Future Labor Shortages Could Boost Wages and Housing Affordability

Today’s children might enjoy a more prosperous future than their parents, thanks to a growing demand for young workers. With a potential housing surplus on the horizon, life could become more affordable. However, by 2040, there may be a shortage of young workers, leading to higher pay and more housing availability, according to demographic experts. Immigration and artificial intelligence remain unpredictable factors, while young workers will still bear the burden of supporting an aging population.

States like North Dakota and South Dakota already face a scarcity of young laborers, with job openings often double the number of job seekers. These positions, such as those in oil fracking, require physical labor that AI cannot replace. “Really a lot of the Midwest is still investigating things like autonomous systems but we’re not really there yet. So labor shortages are a thing and are an issue,” said David Flynn, an economics professor at the University of North Dakota.

The issue of labor shortages is expected to expand to other states, including Washington and Nevada, where there are still more job seekers than available positions. Today’s children could experience economic betterment akin to the post-war baby boomer generation, suggests Steven Ruggles, director of the Minnesota Population Center. He notes the second half of the boomers faced lowered wages due to an influx of workers. Ruggles’ paper, “The pig in the python,” argues that the upcoming young worker shortage will result in greater economic prosperity.

Changing Labor Markets and Housing Trends

By 2040, retirees are projected to surpass new entrants in the labor force, potentially leading to increased pay and affordable housing. “If construction activity remains elevated, changing demographic trends could lead to a growing oversupply of housing in more markets,” the Mortgage Bankers of America noted in a June white paper. This could result in lower housing prices, particularly in states with rapid construction.

Demographers caution that predictions about economic turns can be uncertain. Richard Jackson, president of the Global Aging Institute, reflects on incorrect forecasts of the 1990s housing market crash. Despite this, a decrease in young workers seems inevitable. “Most of the relevant demographics is already locked in,” Jackson said.

Immigration remains a wild card, significantly influencing labor markets as skilled young workers are attracted to the U.S. “It definitely helped prolong the glut of labor,” Ruggles said. Julia Gelatt, associate director of the U.S. Immigration Policy Program, noted that without immigrants, the young population could have shrunk significantly. The future of labor demand and wages is uncertain, especially with unpredictable AI impacts.

In North Dakota, companies pay high wages to attract young labor for energy, construction, and manufacturing jobs. “Companies were willing to pay big wages to attract labor to take oil and gas jobs,” said Marcia Goetz Havens, manager of the state’s Labor Market Information Center. As competition for young workers intensifies, other sectors like healthcare and retail struggle to fill positions.

North Dakota, with nearly 70% labor force participation, faces challenges in attracting new workers. Employers report difficulty in filling manual labor jobs, with young people gravitating toward higher-paying, less demanding roles. “We just don’t have the bodies,” Flynn said, highlighting the need for increased compensation to attract workers to these essential roles.

Stateline reporter Tim Henderson can be reached at thenderson@stateline.org.

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