Less than a generation ago, the American labor pool was whiter and older, according to government demographic statistics. But, the most recent data point to a rapidly changing workforce, one defined by greater diversity, a retiring baby boomer generation and a technologically savvy millennial audience.
For the power sector, age is the biggest challenge as workers nearing retirement depart in greater numbers than they are being replaced.
Leaders in the utility industry have already pointed toward addressing changing demographics as critical to their businesses, not only for the challenges it presents, but also the potential benefits. As population trends move in the same direction, leaders will need to start looking at the statistics and altering the way they approach the workforce.
A changing American workforce
Recognizing the expanding state of diversity in the nation will be critical for business leaders across all U.S. industries, William Frey, author of Diversity Explosion and Ph.D. demographer at Brookings Institution's Metropolitan Policy Program told Utility Dive.
“About fifteen million whites are going to be out of the labor force age population between 2010 and 2030 and about seventeen million hispanics will be new to that population, four million asians and three million blacks,” Frey said. “All of the growth in the future labor force will be racial minorities, particularly hispanics, and I think it’s important for people to understand.”
By 2023, whites will likely comprise less than half of the U.S. population under age 30, Frey predicted in an op-ed for the Los Angeles Times. Data collected from the U.S. Bureau of Labor Statistics underscore the evolution in the workforce with younger minorities and older whites dominating as the baby boomer population retire and depart the labor pool.
Overall U.S. workforce by age, race
Credit: Bureau of Labor Statistics
“If you look at the population in the U.S., people over the age 55 in the U.S. are 75% white. People under age 35 are 46% minority. So there’s a gap in terms of familiarity with culture of the workplace. That needs to change. Looking down the road 5 years or so, industries need to keep this in mind,” said Frey.
“By 2023, whites will comprise less than half of the U.S. population under age 30.”
Addressing the challenges of a changing labor force will be critical to maintaining the national economy, according to Martha Ross, a fellow at the Brookings Institution’s Metropolitan Policy Program, in her article on diversity in the labor market.
“...It’s clear that increasing the skills, educational attainment, and employment rates among young people of color is a major challenge facing both the nation and individual metropolitan labor markets,"she wrote.
Demographics in the utility industry
The trends present in the changing U.S. workforce are reflected in the utility industry as well. Thirty-eight percent of the employees in the electric and gas utility sector may retire in the next decade, according to a 2013 Center for Energy Workforce Development survey.
Workers in utility industry by age, 2015
Credit: Bureau of Labor Statistics
The racial demographics of the utility industry are changing as well. Statistics from 2015, represented in the graphic below, show that minorities represent about a third of the utility workforce. That is up 10 percentage points since 2011 according to BLS data, which show that minorities only represented about 20% of the utility workforce in 2011.
Workers in utility industry by race, 2015
Credit: Bureau of Labor Statistics
In 2006, the U.S. Department of Energy recognized this reality and submitted a report, “Workforce Trends in the Electric Utility Industry,” to Congress. The document immediately begins with discussing the challenges the utility industry ought to expect due to aging in the American workforce.
“The aging of the American workforce has emerged as a critical issue facing American productivity in the 21st century,” reads the report. “For electric utilities, whose service quality and reliability depends on maintaining an adequate, knowledgeable workforce, managing the upcoming retirement transition is a particular challenge.”
Today, the sentiments elicited by the DOE still reverberate throughout the utility industry, as CEOs and other executives look for ways to update their business models. Andrew Bennett, the Senior Vice President of Strategic Accounts and Solutions at Schneider Electric, says that changing demographics in the workforce is something that he has been considering as an industry leader. As the grid becomes more complex, younger workers with technological backgrounds become increasingly valuable.
“I think for a multitude of reasons the utility industry is in really big trouble. We had the distribution system up until about ten years ago look about the same. The fact of the matter is that the grid is getting more and more complex,” said Bennett.
“The very nature of utilities and their relationship to the end user is changing. The traditional economic models that have driven utilities — I don’t know how long they will be around.”
