What is the outlook for the labor market?

A labor and skills shortage is projected for the US labor market. Actually, a looming labor shortage could significantly slow the continued growth of the US standard of living, according to the Employment Policy Foundation, a Washington think tank.

Numbers. Unless productivity, labor force participation or immigration levels increase dramatically, the Foundation estimates that demand for labor could outpace supply by 35 million jobs by 2030. Most of the unfilled jobs would be in highly paid managerial and professional occupations.

The retirement of baby boom workers is one contributing factor to the expected labor shortage. By 2031, nearly 50 million workers in today's labor force will have reached age 65.

Skills. Compounding the situation is a growing skills shortage, as new jobs require more rigorous education and training. Between 2003 and 2013, 30.7 million job openings will exist for those with at least a two-year college degree, the Foundation projects. But based on current graduation rates, only 23.3 new college graduates will be available to fill those positions.

Implications. Labor shortages and skills gaps could significantly hinder the growth of personal income and the economy. Every job unfilled will cost the economy $100,000 per year in lost output and ultimately $3.5 trillion in annual output in current equivalent gross domestic product.