The effect of demographic change on firms' human resource policies

Abstract

This research focuses on the current shortage of young workers as a result of the baby bust cohort now entering the labor force. Previous studies have shown that the young workers of the baby boom cohort experienced lower relative earnings and higher unemployment because of their large cohort size. In contrast, this study is aimed at discovering how firms are responding to the lack of young workers and how human resource policies are changing in order to attract and retain these younger workers. Data from a national sample of 354 firms show that firms have been implementing changes in compensation, benefits and recruiting as a result of the lack of young workers. It is also found that firms are substituting other types of labor for youth at entry-level. Specific human resource policies and types of labor substitution are analyzed and presented in detail along with a discussion of implications for firms and future demographic research.