The Looming Labor Shortage

Last week an L.A. Times article entitled L.A. Metro’s downtown subway project may not open until mid-2022 highlighted a handful of challenges L.A. Metro’s $1.75 billion Regional Connector is having, chief among them, its contractors inability to secure enough skilled labor, including management and craft labor such as concrete workers, carpenters and electricians.  The Regional Connector is a 1.9-mile set of twin tunnels beneath downtown L.A. that will connect three rail lines into two mega-routes that will allow passengers to ride from East L.A. to Santa Monica or from Azusa to Long Beach without changing trains.  It is also one of the Agency’s 28 transit and highway projects that they are trying to finish before the 2028 Summer Olympic Games in L.A. 

This development does not bode well for Metro because contractors will be forced to raise salary offers to attract qualified workers, thereby driving up bid prices, during a time of significant development.  Internally, Metro is also looking to hire 2,200 people this year, from track inspectors and engineers, at a time in which almost 40 percent of its 11,000 employees are eligible for retirement.  They are not alone.  Other public sector institutions, such as LADWP need to hire 3,000 people and the City of L.A. is in the process of recruiting for 5,000 open positions.

This past January the Labor Department declared that U.S. employers posted nearly 7.6 million open jobs, which meant that amount of available jobs now outnumbers the unemployed by about 1 million, which has occurred for the first time in the 18 years the data have been tracked.  As workers try to figure whether they want to switch jobs and businesses try to figure out whether they will raise wages to attract and retain workers, the real question is – Where is our country’s pool of skilled workers?

In L.A. County there are about 8 million residents who are 16 years old and older, which makes them eligible to work.  Approximately 5.1 million are actively participating in the labor force, while a large number of individuals – students, retirees, institutionalized individuals, stay-at-home parents and discouraged workers – remain on the sidelines.  This segment of the population has greatly increased since 1991 as reflected in today’s labor force participation rate of 62 percent, which is down greatly from a high of 69 percent.

The state’s Employment Development Dept.’s shows that the L.A. region supports 4.52 million jobs, up by 56,000 from a year ago, and up 570,600 jobs since 2010.  A majority of recent growth is dominated by occupations in health care and social assistance and additional gains are coming from construction, educational services, leisure and hospitality, professional and business services.  Financial activities and manufacturing continued to see large declines. 

The largest consumer of the region’s most skilled talent is the tech and aerospace industries, which are congregating in downtown L.A., Santa Monica, Venice, Marina del Rey, Playa Vista and El Segundo.  The region’s tech employment increased 14.6 percent between 2016 and 2017, with many of the biggest names in technology—Facebook, Google, Apple, Amazon, Netflix, Spotify, and SpaceX opening and expanding new office space.  The 100 largest tech companies in the region saw a 24 percent increase in hiring last year, according to data from the Annenberg Foundation.  These companies have been able to develop their workforce by recruiting workers from some of L.A.’s other top architecture, banking, entertainment, etc. firms, thereby placing a worker pipeline burden on key sectors of our economy. 

On another part of the jobs’ spectrum is the “Gig Economy”, which provides a majority of workers opportunities to secure short-term contracts or freelance work as opposed to permanent jobs.  It is no longer just Uber drivers and Airbnb hosts. Freelancers also include writers and graphic designers; architects and engineers; and lawyers and accountants.  According to a study commissioned by Fiverr last year, L.A. has become one of the biggest markets for specialized independent professionals like these with about 400,000 workers who collectively earned more than $18 billion last year.

Though progress is being made on the jobs front, L.A.’s unemployment rate – 4.4 percent – ranks it 20th out of CA’s 58 counties, even though L.A. represents a little more than 30 percent of CA’s $2.7 trillion economy.

That leads us back to the question of how can there be labor shortages in the region when there are 220,000 residents looking for work, more than 80,000 people of working age graduating from our K-12 schools, Community Colleges, CSUs, UCs and private colleges and tens of thousands of workers who are underemployed in jobs that cannot cover their cost of living.

This issue is not a simple one, but a critical one and the next few weeklies will begin to look into further trends, solutions and next steps to ensure L.A. continues to foster further economic growth and the creation of good paying jobs.