The U.S. labor market may soon face a new crisis: Too few workers

Even as many workers are fearful that artificial intelligence could endanger their jobs, there’s a potentially bigger employment crisis on the horizon: a severe labor shortage that is set to emerge over the next 10 to 15 years, according to a leading demographer.

Demand for young workers is going to “explode” during that period, leaving employers with a shortage of qualified workers, according to Steven Ruggles, a professor of history and population studies at the University of Minnesota, and the creator of the Integrated Public Use Microdata Series, or IPUMS, the world’s largest and most widely used population database.

A wave of baby boomer retirements will coincide with smaller cohorts of young people entering the labor market, resulting in a smaller overall workforce. That will lead to an “unprecedented situation” where, for the first time in U.S. economic history, more workers will leave the workforce than enter it, Ruggles said.

The labor force is set to shrink by 2.7 million workers, or 1.3%, from 2030 to 2040, according to Ruggles’ analysis of U.S. Census Bureau data and population growth projections from the Congressional Budget Office. That will come after the labor force grows by just 9.1 million people from 2020 to 2030, marking the smallest number of net entrants into the workforce since the 1960s.

“Some people think AI is going to take away all jobs. But there are going to be very few people who are searching for jobs, relative to the size of the economy,” Ruggles told CBS News.

An average of 10,000 boomers a day are turning 65 from 2011 through 2029, according to Census data. In 2025, a record 4.18 million Americans, or more than 11,400 people per day, turned 65.

“Baby boomers are quickly leaving the scene and there aren’t very many young people,” Ruggles added.

Fewer workers, higher wages
Those dynamics could boost workers’ prospects, helping them secure better wage growth and labor conditions, he said. The less competition workers have, the better their earning prospects are, Ruggles explained.

“This is likely to lead to rising wages for young people, stronger unions, and lower inequality,” he said. “For the few people entering the labor force, there is going to be an outstanding economic opportunity. They are going to do very well.”

With fewer people in the U.S. workforce, AI could end up as a necessary support for the economy. AI is likely to help “mitigate the impact of demographic changes on the labor market” without harming workers, Ruggles said.

AI may help firms boost productivity, allowing them to reap profits with which they’ll be able to compensate the relatively few young workers they employ.

“With that high productivity, firms will have a lot of money to pay them with,” Ruggles said.

Workers in these fields stand to benefit
While AI can perform many administrative functions and higher-level tasks like text and image creation and computer coding, human workers will remain essential in fields such as healthcare, construction and education, among others.

It’s part of why excitement around AI has also led to a resurgence in interest in skilled trades.

Career experts say jobs like electricians, plumbers, welders, masons, HVAC technicians and other occupations requiring technical training are increasingly appealing to young people.

Those industries are where the most pronounced labor shortages could appear, according to Ruggles.

“Obviously, some fields are going to be tighter than others,” he said. “Jobs that aren’t likely to see mechanization over the next few decades, like plumbing or electricians, will probably be in particularly high demand, and very expensive.”