Hoosier Workforce Shrinks As Baby Boomers Retire

by Thomas P. Healy

Looming in the background of efforts to improve workforce quality is the demographic reality of diminished workforce quantity.

Matt Kinghorn, senior demographic analyst for the Indiana Business Research Center (IBRC) at the Indiana University Kelley School of Business in Bloomington, lays out the facts in a September InContext article, “Indiana labor force projections: Slowdown on the horizon” “After adding an average of more than 280,000 workers per decade between 1950 and 2010, the latest projections from the IBRC suggest that Indiana’s labor force will grow by only 34,000 in total between 2020 and 2050.”

“Looking out 20 years, the labor force will begin to grow again but not as steeply as before. These trends were set in stone decades ago,” Kinghorn said. “And they are not unique to Indiana.” Credit the Baby Boomers who are leading this long-term demographic shift as they begin to retire. “The generational ebb and flow will manifest itself between 2025 and 2035,” Kinghorn added.

Graphic courtesy Indiana Business Research Center. CLICK TO ENLARGE.

He defines labor force as “the count of people over age 16 who are working or want to work.” Other contributing factors to a reduction in the workforce include declining fertility rates, a drop in net migration, and declining labor force participation rates.

Given the worldwide trend toward urbanization, Kinghorn anticipates a modest .06 percent annual increase in the Indy Metro area labor force between 2015 and 2025. “In general, if we look at population growth in Indiana, most growth in the last 20 years and looking ahead is driven by a handful of metropolitan areas, including the 11-county Indy metro area. Labor markets seem to be more robust in urban areas.”

To equal past labor force growth, Indiana would have to entice five Amazon HQ2s (at 50,000 workers a pop) each decade for 60 years. By contrast, on Oct. 5 the Indiana Economic Development Corporation announced that 22 manufacturers had committed to adding 1,090 new jobs in the state over the next several years.

“It’s going to be a new era. The era of labor force increasing by 250,000 per decade won’t happen any more. Of course we hold out hope to see more people moving here,” Kinghorn said. “But it’s impossible to imagine you could attract enough in-migration at a magnitude that keeps the labor force growing as it did in the past.”

Shifts in workforce development are inevitable, Kinghorn said, and he sees the biggest change in productivity growth. “We’ll have to produce just as much—if not more—but more efficiently with fewer people if we want to maintain our standard of living,” he said.

A version of this article appeared in the October/November 2018 print edition.