The landscape of the U.S. labor market has undergone swift transformations in the past three years, yet the subtle currents driving these shifts have been shaping the scene for decades. The composition of the American workforce is evolving, with an aging demographic, increasing diversity and a higher level of education.

Employers are expanding their workforce and embracing new technologies, though they grapple with the ongoing challenge of securing proficient talent. These shifts are poised to leave a lasting impact on both employment dynamics and the way businesses operate.

In October, the U.S. Chamber of Commerce released a bevy of new data that aims to inform what businesses need to know about the workforce of the future. Following are key highlights from the business organization’s report.

Workforce Participation Will Be Lower

There are approximately 168 million people in the labor force today. That number is expected to grow to roughly 170 million over the next 7 years. Yet despite this growing number, the labor force participation rate (LFPR) has trended downward for more than 20 years with no plateau. In 2000, the LFPR for men reached over 75 percent, while women’s rate hovered around 61 percent. In 2020, men’s and women’s annual average LFPRs dropped to 67.2 percent and 56 percent, respectively. The participation rate is climbing back upward but lags by 6.8 percent for men and 3 percent for women from the 2000 rates.

As observed during the COVID-19 pandemic, women, by and large, leave the labor force to take care of children or loved ones. Explanations for the decline of labor force participation for prime age men (ages 25 to 54), vary, including skills mismatch and going to school.

The reality is that the labor force participation rates are unlikely to fully recover. In fact, experts estimate that the overall labor force participation rate will drop to 60.4 percent in 2030. Nearly three full percentage points less than the February 2020 rate.

There are many factors behind the insufficient labor force participation rate.

The Workforce Is Aging

The share of older individuals within the U.S. population is steadily increasing and it’s likely this trend will continue. This shift is partly attributable to the fact that younger generations are having fewer children compared to their predecessors, resulting in a progressively older, and diminishing population.

As older workers eventually retire, businesses will encounter challenges in filling job vacancies with a less experienced workforce, potentially exacerbating the shortage of workers to support the expanding economy. Consequently, the nation as a whole will be tasked with providing care and support for a growing number of elderly Americans.

The Workforce Will Need More Legal Immigration

Fewer legal immigrants coming to the U.S. means that critical sources of talent for American businesses are drying up, contributing to the significant workforce problems companies are currently facing. Many of tomorrow’s innovators are today’s foreign national college students in the U.S. But these numbers have slid as well.

U.S. Census Bureau data shows that net international migration to the U.S. only contributed to a 247,000 person increase to the U.S. population between 2020 and 2021. Compared to the prior decade’s high of a 1,049,000 increase in our population between 2015 and 2016 due to immigration, the impact that immigration has had on U.S. population growth dropped by 76 percent.

Women Will Outnumber Men

Current demographic trends indicate that the ratio of men to women in the workforce is heading towards parity. Women now account for 46.8 percent of the labor force, and this number is predicted to rise to 47 percent by 2031.

While women are 5 to 8 times more likely than men to have their employment affected by caregiver responsibilities, women’s workforce participation has rebounded since the pandemic lows.

But aside from how many women are participating, there is also a considering of where women participating in the labor force. Industries that are historically comprised of a large female workforce—health care and education—are growing at faster rates than male dominated industries.

More women are completing degrees today than ever before. In 2018, 65 percent of women who began their degree in 2012 had graduated, compared to 59 percent of males. Women continue to earn degrees at higher rates than men and are expected to account for 57 percent and 60 percent of all Bachelor’s and Master’s degrees earned, respectively, in 2029. 

The Workforce Will Be Increasingly Diverse

The U.S. is projected to become more diverse in 2045 as diverse Americans are projected to account for 50.3 percent of the population. The populations of Black, Asian, and Hispanic Americans are all expected to rise, with Hispanics anticipated to account for 30 percent of the labor force by 2060. This is due to higher labor force participation and birth rates.

While the workforce is becoming more diverse as a whole, diversity within industries is not keeping pace. Black workers are underrepresented in the tech industry and especially in the roles with the fasted projected growth. Similarly, there is an underrepresentation of Black and Hispanic workers in the STEM fields. Without intervention, the national decline in math and reading scores in our public schools could further narrow the future diversity within the STEM workforce and the nation’s broader ability to compete on the international stage.

The Workforce Will Be Well-Educated

The makeup of the future workforce is linked to trends in educational attainment. For example, in March 2020 employment rates were highest among 25- to 34-year-olds with bachelor's degrees or higher (86 percent), followed by those with some college (78 percent), high school graduates (69 percent), and those without a high school diploma (57 percent).

Notably, over the past 24 years there has been an increase in the U.S. labor force’s education levels. The share of individuals holding Bachelor's degrees and advanced degrees has steadily expanded, rising by 7 and 5 percentage points respectively, from 1992 to 2016.

At the same time, the share of individuals with lower educational attainment, such as those without a high school diploma or only a high school diploma, has diminished by around 5 and 10 percentage points respectively during the same period.