Labor Shortages A Reality

By IBISWorld Analyst Andrea Alegria

Despite the fact that unemployment levels remain high in most parts of the country, employers in some industries are actually having a hard time finding enough workers. At the end of March, the national unemployment rate dropped to 8.3%, from a peak of 10.0% in 2010 but still much higher than the low of 4.4% at the end of 2006. Still, employers in sectors including mining, software publishing and nursing care are struggling to fill key positions. The sectors that face labor shortages are likely to experience higher wage costs and weaker margins as they compete for talent. Some firms may be forced to change their business strategy, outsource work or settle for subpar candidates.

Mining

Buoyant demand from emerging markets and strong commodity prices has reinvigorated investment in the US mining industry, and many firms are looking to expand production. From drilling shale and natural gas drilling to mining gold, silver and other metals, firms are increasingly looking to explore and mine new sites. This, in turn, is driving demand for skilled workers, including miners, engineers, geologists, mechanics and other trades people needed to operate a mining business. The demand for mining workers outnumbers the available pool of qualified employees, though. Aging baby boomers who are currently in the mining profession are nearing retirement, and slow growth in the availability of skilled employees will make it increasingly difficult for mining firms to fill job openings.

The mining sector includes these industries (and their respective IBISWorld reports):

• Oil Drilling and Gas Extraction (21111)

• Coal Mining (21211)

• Iron Ore Mining (21221)

• Gold and Silver Ore Mining (21222)

• Copper, Nickel, Lead and Zinc Mining (21223)

• Molybdenum and Metal Ore Mining (21229)

• Stone Mining (21231)

• Sand and Gravel Mining (21232)

• Mineral and Phosphate Mining (21239)

• Mining Services (21311)

IBISWorld estimates that these industries will employ about 661,809 workers in 2012. In the next five years, the mining sector will need to add an estimated 54,495 jobs in order to meet anticipated demand, with employment growing at an average rate of 1.6% per year to 716,304 workers in 2017. A skills shortage in this sector will lead to higher wage costs as firms compete for qualified employees with higher pay and increased benefits. IBISWorld expects total wages to increase at an annualized rate of 3.0% in the five years to 2017, outpacing employment growth. The average wage for the industry is expected to increase from $72,789 in 2012 to $78,092 in 2017. Intensified competition for skilled talent poses a threat to the industry, and could mean not only increased costs, but also a reduction in productivity and difficulty meeting contractual obligations.

Software Engineers

Finding qualified applicants for technical positions will also be challenging to firms in the software publishing industries because the rapid growth of mobile and web-based technologies is outpacing the pool of available workers with the required technical skills. Software engineering is among the most in-demand, lucrative careers because computer application and mobile software design requires very specialized skills. For example, software engineers need advanced math skills to write the complex algorithms that are required for developing programs. Many of the skills that programmers need are very specific, leading firms to launch in-house training programs. Rapidly growing firms, such as Microsoft and Apple, are competing for the best talent in the market. The difficulty in finding skilled workers is forcing some technology firms to outsource software development because they can’t find enough domestic engineers.

The software publishing sector includes these industries (and their respective IBISWorld reports):

• Operating Systems and Productivity Software Publishing (51121a)

• Database, Storage and Backup Software Publishing (51121b)

• Business Analytics and Enterprise Software Publishing (51121c)

• Design, Editing and Rendering Software Publishing (51121d)

• Video Game Software Publishing (51121e)

• Security Software Publishing (51121f)

This software publishing sector is expected to grow revenue at an average rate of 3.4% per year to about $47.6 billion in the five years to 2017. Industries in this segment will together employ an estimated 385,616 people in 2012; by 2017, total industry employment is expected to reach about 407,337 people, representing 1.1% average annual growth. A skills shortage in this sector will drive up wages, which are expected to outpace annual employment growth over the period. Total wages are forecast to grow at an annualized rate of 3.4% during the five years to 2017, and the average wage is expected to jump from $104,567 in 2012 to $116,852 in 2017 as a result of intensified competition for skilled workers.

Nursing

The demand for skilled nursing is also forecast to outpace supply, a trend that will be evident across all healthcare industries. For instance, as the aging population in the Unites States continues to boost demand for nursing care facilities, the number of establishments in this industry will grow, driving its employment needs. In 2012, employment in the Nursing Care Facilities industry is expected to total 1.55 million people; by 2017, the industry will need to add about 32,000 jobs.

The rising demand for nurses will be driven by a number of factors, including the rapidly growing number of Americans older than 65 and the greater number of people who will have access to healthcare as part of recent healthcare reform. Additionally, people are living longer and are looking to enhance their quality of life by leveraging the healthcare system. At the same time, skilled nurses are aging (the median age for nurses is currently 46) and more than 50 percent of the nursing workforce is nearing retirement, according to the American Nurses Association. The slow growth of the availability of experienced nurses further dampens hiring prospects for employers.

The nursing sector includes these industries (and their respective IBISWorld reports):

• Nursing Care Facilities (62311)

• Hospitals (62211)

• Psychiatric Hospitals (62221)

• Specialty Hospitals (62231)

• Primary Care Doctors (62111a)

• Specialist Doctors (62111b)

In order to find and retain skilled nurses, firms in these and other healthcare industries will increase wages and offer other incentives to lure qualified employees. IBISWorld forecasts that wages in the Nursing Care Facilities industry, for example, will rise at an annualized rate of 2.5% in the five years to 2017, far outpacing employment growth of 0.4% during the same period. The average wage in the industry is expected to climb from $29,636 in 2012 to $32,876 in 2017.

To download full research reports for the industries discussed in this article, click on the report titles below.

Oil Drilling and Gas Extraction, Coal Mining, Iron Ore Mining, Gold and Silver Ore Mining, Copper, Nickel, Lead and Zinc Mining, Molybdenum and Metal Ore Mining, Stone Mining, Sand and Gravel Mining, Mineral and Phosphate Mining, Mining Services, Operating Systems and Productivity Software Publishing, Database, Storage and Backup Software Publishing, Business Analytics and Enterprise Software Publishing, Design, Editing and Rendering Software Publishing, Video Game Software Publishing, Security Software Publishing, Nursing Care Facilities, Hospitals, Psychiatric Hospitals, Specialty Hospitals, Primary Care Doctors, Specialist Doctors 

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