Winning in a Shrinking Labor Market

If you’re a business owner, you’ve likely felt it already: hiring is harder and keeping great people is tougher than ever. It’s not just a short-term, post-pandemic hiccup. The U.S. labor force is shrinking – and the impact on local businesses is growing.

America’s workforce is facing deep structural changes. First, demographics are shifting. Baby boomers are retiring at an accelerated pace – roughly 10,000 a day – and there simply aren’t enough younger workers to replace them. By 2030, every boomer will be at least 65, marking the first time in history that older adults will outnumber children in the U.S.

Second, the labor force participation rate is declining, especially among men aged 25-54. Many left the workforce during the pandemic and haven’t returned, whether due to early retirement, caregiving responsibilities or long-term health issues.

Third, birth rates have been falling for decades, meaning fewer people are entering the workforce. When you add tight immigration policies, the pool of available workers shrinks even further.

Finally, we face a skills mismatch. Many available workers either lack the training or credentials needed for today’s jobs or lack the desire to learn.

In short, we’re not just in a labor shortage – we’re in a labor shift. The situation is unlikely to improve on its own. While we can’t control demographic trends, we can control how we respond. Here are five strategies to successfully recruit and retain talent in the future:

1. Invest in internal training and upskilling and talent pipelines. When talent is hard to find, build it from within. Offer structured training programs, mentorship and apprenticeships to help employees grow into more advanced roles. Not only does this fill skill gaps, but it also boosts retention – people are far more likely to stay with a company that invests in their future. Consider partnerships with local high schools, trade schools or community colleges to develop a steady pipeline of talent tailored to your industry.
2. Create aesthetic and inspiring work environments. We often think of culture as something intangible – but the physical environment also plays a huge role in how people feel about where they work. Workplaces that are clean, thoughtfully designed and pleasant to be in signal that you value your employees. Natural light, comfortable break areas, collaborative spaces and effective use of technology and acoustics can go a long way in making work more enjoyable and energizing. A well-designed space can help foster pride, creativity, and connection – key components of a strong workplace culture. I believe that in the future, engaging spaces will be more about the connection than the collection of people.
3. Rethink your workforce strategy by tapping into freelancers and contractors. Not every job function needs to be filled by a full-time employee. Many companies are discovering that contracting out certain responsibilities or leveraging freelance talent can lead to better results – with less strain on payroll. This approach gives access to highly-specialized skills you might not need year-round. Roles in marketing, design, information technology, human resources and operations can be efficiently filled this way. Our company has embraced this model over the last two years, and we’re stronger for it. We get top-tier talent on demand and remain agile, all while responsibly managing costs.
4. Use technology to enhance, not replace, human work. Automation and artificial intelligence can help bridge the labor gap – but the goal shouldn’t be to replace workers. Instead, use tech to handle repetitive tasks, freeing up your team to focus on higher-value work. Done right, this will both improve productivity and job satisfaction, without undermining morale.
5. Build a culture where people want to stay. Compensation matters – but culture can matter as much or more. Employees stay where they feel respected, heard and supported.

Invest in leadership development, communicate clearly and offer real growth opportunities. Offering regular feedback, recognition and providing a sense of team connection will go a long way in retention.

Labor force challenges aren’t going away. But businesses that take this moment seriously – by investing in people, designing better environments and rethinking how they structure their teams – will not only survive but thrive. In an era of talent scarcity, becoming a workplace of choice is one of the smartest competitive edges you can build.

Donnie Brawner, Partner, Colligo Holdings
CEO/Owner, Paragon 360 & Paragon Fabrication

Originally Featured in Springfield Business Journal: Winning in a Shrinking Labor Market