The American workforce is in crisis, buffeted by one challenge after another – some recent, and some, like demographic changes, that have been building for decades. At a recent employment law seminar – our first in-person employment program since 2019 - Pierce Atwood brought together clients from health care, higher education, accounting, the nonprofit sector, and other industries to discuss both short- and long-term solutions to these challenges.

Demographic and Educational Disruption

With an entire generation of baby boomers now retiring, a smaller Gen-X cohort that can’t replace them, and a public education system falling behind other developed countries in preparing students, there simply aren’t enough qualified workers to fill the pipeline with capable younger successors. These factors are conspiring to change the face of the American workplace, as many businesses confront poor prospects for growth, or even survival, with their current business models.

Long-term Decline in Workforce Participation

Demographics and a frayed education system may be working in a kind of negative synergy, but they also have co-conspirators. One is the overall U.S. labor force participation rate, which has been declining for at least 20 years:

The participation rate had already begun its downward trend when the Great Recession hit in 2008. It never returned to pre-recession levels before the pandemic struck in 2020, and it has not recovered even to where it was in 2019. A smaller working age population, which is participating in the workforce at a lower rate, and of whom a smaller percentage are employable, is a triple whammy against resupplying almost any company’s workforce.

The Explosion of Mental Health and Substance Use Disorder Conditions

Added to these trials is a meteoric rise in mental health conditions and substance use disorders among workers. In FY 2021, the EEOC reported receiving 8,400 charges from individuals alleging discrimination due to mental health or substance use. These claims now make up 30% of all ADA claims, a 50% increase from just 10 years ago.

Most common among the conditions raised at the EEOC are anxiety and depression (together 60% of all mental health charges), and also PTSD, bipolar disorder, and schizophrenia. Some, but by no means all, of the increase in these conditions is due to the pandemic: fear of contracting COVID-19, increased stress from additional child care responsibilities in the wake of day care and school closings, anxiety about getting or not getting the vaccine, social isolation from working at home and/or limiting social contact, and other factors.

Longer term, we have also seen a similar explosion of mental health-related conditions among millennials and particularly Gen Zers, which correlates with (and which respected social scientists attribute to) the intensive use of social media by children, beginning with the first iPhone in 2007.

While the pandemic no doubt made matters worse, the rise in mental health conditions predates COVID-19 by at least a decade, and these conditions will continue at higher levels when the pandemic has receded from our daily consciousness. Meanwhile, employers must continue to honor their employees’ rights under the ADA, FMLA, OSHA, and state human rights and workers compensation acts, even as these conditions can generate some of the most challenging situations for HR.

On Top of it all, Quiet Quitting

A final contributor to this perfect storm is an even more invidious co-conspirator: “quiet quitting.” Loosely defined, quiet quitters are disengaged employees who are doing the bare minimum to stay employed – at a time when, because of the dearth of prospective employees, that minimum is a low bar indeed. Gallup reports that as much of 50% of the U. S. workforce is not fully engaged. In a recent survey conducted by Qualtrics and reported by Bloomberg Law, the percent of employees who were likely to give their best efforts for their employer declined in 14 out of 15 industries from 2021 to 2022.

How can Employers Survive This Perfect Storm?

Do quiet quitters need performance management? Are they candidates for discipline? Do they require ADA accommodation and/or medical care? All of the above? How can employers keep a viable workforce together in the face of so many simultaneous headwinds? Seminar attendees broke into small discussion groups to tackle these and other questions, and to share their answers and solutions.

Clients from across the employer spectrum confirmed the experience of disengaged employees, as well as a very short supply of credible job seekers and an alarming increase in the number of difficult and problematic candidates. Yet despite these discouraging trends no one suggested that the initial response to quiet quitting should be disciplinary or punitive. Instead, attendees recognized that disengaged employees and the shortage of workers are interrelated consequences of long-term social and health-related trends, accelerated or worsened, but not caused, by the pandemic and the government’s reaction to it.

The following themes emerged:

• Early and Sustained Engagement with all Employees. Despite the added burden on HR, seminar attendees strongly agreed on the need to help employees feel connected and appreciated. Two ideas stood out: Employee Engagement Groups, and one-on-ones with supervisors. Groups can generate a shared responsibility for and ability to benefit from both enterprise and personal success. (Employers must take care not to engage in what could be construed as de facto collective bargaining with groups of employees.) One-on-ones provide a means of building trust and empathy while supporting individual employee goals, learning, and growth. Social events have their value, but they are not a substitute for engagement on issues that impact compensation, opportunity for advancement, and work-life balance.

• Investment in the Best Existing Employees. Many attendees emphasized the importance of identifying employees with promise as early as possible, learning about their needs, interests, and motivations, and investing in them with training, relationship building, and early promotion. While there is added risk in betting on potential, employers recognize that if they do not, they may start losing their most promising employees to their competitors.

• Increase Flexibility to Accommodate Employees' Lives and Mental Health Needs. Many employers have already created hybrid work schedules, providing their employees with additional flexibility. The tension between satisfying employee demand for remote work and sustaining workplace culture is apparent, but at a time when employees have the upper hand, most employers have little choice but to allow remote work for jobs that can be done remotely. At the same time, employees need intermittent leave for their mental health either under the FMLA or as an accommodation under the ADA. When possible, most employers should embrace flexible schedules if they are compatible with the business.

• Partnering with the Education System. Accounting firms in attendance noted that fewer high schools are teaching accounting, and the number of students interested in accounting careers is dwindling. Others noted the general decline in preparedness, with respect to both specific skills and the ability to behave responsibly. Meanwhile, new employees understand their leverage and are using it to demand the schedules they want and other concessions from desperate employers. It is not clear yet whether this is just a byproduct of changes in the supply and demand dynamic, or a longer-term psycho-social trend fueled by social promotion in schools and the impact of pandemic-driven remote learning. Either way, employers need closer and continuous contact with high schools, community colleges, colleges, and universities to convey what’s working and what’s not.

• A Need for Foreign Workers. There is widespread recognition that for the foreseeable future, the U.S. workforce is highly unlikely to provide workers willing to do all of the jobs that need to be done. At the same time, many recent immigrants have training and education qualifying them for more skilled positions than they are able to find. For many employers foreign workers will be a vital part of a multifaceted workforce strategy.

Program Takeaways

The American workforce is losing its mojo: its size, readiness, and commitment are all in decline. The causes are complex and beyond any one employer’s ability to solve, but despite these negative macro trends, smart, energetic, committed employees still exist. In the near term, employers will have to invest more time and resources into identifying, developing and supporting these workers.

Longer term, employers likely need to:

1. Look to foreign workers, both to fill positions and create competition for U.S. workers.

2. Insist that our public education system prepare the next generation of workers by improving basic proficiencies, becoming more responsive to market needs, and incorporating more vocationally relevant subject matter into their curricula to improve employee readiness.

3. Focus on innovation to deliver the same quality products or services with a smaller, more productive workforce.

Conclusion

Human Resources professionals are hungry for opportunities to talk about their biggest challenges, and to share ideas for adapting to and eventually solving them. But even in the face of unprecedented hardships that are economic, demographic, medical, and social in nature, HR leaders remain optimistic and resourceful. They are willing to reach outside their organizations to collaborate more broadly with those responsible for providing workers with the knowledge, skills, habits of mind, and attitude for success. As the legal landscape associated with this environment continues to evolve, we will continue to provide our clients with these opportunities.