Table of contents
The U.S. Workforce Crisis
The Cost of an Aging Workforce
The Advantage of Offshore Labor
Conclusion
Contributors
David Landau
Contributor
The American population is aging, and its labor force with it. An aging labor force means a shrinking labor force, a growing skills gap, and an abundance of overqualified workers. Businesses, both old and new, big and small, have been struggling to manage the problem.
As businesses seek solutions to these growing problems, many are turning to alternative options. One such solution that should never be overlooked is making the switch to offshore labor.
By making the switch to offshore labor, any business can find the right employee with the right amount of experience, the right set of skills, and all at the best price.
The U.S. Workforce Crisis
The population of the U.S. is aging, and its labor force with it. This much is certain.
Between 2000 and 2022, the median age in the United States went from 35.5 to 38.9, an increase of 3.4 years. Many states even reported a median age in excess of 40 (1). Compounding the problem is America’s declining fertility rate, which has remained well below the minimum replacement rate for the past 15 years, with no sign of reversing in sight (3).
America’s steadily aging population means a population-wide shift toward retirement age. As of 2024, the average retirement age in the United States was 62. Of all U.S. adults aged over 60, roughly 30% of those between 60 and 64 were retired, and 70% of those between 65 and 69 had retired (2).
When taken altogether, America’s aging population has led to a 2.4% decline in the working-age population (1). Many businesses are now reporting that a lack of talent is one of their greatest obstacles to success, and a smaller talent pool won’t help.
More than just a shrinking talent pool, an aging workforce carries with it a number of new problems that many businesses simply aren’t equipped to handle.
The Cost of an Aging Workforce
An aging workforce means more than just a labor shortage. Older workers come with their own unique set of challenges; challenges not found in younger hires.
Older workers usually carry more experience and a greater skillset, but that’s not always a good thing. If a business is looking for a new hire to fill a lower-ranking spot, paying more of a premium for more experience may not be worth it. If the only available option for a business is an older employee, then it may be forced to pay for something it doesn’t need.
The increase in salary to pay for even a modest amount of extra time in the labor force can be startling. The starting salary for a software engineer in the U.S. could be as much as $65,000 per year. A software engineer with just 6 years of experience could command a salary of more than $200,000 per year. As America’s workforce ages, finding a software engineer with less than 6 years of experience in the industry could become a challenge in and of itself.
In spite of more experience, older workers may actually be uniquely unqualified for many roles today. Most older employees are far removed from their original education, and a degree earned in the early 2000s is very different from a degree earned today. Teaching standards change as time goes by, along with the skills and knowledge conferred.
Education standards change, but so does technology. Older employees are frequently less and less capable of adapting to the new technology permeating the workforce, technology that has become the backbone of productivity. This creates a skills gap that businesses are struggling to fill, a gap that will only expand as America’s workforce ages.
Between their overqualification for many roles, a higher salary, and a greater skills gap, an overabundance of older employees could mean a business, large or small, has to pay more for less. Productivity will invariably decline, and expenses will pile up. A larger, more established business may be able to handle the new burden, but a fledgling business could see its options dwindling. The startup culture that is America could suffer.
Nearly 5.5 million new businesses were started in 2023 alone (4), and the most frequently reported reason for business closure is cash flow problems. As workers age, new businesses will inevitably have to pay more for overqualified employees, along with the on-the-job training they require. This is a challenge that a new business already strapped for cash may simply be unable to overcome.
Given the escalating challenges that businesses face with an aging workforce, businesses must find innovative solutions to stay competitive – one promising answer is offshore labor.
The Advantage of Offshore Labor
America’s labor force is aging, but offshore labor offers a unique opportunity for businesses to tap into growing labor markets abroad, where skillsets and costs align more favorably.
In recent years many countries around the world have actually had a growing labor force. Countries including the Philippines, India, and Mexico have all seen significant gains in their working-age population. With this new and growing labor force comes fresh opportunities for U.S. businesses facing the challenges of America’s aging population.
With an abundance of potential hires overseas, businesses can hire employees with any level of experience they desire. Businesses no longer have to worry about paying for overqualified employees or having to upskill an employee lacking the necessary expertise, something good for any business or startup.
Even highly skilled employees can be found offshore for significantly less than their American counterparts. A senior software engineer in the U.S. could cost a business upwards of $300,000 per year. By making the switch to an offshore employee, a software engineer with the same level of experience could cost a business just $100,000. The cost difference for the same level of expertise is a game changer, especially for a business just starting up.
More than just software engineers, U.S. businesses can find offshore employees qualified for any position they may need filled. Accountants, tech support, customer support, virtual assistants, graphic designers – all with any required level of experience – can be found for less offshore.
The younger employees that can be found overseas invariably come with a fresh and unique set of skills that can’t always be found in American employees. By using offshore labor, a business can gain the insights of employees who come from different countries with different cultures. Businesses are no longer limited to their local workforce and can expand well beyond their borders.
By using offshore labor, any business can find the right employee with the right set of skills for the best possible price.
Conclusion
America’s labor force is aging, and with it comes a whole host of problems. A shrinking labor force is a challenge for any business, which may end up having to pay more for every hire. As workers age, businesses may have to pay more for overqualified employees who also require training to close the skills gap they bring.
While American businesses are struggling to solve this challenge, offshore labor offers a remarkable solution. By using offshore labor, businesses can hire employees with any level of expertise they require, and for less than their American competitors.