing in things such as training and development relative to other companies in their industry.


Increasingly complex and mounting challenges to find and keep highly skilled, motivated, and engaged workers have elevated people to an entirely new level in the value-generation landscape. Today, the workforce has become the mechanism in creating shareholder wealth. Top managers who know how to bring together the right internal and external resources can develop and sustain a higher-performing workforce. Doing the best job possible of recruiting, selecting, developing, engaging, and managing the right people results in higher retention, more proficient and productive employees and, ultimately, higher levels of customer satisfaction.

Indeed, the stakes are high, and the rewards for organizations that rise to the challenges of The New Labor Economy and the workplace of the future will be immense. In addition to transforming business processes to maximize productivity and increase profitability, the ability to apply talent in a manner that is better, faster, more agile and more innovative than the competition is essential for long-term growth and survival.

Author's Bio: 

Mr. Frey is dedicated to helping people find, follow, and live their passions. Get you free copy of his latest publication at Recession Crusher 7.3 Mr. Frey can be reached at 260.489.0900