While unemployment rates are still historically low, some industries are struggling more than others to find workers. Which part of the labor market is taking the hardest hit? Blue-collar workers, according to The Conference Board's report, "US Labor Shortages-Challenges and Solutions."

"In a span of 10 years, the U.S. economy moved from having the weakest labor market since the Great Depression to one of the tightest in history," the authors write. "The result is a labor market with critical shortages, especially for blue-collar and manual services employers who are experiencing much tighter labor markets than employers of highly educated white-collar workers–the exact opposite of prevailing trends in recent decades."

The Conference Board surveyed more than 200 human resource executives and found that 85 percent of companies in "mostly blue-collar industries" reported recruiting difficulties versus 64 percent among companies in "mostly white-collar industries." Further, almost a quarter (23 percent) of companies in mostly white-collar industries report having neither recruitment nor retention difficulties, whereas this is true for only 8 percent of companies in mostly blue-collar industries.

"Employers' complaints have merit, and the labor shortages problem is having a strong impact on the US economy," the authors write. "If not addressed, the problem could get worse, yet most US labor-market thought leaders are currently much more focused on the risk of massive technological unemployment in the distant future than on the existing labor shortages. If left unchecked, today's conditions could easily develop into one of the worst labor shortages of the last 50 years."

Several trends have contributed to a dramatic decrease in the labor supply, according to the report:

The massive retirement of the large baby boomer generation is bringing growth in the working-age population to a halt — a trend that will continue through 2030. "Never before have such a large number of retirements and almost zero growth in the working-age population happened before."
As a growing share of young adults are enrolling in four-year colleges, the number of working-age people with a bachelor's degree is increasing by about 2 percent annually. On the flip side, the number without a bachelor's degree is shrinking.
The recovery in labor force participation has been disappointing, especially among men, and especially compared to other advanced economies in the last decade.
The large increase in recent decades in the number of people not in the labor force due to disability – and almost all lack a college degree.
Compared with earlier decades, young men without a college degree are less likely to be in the labor force. "That decline in participation is partly because they are much more likely to be single, living with their parents, and have less of a need to earn income," the authors write. "These trends are more structural than cyclical and will be hard to reverse."
The large drop in labor force participation of 16-24-year-olds. "While good from a societal perspective since it is a result of higher education attainment at this age, the steep decline in the labor force participation of young people significantly reduces the supply of workers in occupations that typically hire young and less-educated workers," they write.

While the supply of blue-collar workers has dropped, the demand for such labor has risen, particularly as eCommerce continues to grow substantially. Employment in personal care and health support jobs has also been increasing rapidly.

To combat these issues, organizations are raising wages to attract and retain more blue-collar workers, the survey found.

"Given the variation of tightness across occupations, it is not surprising that most of the wage acceleration is occurring in blue-collar and manual services jobs, where wage growth is already above prerecession rates," the authors write. "Wage growth for management and professional workers, which includes close to 40 percent of the workforce and most of total compensation, is accelerating more moderately, which is one reason why, despite the historically tight labor market, overall wage growth is still well below prerecession rates."

As companies raise wages, their profitability declines, according to the report. "With the US economy projected to slow and labor shortages escalating, the pressure on corporate profits is likely to increase in the coming years," they write. "If the current trend continues, profitability rates will soon drop to historic lows. Lower profits make companies more reluctant to spend, a trend that may slow down economic growth even further and risk the sustainability of the current economic expansion. In addition, the drop in corporate profits and growing labor costs may force more industries to raise prices and lead to a higher overall inflation rate."

As a result, a number of those surveyed are using a mix of strategies, including lowering requirements for prior experience and/or certain skills and competencies, as well as expanding the target recruitment demographics to include more women and minorities.

"Lowering hiring requirements often creates a need for investing more in improving the skills and development of new recruits," the authors write. "Many forward-thinking companies are actively creating talent pipelines by cultivating connections with local high schools, trade schools, and universities with the goal of improving technical curricula and developing internships and apprenticeships. In addition, these companies have been more intensely providing or expanding online learning opportunities."

Companies suffering the most recruitment and retention difficulties are making stronger efforts to make the company a more attractive place to work by improving working conditions (such as work environment, job hours, and responsibilities); increasing work schedule flexibility; increasing efforts to monitor and, if necessary, reduce employee workload; and decreasing required employee overtime. In addition, they are increasing efforts to streamline boring or burdensome tasks.

"Governments could improve participation by improving health outcomes for working-age individuals, by reducing the number of incarcerated people, by making work more attractive and non-work less attractive from a tax/benefits perspective, and by removing existing barriers to labor market participation," the authors write.

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Blue-collar workers in high demand, short supply

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