Women at work

America's labor shortage solution? Women.

March 12, 2014: 9:47 AM ET

Amid a looming workforce shortage, women will need to assume a significantly more prominent role in the workforce.

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FORTUNE -- Sheryl Sandberg has been urging women to lean in at work, but over the course of the next generation, women might not have much of a choice in the matter.

That's one conclusion you have to draw from the stark demographic realities outlined in economist Milton Ezrati's forthcoming book Thirty Tomorrowswhich analyzes the effects that demographic trends will have on the global economy over the next several decades.

It's no secret that birth rates have collapsed in the developed world. The most pronounced change is in rich, East Asian countries like Japan, where birth rates have fallen from 3 children per woman in 1950 to 1.3 children in 2010. Several European countries including Germany and Italy have also seen their birth rates fall well below the so-called replacement rate, meaning the roughly 2.1 children per woman at which a country's total population eventually stops growing and stabilizes, absent immigration.

MORE: Without immigration, the U.S. economy looks like sclerotic Old Europe

Even the U.S., which has somewhat resisted the rich-world declining birth rates trend, has seen its fertility rate decline from 3.5 births per woman in 1950 to 2.0 in 2010. The U.S. fertility rate is expected to decline further, exacerbating what will become a labor shortage in coming years.

It may seem strange that we could be facing an impending labor shortage during a time of high unemployment and low participation in the labor force, but all signs point to the fact that our current jobs problems are temporary, while the medium-term future of our workforce has been set in stone by how many children parents have decided to have.

This presents real problems for the U.S. economy, the most salient of which is the health of entitlement programs like Social Security and Medicare. Ezrati estimates that the number of Americans working per retired person in the U.S. will drop by 40% from 5.2 today to 3.0 in 2030. But beyond entitlements, fewer members of society working simply means less wealth to go around.

Some factors will help ease the economic burden of this demographic shift. One is the simple fact that worker productivity increases as companies apply new technologies and processes to their businesses. Another is immigration, though the extent to which we accept this kind of aid is hotly debated and far from certain. Women will be the third force to help matters.

US Labor Force Participation Rate: Men Age 25 to 54 Chart

US Labor Force Participation Rate: Men Age 25 to 54 data by YCharts

The chart above tracks the progress women of prime working age have made in entering the workforce since the 1950s. And while women have made huge strides, the work world is still predominately male. With a labor shortage waiting in the wings, working-age women will be an invaluable resource for the American economy.

Of course, it's not as if women of working age who don't have jobs aren't contributing to society. Many are spending their days raising the next generation of workers (and, of course, some of the 12% of working-age men who don't have jobs are doing the same thing). So, how can the economy coax these folks into the workforce to support an aging society without disrupting the way we care for children? Ezrati argues that the coming labor shortage will do a lot of the work for us, as wages rise in response to the availability of eligible workers.

MORE: Russia's laughable economic threats against the U.S.

A cultural shift is also required. Ezrati writes:

Where women are concerned, surely the most effective policy would find ways to accommodate family obligations, particularly children. Though modern societies have mostly ceased to view child care as the sole preserve of mothers, the reality is that women still shoulder the bulk of these obligations ... In most cases, this issue explains why women's participation rates, even now remain so much lower than men's. Affordable, quality child care is one clear solution, and one which governments and business can collaborate.

Ezrati argues that businesses will "have plenty of inducements to accommodate the child care needs of its workers." This makes sense, as a large company can more efficiently provide onsite child care than individual workers can on their own. Businesses, faced with the choice of raising wages high enough to induce stay-at-home parents back to the workforce or setting up child care services will find it economical to choose the latter. Indeed, we are already seeing some movement in this direction, as nearly one-third of Fortune's Best Companies to Work For offer some sort of onsite child care.

But not all companies are going to have the wherewithal to start their own child care programs, and that's where government policy can step in to help. Ezrati suggests adjusting labor laws to allow changes to work weeks and compensation, allowing workers and businesses to set up systems that make it easier to balance at-home responsibilities. More radical shifts would include tax incentives for companies to provide child care, universal licensing for child care providers to make parents more comfortable with the arrangements, or changing laws to allow parents to enroll students in school near where they work as opposed to where they live.

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