Bennett, who wrote an article about aging in the utility industry for Smart Grid News in 2014, explained that while people in the baby boomer generation are retiring in more numbers, there is also is a declining pool of college graduates with the types of skills industry employers need in order to maintain progress and advance in the smart grid sector.
In his piece, he wrote that he had found that “72% of energy employers are having difficulty finding quality candidates to fill their positions.” The trend, he explains, can be attributed to the fact that utility leaders have not dedicated enough time to expanding or developing their workforce over the last two decades.
”The very nature of utilities and their relationship to the end user is changing. The traditional economic models that have driven utilities--I don’t know how long they will be around.”
“The issue with the utility industry now, similar to oil and gas, is this baby boomer set of demographic problems that come with a complex job. It has been made a lot worse now, as these guys didn’t do a lot of hiring throughout the early 1990s,” he told Utility Dive.
“And of course the problem is that now even if you have a sequential strategy of hiring younger people more methodically or more actively, you’d probably still have some issues in terms of demographics.”
And, while hiring more from the millennial labor pool seems like an obvious solution, Bennett contends that for the utility industry it’s actually not that easy.
“I graduated from college in 1994, and I don’t think I knew anyone in the four years before me or after me that went to work for a utility because quite frankly those folks generally took jobs in IT or software or in processor development,” he said.
“Utilities are traditionally not seen as an attractive place. I think utilities have some issues considering it’s not the most sexy market for millennials.”
The path forward: Embracing a new generation
As industry leaders consider the role of their businesses not only within a younger, increasingly diverse workforce, but also audience, considering solutions that won’t trade-off with profits or functionality.
Ian Altman, CEO of GrowMyRevenue and consultant to other business leaders on industry innovation, says that the best strategy is to find a balance between the interests of the company and the demands of its employees.
“If you recognize that the older members and younger members of the workforce, your goal is to understand or appreciate their differences, because you are not going to convince either group to behave like the other ones,” said Altman. “The big mistake that businesses make is to try to make millennials to behave like older generations.”
“The big mistake that businesses make is to try to make millennials to behave like older generations.”
In terms of trying to find a way to attract employees that are younger and have different backgrounds, Altman says that the best strategy is simply to hire a millennial person in HR.
“If you want to make your company more appealing to millennials, hire millennials to make it more appealing. This generation want to see millennials running things,” said Altman. “If a place is a seems like it’s not going to be fun to work there, a person can go post about it anonymously online on websites like Glassdoor. The power structure has shifted.”
New technology, new workers
Cutting edge technology could be a one way to reel a younger, and more diverse labor pool. Bennett says that within his experience at Schneider Electric, he has looked toward a few ways at attracting younger people to the utility industry.
As greater emphasis builds within younger generations over autonomy of energy choices and clean, renewable sources, Bennett explains that industries ought to start considering the growing appeal of microgrids.
“We have a microgrid project at our North American headquarters that allows us to get off the grid and think about sustainability,” he said. “I would say it’s one of the reasons why we have been very successful at attracting millennials, you know folks that might otherwise think this is a boring industry because this is pretty cool, cutting edge stuff. This isn’t stagnant R&D. This stuff is changing almost constantly. I think this is a great market to bring in labor.”
The federal government has shown interest in helping utilities and energy vendors embrace a new and increasingly diverse workforce. Since 2013, the Department of Energy's Minorities in Energy Initiative has sought to increase utility engagement with minority-owned businesses, boost science and tech education for underserved students and educate new communities about climate change.
Bennett also says that companies ought to look toward recruiting workers from other industries for advice.
“I think that some of the smart utilities are actively looking at bringing in employees that think differently or come from different industries. Some of the innovative utilities I've been looking at have been considering a sort of cross-pollination. I spoke with someone recently that recruited from a well known social media company, and I thought 'wow,' not used to seeing that at a utility.”
At the end of the day, though, Bennett advises the best strategy is paying attention to market and demographic trends.
“The utility industry has often been kind of slow to react, and it’s going to put some of these companies in a precarious position.”
Graphic Design: Natalie Forman
Publicity: Taylor Gasdia
Data Collection: Zack Hauck
Front-End Programming: Hayden Wagner