Governments around the world are facing a unique challenge as the “Grey Wave” — an increasing number of workers retiring — cuts essential staff and creates a massive gap in the workforce. As veteran employees retire in large numbers, governments must find ways to adapt to these vacancies while maintaining critical services. Compensation planning, traditionally focused on managing personnel costs, must now also consider how to attract, retain, and effectively utilize a new generation of public servants.
The key to adaptation lies in the strategic use of data and harnessing modern tools to manage an evolving workforce. Real-time data, comparative analysis, automation, and a unified platform can not only accelerate the speed of work, but can redefine its impact. In the wake of a diminishing workforce, advanced tools are now an essential ingredient.
The aging government workforce is not just a future concern for governments; it’s happening now. In 2024, the U.S. is poised to strike what employment analysts have dubbed "peak 65," when the youngest baby boomers reach the retirement age of 65. It stands as a record-breaking time for retirements and it is estimated an average of 11,000 Americans a day turn 65, tallying approximately 4.1 million people every year until the end of 2027.
Local governments are bracing for the profound impact on their workforces. A substantial portion of public sector employees belong to this generation, and their departure threatens to create significant staffing gaps. The loss of seasoned employees will inevitably result in a decline in institutional knowledge, slowing productivity and efficiency within government operations. Yet, this mass exodus could also open doors for younger generations—Gen X, millennials, and even Gen Z—to step into these vacated roles. The challenge for local governments will be to recruit and train this new wave of workers, ensuring the continuity of essential services. Additionally, they must navigate the financial strain of managing pension obligations for retirees while offering competitive benefits to attract fresh talent, all within an increasingly tight fiscal landscape.
As labor shortages grow more common, governments must use data to forecast future workforce needs and develop strategies to retain critical staff. By analyzing real-time data, agencies can compare compensation structures, identify underfunded departments, and benchmark their offerings against private-sector competitors. This data-driven understanding of resources becomes vital for localities when looking at recent Labor Department stats that show troubled waters ahead.
In 2023 alone, the US witnessed a surge of nearly 350 union strikes. There were 33 major strikes across the nation, the most since 2000. California topped the charts at 71. The strikes involved almost 460,000 workers, with 86.7% connected to service-providing industries like government. Los Angeles and San Jose were two of the California cities impacted. In San Jose, 4,500 city workers voted to strike; in Los Angeles, more than 11,000 workers did the same.
What’s more, labor is seeing dramatic gains driven by our recent bout of inflation and our lower-than-low unemployment rate (currently at 4.1 percent). San Jose unions negotiated a 14.5% pay increase over three years, while Los Angeles unions negotiated a 22% cost-of-living adjustment (COLA) for the life of their contracts and a $25 per hour minimum wage by 2026.
When there’s enough funding, and it’s justified, there’s no issue — public servants deserve competitive compensation. But what happens when the money isn’t there? Governments are left with tough choices: cutting services or department budgets, considering layoffs or furloughs, and possibly even raising taxes. Those are budget strains no one wants in the long or short term.
So, in real terms, how can data analytics move beyond being a flashy buzzword and create tangible results? It starts with a solid data strategy, replacing departments’ outdated spreadsheets with a system for accurate, real-time data analysis.
Modern digital labor planning and compensation tools provide local governments with effective solutions to manage the workforce changes caused by baby boomer retirements. These tools enable governments to forecast staffing needs, identify potential skill gaps, and streamline recruitment and training efforts. Compensation platforms also allow governments to balance pension obligations for retirees while designing competitive benefits to attract younger workers.
And while leveraging data strategy tools for important insights should happen before negotiations begin, adopting these technologies at any stage of talent attraction, retention or planning can yield huge benefits:
The future of government workforce planning depends on the ability to anticipate and respond to both immediate and long-term needs. As more seasoned workers exit the public sector, governments must be ready to adapt quickly. Data-driven strategies not only help address current labor disputes but also ensure that agencies can proactively plan for tomorrow's workforce. This includes identifying skill gaps, recruiting younger workers, and offering competitive compensation packages that attract top talent.
At GovInvest, we have worked with over 1,000 public agencies to implement real-time data solutions that support smarter workforce management. Our experience shows that by using data to guide decisions, governments can improve communication, make faster adjustments, and create a more sustainable path forward.
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Do you want to learn more about how labor costing tools can help your government navigate the challenges of the Grey Wave? Connect with us today to explore solutions tailored to your needs.
