For years, economists warned that Baby Boomer retirements would reshape the American labor market. Most business leaders nodded along. Then they went back to running their companies. The timeline felt distant. The problem seemed abstract.
It no longer is.
I recently sat down with economist Bill Conerly, author of The Flexible Stance and a longtime advisor to business leaders across the country. Conerly has been tracking this demographic shift since 2005. He first presented research on the coming labor shortage to a Texas trade association. He remembers asking CEOs at the reception what they thought of his projections. “They kind of shrugged their shoulders,” he told me. When he pressed, they admitted: “I’ll be retired by the time that happens.”
Those CEOs have now retired, and the shortage they once dismissed is a reality for today’s leaders.
The Numbers Tell a Clear Story
The math is straightforward. The native-born working-age population entering the labor force roughly matches the number of Boomers leaving it. Many Boomers are working slightly longer than previous generations, so the picture improves only marginally. Conerly’s assessment is blunt: the working-age population will be “roughly flat for the next five years or so” with modest improvement in the 2030s.
Any net growth in the labor force, then, depends on immigration. That pipeline has narrowed dramatically. At the peak of immigration during the Biden administration, the U.S. added roughly 3 million people annually, most of them working age. In the last 12 months, that figure has dropped below a million. Conerly believes the effective number may be closer to zero. Some analysts project a slight contraction in the labor force due to deportations.
This is the context for every hiring decision. Leaders who plan workforce strategies assuming talent will be available when needed use an outdated model.
A Management Problem Decades in the Making
The labor shortage is a demographic issue, but it has also exposed a management issue. Conerly traces it back to the era of labor abundance. That era shaped how an entire generation of leaders learned to lead.
“Managers got sloppy about working with people or keeping them motivated to stay on the job. Those managers have retired. I worry particularly in family businesses. Many of the managers may have learned from their parents, their uncles, or their grandparents.”
When there was always a line of applicants at the door, retention wasn’t a strategic priority. It was an afterthought. That mindset got passed down. Now it’s colliding with a market where every departure is harder to backfill.
Organizations that navigate this well rethink how they lead, not just how they recruit. Flexibility matters more than before. Conerly is direct: “When the job market is tight, being flexible makes just a ton of sense.” That means rethinking rigid scheduling. It means reconsidering which roles need full-time hours. It also means making day-to-day work good enough that people want to stay.
AI Is Changing the Labor Market, but Not Evenly
The temptation is to look at AI as the solution to the labor shortage. Conerly pushes back on that framing. AI is clearly increasing productivity, particularly in sectors like programming. For example, starting salaries for developers are down, and programmers who are still working are much more productive than they were two years ago.
But the impact is uneven across sectors. AI can help customer service handle more volume and assist electrical contractors with faster, more detailed job estimates from blueprints. However, AI does not enable massage therapists to do more treatments per hour, nor does it frame a house or process food.
This is the distinction Conerly urges business leaders to make: “Every business person should consider whether the people they hire work in sectors where AI will increase talent supply, or whether they are in sectors less impacted by AI and thus may remain scarce.”
The sectors that relied most heavily on immigrant labor (agriculture, food processing, construction) are facing a double squeeze. The workforce pipeline is shrinking, and the work itself remains stubbornly resistant to automation.
The Productivity Paradox No One Is Solving
There is a strange tension playing out inside companies that have embraced AI tools. Workers are producing significantly more output. They are not working fewer hours.
The productivity gains are real. The time savings are not materializing as reduced workloads. They’re being absorbed as increased expectations.
This creates a retention risk that most organizations haven’t accounted for. If employees feel they’re delivering more value but not seeing any return in the form of flexibility, compensation, or time off, the math eventually stops working for them.
Leaders should reassess the link between output and hours. Identify which roles truly need a fixed 40-hour schedule. In a competitive labor market, prioritize flexibility to better retain key employees.
Small Businesses Face a Different AI Challenge
For enterprise companies, AI adoption is about resource allocation. They have teams to evaluate tools, budgets for deployment, and enough similar roles to justify the cost of custom solutions. Small businesses don’t have that luxury.
Conerly’s advice for smaller organizations is practical. Start with a simple question for every employee: What is tedious and repetitive about what you do? Then encourage them to find tools that address those pain points. The ideal long-term solution might be an integrated system, but waiting for the perfect plan means falling behind.
“If the company is slow to roll out a general system, I’d say every worker should find an app,” Conerly recommends. He is optimistic about integration because technology is moving quickly. “In March 2026, AI will help them talk to each other. Maybe it’s April, or January 2027, but soon, it’s all going to connect.”
The Shift Toward Experience
One of the most compelling threads in my conversation with Conerly was his view on where the economy is heading. We’ve moved past the era of needing more food and more stuff. Obesity is a bigger problem than hunger. Most households already have the goods they need.
What people are spending on now is experience. Boxing studios, yoga classes, pottery workshops, and river rafting. These are labor-intensive services that require human presence and skill. They cannot be automated away.
Conerly sees this as a structural shift that will gradually absorb displaced workers. The transition may be bumpy. The historical pattern supports him. When the spinning jenny automated the production of thread during the Industrial Revolution, prices dropped, prosperity increased, and new kinds of work emerged. The difference now is speed. What took 60 years during the Industrial Revolution might take just a fraction of that time with AI advancing so rapidly.
“The real challenge,” Conerly told me, “is that things are happening so fast that it’s possible there’ll be a period of time where we haven’t yet made the adjustment.”
What a Flexible Stance Looks Like Right Now
Conerly’s book, The Flexible Stance, is built around a simple idea: plan for multiple scenarios. Avoid locking yourself into commitments you can’t reverse. Given the current environment—war in Iran, tariff uncertainty, inflation above target, a Fed in wait-and-see mode—his advice to business leaders is pointed.
If you have a major commitment, pause before proceeding. Delay, but only as needed for clarity. Use modular project plans—break work into phases, review progress, and adjust as new information emerges. Communicate regularly with customers and employees. Always gather information before acting.
And above all, resist the pull of headlines. Conerly has spent a career watching the gap between what economic data says and what the news media makes of it. “I will see a headline that doesn’t match the data,” he says. “A major revision to retail spending goes down, I chart it, and it’s just a tiny wiggle.”
The leaders who will come through this period in strong shape are those who narrow their focus to what’s directly relevant to their business. Stay flexible in your planning. Invest in keeping the people you already have. The labor market is not going to get easier. Companies that treat retention, flexibility, and AI adoption as strategic priorities, starting now, will still be standing when the dust settles.
Brandon Laws is the host of Transform Your Workplace*, a podcast exploring the intersection of leadership, culture, and the changing world of work.*