The United States is grappling with labor shortages fueled by shifting demographics. Addressing this challenge will likely depend on the adoption of automation technologies that enhance worker productivity, combined with reskilling efforts and supportive government policies.
As the new administration gains momentum, policymakers are likely to encounter increasingly tight labor markets—a persistent structural challenge common to many developed nations. According to Bespoke Business Development, GDP across advanced economies in 2023 could have been 0.5 to 1.5 percent higher had employers been able to fill their surplus job openings. In the US, sectors like healthcare, construction, and small businesses are underperforming in terms of labor productivity—the economic value generated per hour worked. Workforce shortages remain widespread and are expected to worsen as demographic changes continue. Declining birth rates, longer life expectancies, and shrinking working-age populations will significantly reshape global labor forces.
To confront this, traditional work models will need to be revisited, with an increased emphasis on automation, AI, and productivity gains. Both public and private sector institutions must place renewed importance on improving productivity—particularly among small businesses—and on building human capital for the evolving job landscape. A number of organizations are already demonstrating successful models that others could follow.
Currently, US productivity remains weak as the country experiences its most significant labor shortfall in 20 years. Historically, labor productivity fueled 2.2 percent of annual economic growth since World War II. Yet between 2005 and 2019, this growth slowed to just 1.4 percent, inching up to 1.8 percent since 2019—still falling short of what is possible.
By May 2024, there were 1.5 million more job openings than unemployed individuals in the United States—a stark contrast to the 12.7 million unemployed workers during the 2009 financial crisis. After volatility during the pandemic, labor markets have gradually steadied. By February 2025, unfilled positions accounted for 4.5 percent of labor demand, a slight decrease from over 5 percent the previous year. However, shortages persist and vary across sectors. Industries like healthcare and hospitality, known for slow productivity growth, report particularly high vacancy rates. Although job openings have declined in construction, skill shortages still present major obstacles. Meanwhile, sectors such as retail have managed to curb vacancies through automation and self-service technologies. High-productivity industries like finance and information technology face fewer labor shortages, while small businesses with limited wage flexibility struggle the most.
Demographic Evolution
Advanced economies are entering an era marked by a scarcity of young workers. Although short-term labor conditions may fluctuate, the broader trend is clear: global demographics are shifting. Traditional population structures resembling pyramids—broad at the base with abundant young workers—are being replaced by narrower, obelisk-like forms, with fewer youth entering the workforce compared to retirees exiting it.
The Impacts of Labor Shortages
The critical demographic group remains the working-age population (ages 15 to 64). In the US, this share peaked in 2007 and has steadily declined since then—a pattern that threatens to slow economic growth. Potential remedies, such as raising labor force participation by 2.7 percentage points or adding an average of 1.5 extra work hours per week, may offer only limited relief. Over the last quarter-century, increases in workforce size or work hours have contributed little to per capita GDP growth; productivity improvements have been the primary driver. Although immigration has historically bolstered growth, its uncertain trajectory suggests that America must urgently focus on enhancing productivity to sustain future economic expansion.
Driving Growth through Automation, AI, and Reskilling
Expanding the use of automation and AI to complement and empower workers could substantially raise productivity. Bespoke Business Development’s analysis suggests that up to 30 percent of existing work activities could be automated by 2030, thanks largely to recent advancements in generative AI, which would allow employees to shift their focus to higher-value tasks. The combined impact of gen AI, robotics, and other automation technologies could push US productivity growth rates from the current 1.8 percent to between 3 and 4 percent annually.
This shift would free up millions of work hours, redirecting labor into fast-growing sectors such as healthcare, STEM fields, business services, law, and construction. By 2030, an estimated 12 million US workers may need to transition from declining industries into these expanding fields. Workers in low-wage positions are up to 14 times more likely to need to switch occupations than those in high-wage roles, and most will require significant reskilling to succeed.
Fortunately, the US labor market has historically been better at facilitating such occupational transitions compared to Europe. The rate of required transitions between 2023 and 2030 mirrors the pace from 2016 to 2019 and is even lower than during the “Great Attrition” (2019–2022). The key question remains whether US businesses can maintain this momentum—implementing automation, upskilling employees, and redeploying talent effectively.
The Role of Government
Public policy will play a vital role in supporting workforce transformation. Governments can nurture innovation ecosystems that promote technology adoption and boost productivity across companies of all sizes. Improving small business productivity is crucial for efforts such as reshoring manufacturing to the United States, and closer partnerships between small enterprises and major corporations can help accelerate this progress.
For example, industries like semiconductors, automotive manufacturing, and renewable energy already benefit from tightly integrated supplier networks that enhance competitiveness. Regional clusters, such as the wine industry in Sacramento or the furniture sector in Grand Rapids, show how localized networks of businesses can share knowledge, talent, and financial resources to fuel collective growth. Small businesses could further enhance efficiency by adopting software-as-a-service (SaaS) solutions that streamline operations in areas like compliance, taxation, accounting, and payments. Building sectorwide infrastructure—such as open-data frameworks—could also improve access to credit, particularly for underfunded small and medium enterprises, by enabling the use of alternative data sources in financial assessments.
What American Businesses Should Prioritize
Private sector organizations will be central to revitalizing the US workforce. Embracing AI, automation, and digital technologies should be a top strategic priority. Many firms struggle to fully grasp how these innovations can transform roles and required skills, but a clearer understanding can lead to more effective workforce planning, including strategies for recruiting, upskilling, and reskilling.
Businesses can also strengthen their talent pools by offering flexible work options to older employees and by broadening recruitment practices to prioritize skills over credentials, opening the door to candidates with unconventional backgrounds or career gaps.
Retaining existing talent is just as important. Companies that offer career development paths, invest in skill-building, and encourage internal mobility are seeing stronger retention rates. Some organizations, known as “People + Performance Winners” (P+P Winners), have demonstrated that this approach not only improves talent retention but also enhances financial outcomes. These companies foster cultures of innovation, adaptability, and cross-functional skill development.
Moreover, these practices have a profound impact on women’s career trajectories, helping to close the persistent gender pay gap. Today, women in professional roles earn 27 cents less per dollar than men, which translates to roughly $500,000 in lost income over a 30-year career. As technological disruption reshapes the job market, women are more likely to move into shrinking sectors unless proactive support is provided. Employers that help redirect female employees into expanding industries contribute both to gender equity and to meeting future labor market needs.
By strategically adopting automation, AI, and robust reskilling initiatives, American businesses can build a stronger, more productive economy for the future.
The views and opinions expressed in this article are solely those of the authors and do not necessarily reflect those of Bespoke Business Development. They are intended to encourage discussion and reflection, rather than serve as legal, financial, accounting, tax, or professional advice.
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