By Peter Cappelli

Recent studies warn that the U.S. economy might soon experience widespread job vacancies that can't be filled due to a shortfall of workers. Do these arguments have merit, and if so, what are the implications for HR managers?

The demographic phenomenon behind these predictions is the "baby bust" cohort, the age group just behind the baby boomers. This group is roughly 16% smaller than the baby boom, and the assumption is that this smaller cohort will not be able to staff all the jobs now filled by the baby boomers.

In fact, the baby bust cohort has been in the labor force for some time. Their average age is about 32. And just behind it is another, larger cohort that some call the echo of the baby boom, the children of boomers, which is the group just now entering the labor market.

In large part due to the echo group, government projections indicate that the labor force not only will continue to grow but also will actually increase at a rate slightly faster than that of the 1990s, at least through 2014. The rate of increase will then begin to slow, although the labor force will still be growing. If baby boomers decide to delay retirement or to work part-time after they retire from their main jobs, then the labor force could grow even faster.

Labor shortage is unlikely

Nothing about changing demographics, therefore, suggests anything like a labor shortage in the near future. Tight labor markets like those of the late '90s are certainly possible, but they would require a sustained economic expansion similar to that of the '90s, the longest economic expansion in U.S. history.

Betting on a labor shortage, therefore, requires betting on a long-term economic boom. Long-term economic forecasts are about as accurate as long-term weather forecasts, and no prudent HR manager should base the organization's employment policy on such a long-term bet.

So should anything about the changing demographics of the labor force be of concern to a prudent HR manager? Yes.

Monitor internal demographics

First, an organization's own demographics, which are separate from the demographics of the labor force as a whole, are worth examining carefully. Few employers have an even distribution of workers across age groups.

Because most employers disproportionately hire younger workers for entry-level jobs and do so in fits and starts — hiring quickly when they are expanding, stopping when growth stops — many organizations have demographic bulges in their age distributions. Due to entry-level hiring done in the economic boom of the 1960s, many companies employ a disproportionate number of 60-year-olds. Age concentrations matter because potential retirement waves can cause a substantial loss of talent in a few crucial jobs.

Retired boomers provide labor, bring skills

Second, changing labor demographics allow employers to tap into a huge pool of skilled workers who have been largely neglected by employers: retirees, a group whose ranks will swell enormously as baby boomers reach retirement age.

The baby boom cohort will be healthier, more active, and longer lived than any previous older age group. Many boomers will want to keep working as a way to stay engaged; many more will need to keep working to pay for the much longer retirements that increased life expectancy allows. The question is this: Can employers tap into this "new" pool of labor?

Many organizations, including most corporations, filled their staffs with young and inexpensive workers who then advanced through the ranks earning seniority-based pay to become experienced and expensive workers. Efforts to restructure costs, therefore, often meant — at least implicitly — replacing older workers with younger ones. When employers considered using older workers, they saw problems because the pay for those workers — tied to seniority — was high.

Flexible workplaces attract retirees

The days of lifetime employment and seniority-based wages are largely over now as companies have moved toward models of contingent work, independent contracting, and free market–based arrangements. Flexible employment models allow for a tremendous fit with the large pool of labor market re-entrants.

Employers can draw from that pool by implementing policies and practices that accommodate older workers. Doing so might require more flexibility than some employers are comfortable allowing: Older workers might not want to work the long schedules of their younger counterparts, and they might be less willing to manifest the commitment and rah-rah spirit that some organizations require.

But these workers also offer desirable skills and competence and are often willing to work for less money and fewer benefits than their younger, career-minded counterparts. The challenge for HR managers is how to engage retirees in cost-effective ways.

If retirees want greater control over their schedules and tasks in return for lowering employment costs, then HR managers can add value by creating workplace arrangements that offer retirees that control.

Manage performance effectively to capture competitive advantage

The problem is ensuring that the organization gets the right work done according to its schedule. The solution begins with effective performance management:

• Define performance criteria precisely and explicitly.
• Communicate expectations clearly.
• Have a large-enough pool of workers available to match skills and schedules with organizational needs.

HR managers might feel as if they are running their own temp agencies when they use retirees. But those HR managers who can adapt to embrace this new pool of workers can capture a significant source of competitive advantage.

About the author   Peter Cappelli is the George W. Taylor Professor of Management at the Wharton School, University of Pennsylvania, and is Director of Wharton's Center for Human Resources.