At Lake Champlain Chocolates, the owners take turns stacking boxes in the warehouse. At the Burlington Bagel Bakery, a sign in the window advertises wages starting at $25 an hour. Central Vermont Medical Center trains administrative staff to become nurses. Cabot Creamery brings in workers from out of state to package its signature cheddar cheese blocks.

The reason for the workforce problem is simple: Vermont’s population is aging rapidly. More than a fifth of Vermonters are 65 or older, and more than 35 percent are over 54, the age at which Americans typically begin leaving the workforce. No country has a smaller proportion of its residents in their prime working years.

Vermont offers a first glimpse of where the rest of the country could be headed. The baby boom population is increasingly losing employment, and subsequent generations are not large enough to fully replace them. Immigration plummeted during the pandemic, and while it has since risen, it is unclear how long that will last given a lack of broad political support for higher immigration. Birth rates are falling.

“All of these things point to a persistent labor shortage,” said David Autor, an economist at the Massachusetts Institute of Technology who has studied long-term labor trends.

Vermont’s unemployment rate was 1.9 percent in September, among the lowest in the country, and the labor force is still thousands of people smaller than it was before the pandemic. Employers are fighting for scarce workers, offering wage increases, signing bonuses and child care subsidies, and enticements like free ski passes. When these tactics fail, many limit operating hours and reduce product offerings.

As a rural state — Burlington is the smallest “largest city” in the country with fewer than 45,000 residents — Vermont has been draining young people for better opportunities for decades. And while other states have helped bolster their workforces through immigration, Vermont’s foreign-born population has remained small.

But demographic developments are the root of the problem.

“We knew where we were going — maybe we got there a little quicker than we expected,” said Michael Harrington, the state labor commissioner. “There are simply not enough Vermonters to meet the needs of our state and our employers going forward.”

Similar shortages occurred across the country in 2021 and 2022 as demand – for both goods and labor – surged following pandemic lockdowns. The overall labor market has become more balanced as demand has slowed and Americans have returned to the workforce. But economists and demographers say shortages will recur as the population ages.

“It seems to be happening slowly enough that we don’t consider it a crisis,” said Diana Elliott, vice president of U.S. programs at the Population Reference Bureau, a nonprofit research organization. “It’s happening in slow motion.”

Long-term labor shortages will look different than the acute shortages experienced during the pandemic. Companies will find ways to adapt, either by paying their workers more or adjusting their operations to require fewer workers. Those who cannot adapt will lose ground to those who can.

“A new equilibrium will simply emerge,” said Jacob Vigdor, an economist at the University of Washington, adding that companies that have built their businesses on the availability of relatively cheap labor could struggle.

“You may find that this business model no longer works for you,” he said. “There will be disruptions. There will be winners and losers.”

The winners are the workers. When there is a shortage of workers, employers have an incentive to broaden their search – including people with little formal education or people with disabilities – and to offer opportunities for advancement to existing employees.

At Central Vermont Medical Center, as in rural hospitals across the country, the pandemic exacerbated existing nursing shortages. An aging population means the demand for healthcare will only increase.

That’s why the medical center partnered with two local colleges to develop a program that allows hospital employees to train as nurses while working full-time. The hospital set up an on-site classroom and simulation lab and made its nurses available as lecturers. Students spend 12 of their paid work hours each week learning – and if they remain as nurses for three years after completing the program, their student debt is forgiven.

The program has graduated 27 licensed practical nurses and eight registered nurses as of 2021; some previously held administrative positions. The hospital is expanding training to include roles such as respiratory technicians and phlebotomists.

Other companies are finding their own ways to accommodate workers. Lake Champlain Chocolates, a high-end chocolate maker outside Burlington, has redesigned its production schedule to reduce its reliance on seasonal help. The company has also begun bringing former employees out of retirement and hiring them part-time during the holiday season.

“We adapted,” said Allyson Myers, the company’s marketing director. “Before the pandemic, we would never have said: Come work in the fulfillment department one or two days a week. We wouldn’t have offered that as an option.”

