Last week I posted Shrinking Workforce is Good for Technology and got a couple interesting comments. I thought this interesting enough to bring back to the foreground. First off, the post was really not about the HR effects of the decline in the workforce as baby boomers retire, but around the Economist’s social commentary that perhaps some population decline isn’t such a bad thing for the globe as an environment.
Colin’s comment:
Though I agree with the article’s central point about the promise of technology, one thing it elides is that the declining population trend is not uniform across the EU/Russia/Japan and the US. While it has declined steadily, fertility here is still right around replacement level and immigration (legal and otherwise) is comparatively high.
The end result of this is that by 2050-ish, the EU will be under 300 million population, with a median age in the 50s, while the US will be third behind China and India with a population over 400 million and a median age not much higher than today’s (upper 30s). For those who see economic destiny in demographics, this is a pretty interesting data point.
does seems to argue that there might not be a serious decline in population. In fact, if you look at the global population trends, the U.S. may not be so badly off. In fact, if you go run some numbers from the U.N. website, you’ll see that Colin is correct with his numbers.
Donald from Sourcing Analytics Inc had this to say:
You bring up, Kingsbury, the all important topic of immigration. So much has been talked about how immigration is undermining our economy. Of course, a very different position could be taking that it is helping fuel expansion.
The demographics tell us two very important things:
1. With employment a near full during the 90s and right now increasing after a slow down, immigration (both legal and illegal), has helped us avoid a very serious labor shortage in this country.
2. Without the offshoring of a significant number of jobs, there would not be enough of a labor pool to supply the job market.
Now the composition of the job market can be analyzed of course and it may very well show that Walmart-type jobs are replacing higher paid/higher skill jobs, but certainly productivity gains through technology has also picked up the slack of a more slowly expanding labor pool.
My reaction is that both of the above are correct. However, there is the underlying driver of thise “crisis.” In a global competition for talent, the U.S. seems to be losing the overall battle. In 10-15 years when the baby boomer population is in full retirement and the U.S. looses it’s senior talent, there are currently insufficient numbers of mid level professionals to fill their ranks. Add to this the fact that countries like China, South Korea, and India are doing a much better job nurturing the next generation of workers, and you have a global environment where offshoring is no longer an option. In fact, offshoring is no longer a valid term since we are not actually owning the product and moving the production. The future scenario is actually where “foreign” entities increasingly dominate the market. Is this bad? Definitely not from a global perspective. Certainly if you are an American.
7 responses to “Shrinking Workforce is Good for Technology Revisited”
Dubs,
You reference a “global competition for talent’” but the reality is that there is a global competition for cheap labor, both skilled and non-skilled.
That’s all well and good and inevitable in a shrinking world, but without a doubt in my mind, the trends we are seeing now will be absolutely DWARFED by the impact we will see in the next 1 to 7 years from peak oil.
For a general discussion for those of you not familiar:
http://www.peakoil.net/
http://www.hubbertpeak.com/
Peak oil will make the competition for talent a nearly moot point as the competition for cheap, reliable, renewable energy heats up. The real way for the US to guarantee its place in the world will be to provide the innovation needed to ensure the future of energy: not simply snatch and grab the dwindling oil supplies.
I’d be very interested to hear comments on this largely unnoticed trend. Indeed, we may have already achieved peak oil in a world with rapidly growing oil demand – primarily because of countries like India and China, where much of the current off shoring is going.
DDubs,
Good points all. Outsourcing is a temporary advantage, as wealth effects will in time make it more rewarding for Indian MDs to treat their countrymen than to transcribe medical records from doctors in Iowa. Already we are seeing some heating up in places like Bangalore and Hyderabad. India’s and China’s future depends on their ability to utilize the >80% of their populations that do not live in one of the sophisticated coastal cities like Bangalore or Shanghai.
