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Labor and Employment

Millennials to Baby Boomers: Why workers of all ages are adding to the labor shortage

Millions of workers of various ages have yet to return to the workforce after the onset of the pandemic, a trend that could meddle with the Federal Reserve’s efforts to tamp down inflation. 

The Bank of America Institute, a think tank that draws on Bank of America data, found that more than two million workers should have come back to the labor force since the onset of the pandemic but haven’t. Many are older workers who retired early, but there are also plenty of millennials and Gen Xers in the mix.

“When you don't have enough workers, you’ve got to raise wages right to attract” talent, said Bank of America Institute economist Anna Zhou. “Whether they will come back will be a critical component to see whether labor supply picks up in the U.S.”

A help wanted sign is displayed at a restaurant in Arlington Heights, Ill., Monday, Jan. 30, 2023. On Thursday, the Labor Department reports on the number of people who applied for unemployment benefits last week.

Who’s missing from the labor force?

According to the report, the missing workers are a mix of older generations and those in their prime working years: 

  • 30% are traditionalists (born 1925 to 1945)
  • 23% are baby boomers (born 1946 to 1964)
  • 13% are Gen X (born 1965 to 1980)
  • 11% are millennials (1981 to 2000)

Most of the prime-age workers left the restaurant and retail sector and tend to be lower earners, according to the report. 

Why are people not working? 

The report says high costs for caregiving, migration trends and long-COVID could be pushing people to leave the workforce behind. 

► Caregiving: About 7% of respondents the Census Bureau’s latest Household Pulse Survey said they would not be returning to work because of caregiving, with 5% looking after children and 2% looking after elderly people.

The consumer price index shows daycare and preschool costs have gone up by more than 10% since the start of the pandemic.  

"Some working parents might have to stay away from their kind of lower-wage jobs and choose to be more of a full-time parent or caregiver," Zhou said. 

► Migration trends: States with large cities with a high cost of living like New York and California are seeing workers leave for more affordable states like Florida. Zhou said those workers might have enough money saved up to work less or stop working altogether.

► Health issues and other factors: An estimated 24% of people infected with COVID-19 have experienced long COVID, according to a July report from the Minneapolis Fed, and about a quarter of those workers said the illness is impacting their ability to work. 

The Bank of America Institute says the opioid epidemic and obesity rates could also play a role.

The return of these workers could help bring down wage raises and tame inflation, but Zhou noted that issues like high childcare costs aren't going away any time soon. 

"It will take some time to try to reverse," she said. "The labor market probably will stay fairly tight for the foreseeable future."

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You can follow USA TODAY reporter Bailey Schulz on Twitter @bailey_schulz and subscribe to our free Daily Money newsletter here for personal finance tips and business news every Monday through Friday.

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