Then there is the easiest way to attract workers: pay them more. Lake Champlain has increased starting wages for its factory and retail workers by 20 to 35 percent over the past two years.

Charles Goodhart, a British economist, said population aging would tend to lead to lower inequality – but at the expense of higher prices.

“As available labor supply will decline relative to demand, workers will demand and receive higher wages,” Mr. Goodhart, who published a book in 2020 on the economic consequences of aging societies, wrote in an email.

When Walmart approached Cabot Creamery to expand distribution of its Greek yogurt, Jason Martin was hesitant — he wasn’t sure he could find enough workers to meet the additional demand.

Mr. Martin is senior vice president of operations at Agri-Mark, the agricultural cooperative that owns Cabot Creamery, the nationally distributed brand that employs nearly 700 people in Vermont. When company leadership talks about adding a product or expanding production, labor is almost always the first topic, he said.

“When I present products to our board, in the back of my mind I always think, ‘I have to find the people,’” Mr. Martin said.

The labor problems are evident at Cabot Creamery’s packaging plant in the company’s namesake city. Blocks of cheese weighing nearly 700 pounds are fed to machines that cut them into cracker-sized slices for a product. Employees wearing gloves and hairnets then toss the slices into plastic bags, which are sealed and packaged together. Many of the workers are in their 50s and 60s and have been working at Cabot for decades.

Cabot is over an hour from Burlington in a rural area where cell phone coverage is spotty and many roads are unpaved. According to the state Department of Labor, there are only about 700 unemployed people in the county, and although the company has increased wages and offers generous benefits, a recent marketing campaign touts perks including a defined benefit pension plan, tuition reimbursement and, of course, free benefits Cheese – hiring employees remains difficult.

Adding to the challenge is Vermont’s housing shortage. Cabot has contracted with a local college to use unoccupied dormitories to house temporary workers who have arrived from other states and, on guest worker visas, other countries.

The company is also investing in automation — not only to reduce the need for workers, but also to make jobs less stressful for its aging employee base. New systems pack cheese slices automatically.

For economists, investments like Cabot’s are good news – a sign that companies are finding ways to increase employee productivity.

But ultimately, many economists say, Vermont — and the country as a whole — will simply need more workers. Some could come from the existing population, through companies’ efforts to tap new labor pools and government efforts to address larger problems such as the opioid crisis, which has sidelined hundreds of thousands of working-age Americans.

Not all economists believe that the aging population is likely to lead to a nationwide labor shortage.

The number of people in their prime working years had stagnated for years before the pandemic, but workers were often plentiful, said Adam Ozimek, chief economist at the Economic Innovation Group, a nonpartisan public policy organization. He added that increased immigration would increase both demand and supply.

Still, many economists argue that immigrants will be an important part of the solution, especially in areas like elder care that are growing quickly and difficult to automate.

“We need to start looking at immigrants as a strategic resource, as incredibly valuable parts of the economy,” said Ron Hetrick, senior labor economist at Lightcast, a labor market data firm.

Kevin Chu has been traveling around Vermont for the past few months, speaking to local business groups, elected officials, nonprofits and just about anyone else who would listen. His message: Vermont needs more people.

Mr. Chu is executive director of the Vermont Futures Project, a nonprofit organization supported by the Vermont Chamber of Commerce that views the labor shortage as an immediate, long-term threat to the state’s economy.

Mr. Chu grew up in Vermont after his parents immigrated from China in the mid-1980s as part of a wave of immigrants – many of them refugees – who came to the state during that time. He remembers attending Burlington High School at a time when the flags of their students’ home countries flew, dozens in all.

“I feel like I’m getting a glimpse of what Vermont could be,” he said.

Mr. Chu’s message resonated with business leaders and state officials, but was a harder sell to the population at large. A recent poll found that a majority – but not a majority – of Vermonters supported increasing the population.

The Futures Project aims to increase the population from less than 650,000 today to 802,000 by 2035. This would also help reduce the average age in Vermont from 42.7 to 40 years.

The state still has a long way to go: Vermont added just 92 people from 2021 to 2022.

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