Peak oil? It’s OT, but I’ll just register that I don’t buy it. We’ve barely tapped the Alberta tar sands, just to name one. There’s plenty of good reasons to reduce our dependence on foreign oil, but I’m far from convinced that the “peak oil” scenario is anything but an apocalyptic fantasy.
Thanks guys. As Donald mentioned I am one of the many who don’t really understand the oil issue. The debate whether oil vs. talent is a larger economic impact is up for grabs, but I can’t really do anything but focus on the one that is an HR issue. (perhaps oil is in some way I don’t understand).
Not to go too far off thread, but a quick note on oil:
The issue of peak oil is not so much how long oil supplies will last, but how much oil can be extracted (produced) in a given time frame (day/year, etc.)
For numerous reasons, once an oil well has extracted more than half of the oil it ever will, the production becomes more difficult, and daily production begins to decline. Production follows a bell curve. A good producing well will yield somewhere around half of the oil in it. Average would be around 40%.
Four of the 5 largest oil fields in the world are currently in decline. 3 were recognized as such in the past year. The US has seen declining domestic production since 1971.
Although the tar sands in Canada potentially hold enough oil to provide for decades, the rate it can be recovered is roughly 1.9 million barrels per day. The current world demand is about 80 mbpd. Current world production is about 83mbpd.
Discovered, but as yet non-producing oil will not provide any significant new capability for at least 7 years (based on time to market for new discoveries).
So the major oil fields are in decline and will produce less per year, while world demand is growing rapidly as China and India emerge as economic powers.
Peak oil is not about how much oil is out there, but rather the imbalance of demand exceeding the absolute limit (in decline) of how much oil can be produced. Remember your economics and supply and demand. In this case, there is a ceiling on supply per unit of time (day). So demand will exceed supply. Period. When that happens (in no more than the next five years, and perhaps in 2006) growth in many countries will come to a screeching halt. The impact will be felt worldwide as pricing will shoot upwards, and new investment will decline.
The addition of new capacity in all areas of the economy in third world nations will slow to a crawl, and even retreat, as the superpowers will have the access to oil. Demand will again begin to grow for domestic talent which may or may not keep pace with the slowing economy as markets for our products dwindle.
Until, and when alternative replacement sources of energy ramp up (coal, wind, solar, nuclear), the issue of offshoring will seem a quaint turn of the century phenomenon.
In an attempt to pull this back at least slightly on-topic I will offer the following:
http://www.eia.doe.gov/oiaf/1605/ggrpt/summary/special_topics.html
This is a chart showing energy consumption per unit of GDP in the US since 1980. Roughly speaking, we use half as much energy to generate a dollar of GDP today as we did in 1980.
But GDP and productivity have grown a lot. A large portion of that growth is now due to intangible goods, information products, and services in which energy is only a small component.
Electric power is a commodity. I can generate electricity in dozens of ways. I cannot obtain any advantage by purchasing electricity from Smith Power versus Jones Power, since in a commodity market all prices will converge on marginal cost.
Likewise, changes in the cost of electricity will in one sense not change competitive factors because we all pay (relatively speaking) the same price for it. But, if I hire some great engineers who figure out how to run my factory line with 5% less juice, I suddenly have a real advantage.
Talent, unlike energy, is truly a scarce resource because once Smith has hired that engineer, Jones can’t. I can’t replace a great engineer with a machine. Five hundred years ago that engineer might have been able to grow two more bushels of wheat than the neighboring serf. Two hundred years ago he might have become the best cooper in the city. Today a couple of smart engineers can get together and build machines and systems that span the globe and impact billions of dollars in output. The returns to talent will only increase, and they will increase faster every day.
Don- I have a few more things to say about peak oil but I don’t want to clutter Dub’s blog with it. I don’t see your email anywhere but if you want opinion worth every penny you pay for it then drop me a message at ckingsbury at hrmdirect you-know-what com.
Don’t worry about it guys. I’m actually finding this very entertaining and educational. I simply can’t contribute much. Proceed as you will.
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