Bacon Bytes

James A. Bacon

Move Over, Boomers

The U.S. economy will face widespread labor shortages as Baby Boomers retire -- forcing communities to re-write the rules of economic development.

Economists and Democratic candidates for president may be decrying the “jobless” economic recovery, but if Rebecca Ryan is right, that issue won’t last long. Only four years from now, predicts the founder of Next Generation Consulting, Inc., the economy will be experiencing a massive labor shortage – too many jobs, not enough workers. She estimates that unfilled positions could reach six million by 2008; some forecasters have put the number as high as 10 million.

The labor shortage represents the flip side of chronic unemployment in the 1970s when the Baby Boom generation flooded the marketplace with workers. Now, three-four decades later, Baby Boomers are retiring in unprecedented numbers, and they’re being replaced by a much smaller age cohort, Generation X. The U.S is fast reaching the point, Ryan says, where two people will be retiring for every one who joins the workforce.

If Ryan’s forecasts are even close to the mark, the new demographic realities will roil U.S. labor markets – and create an identity crisis for economic developers. Virginia’s economic development infrastructure, like that of most states, is geared mainly to increasing the number of jobs and taxable investment. When Baby Boomers start retiring, there won’t be much point in creating new jobs if there’s no one to fill them. In all likelihood, Virginia communities will be facing an utterly unfamiliar challenge: recruiting workers to fill the jobs. If we fail to make this radical leap, corporations will take their investment and wealth-creating opportunities to communities -- in India or China, if need be -- that can attract talented young workers.

Ryan issued her forecast, along with insights into what makes GenXers tick, at the 7th Annual Regional Economic Forum sponsored by the Greater Richmond Chamber of Commerce. Her presentation represents the latest effort of Richmond’s 

business and civic leadership to rethink economic development in a global economy which places a premium on knowledge, innovation and productivity. The issues faced by Richmond, it goes without saying, affect every community in the state.

Last year, the forum had hosted Richard Florida, author of The Rise of the Creative Class. The Carnegie Mellon University professor advanced a novel vision of economic development centered on human capital. If Richmond wants to nourish a new generation of growth companies, he suggested, civic leaders should work on retaining and recruiting the artistic, scientifically and entrepreneurially gifted people who disproportionately account for innovation and economic growth. Offering a job and paycheck isn't enough. Communities must create an ambience that creative people -- especially younger members of the creative class -- find alluring.

Florida’s visit stimulated widespread comment, enthusiasm and study, though, as of yet, little concrete action. (There has been activity behind the scenes, however, which Bacon's Rebellion hopes to report on soon.) One purpose of asking Ryan to discuss the challenges of the GenX generation was to keep the pot boiling.

Ryan didn’t disappoint. She shares a number of perspectives with Richard Florida: Increasingly, Americans are choosing where they want to live, and only then pursuing a job. Among GenXers, she noted, three out of four subscribe to the philosophy, "live first, work second." As it gets more difficult to induce talent to move to uncool locations, corporations increasingly are moving facilities to where the talent it. Thus, to attract corporate investment, cities like Richmond must become the kinds of places where talented employees want to live. 

But Ryan parted company with Florida in critical ways. Florida had stressed the "three ts" -- talent, technology and tolerance -- as the attributes that members of the creative class look for most. Diverse, culturally liberal locations like San Francisco, Boston and Manhattan came off looking the best. His analysis put relatively homogenous, conservative cities like Richmond on the horns of dilemma. Do they try to transform themselves into something resembling San Francisco -- something they can never be -- or do they just resign themselves to economic decline?

Ryan's research suggests that the choice isn't so stark. By her measures, a city like Chicago that's uncool by Florida's definition actually compares favorably with super-cool San Francisco on a wide variety of measures. (Having achieved economic-

development super stardom, Florida has come under attack from other quarters as well. Writing in New York's City Journal, Steven Malanaga notes that since the dot.com crash, un-hip cities like Las Vegas, Oklahoma City and Memphis have whipped creative Meccas like San Francisco in job creation. See "The Curse of the Creative Class.")

Like Florida, Ryan notes that GenX has different values and priorities than previous generations. These young adults, born between 1961 and 1981, are savvy, self-sufficient and skeptical of traditional authority, or "boards, bureaucracy and bullshit." They do not work well in traditional, hierarchical management structures. By a wide margin, they prefer working for small companies that are more tolerant of idiosyncratic workstyles. And they change jobs frequently.

GenX also has different ideas of what makes a community attractive, Ryan says. Traditional analysis fixates on job growth, income growth and the cost of housing. GenXers are more likely to be interested in the number of Starbucks in a city, the length of the commute, the diversity of ethnic restaurants and the vitality of the local music scene. Economic developers lack the metrics to measure these aspects of their communities.

According to Ryan's research, here's what GenXers look at:

• Earning. How broad and deep are the occupational options in a community? What potential is there to change jobs if someone doesn't like his current situation?

• Learning. GenXers are dedicated to life-long learning, but they don't always find what they want from the local university. More germane: Can they find a Pilates instructor, or take lessons in gourmet cooking?

• Vitality. GenXers like to see people "out and about." How many people do you see jogging, roller blading or eating outdoors? How strong are the parks, trails and recreation areas?

• After hours. How's the nightlife? What's the music scene? Does downtown shut down after midnight?

• Around town. Are there cool "third places" -- venues where people can hang out, "where caffeine, people and ideas collide"?

• Cost of lifestyle. Are the cool places to live, like lofts along the riverfront, financially accessible to young people, or can only the affluent afford them?

• Social capital. How engaged are people in the community? In particular, how easy is it for young people to get connected?

Based on her work with cities, mostly in the Midwest, who are thinking about retaining and recruiting GenXers, Ryan offers a number of best practices.

• Public scorecards. Devise metrics for tracking the things that matter to young people, publish them, and use them to guide  public and civic investment.

• Young professional networks. Encourage the creation of networks where young professionals can plug into the community. According to Ryan, GenXers say they have 90 days to get hooked into the community before they start drawing negative conclusions.

• Human capital-driven marketing plan. Target specific demographic groups that match up well with your community's assets for recruitment.

Ryan can't point to a state or region of the country that has fully embraced a human capital-oriented economic development program, but she says a number of communities -- Oklahoma City, Nashville, Quad Cities, Ill., Iowa -- are moving in that direction.

Virginia has laid the intellectual foundations for such a shift. (Pardon me for tooting my own horn, but Bacon's Rebellion advocated an economic development program based on human capital in "Putting People First," August 26, 2002). The time for talk, though, is over. With only a few years until the labor crunch hits home, we need to start now changing the way we do business.

-- February 2, 2004