For many years, the Bureau of Labor Statistics (BLS) used replacement rates to measure occupational demand due to individuals leaving their occupation. When the BLS switched from replacement rates to separation rates, it was quite a shock for many of us. On average, these rates measuring this type of labor demand more than quadrupled!
For workforce planning professionals who have used replacement rates for years and who have developed strategic plans based upon these data, making the transition is not at all trivial. What do these separation rates mean? How can we use them?
Let’s take a look.
Occupational separations are a count of the number of workers who are projected to leave an occupation. Separations are not meant to capture all movement in and out of occupations, but rather provide an estimate of workers who permanently leave an occupation.
There are two components to separations: occupational transfers and labor force exits. Occupational transfers measure the number of workers expected to leave an occupation and move into a different one. Labor force exits are the projected number of workers leaving the labor force; exits include workers who retire as well as those who leave the labor force for some other reason, such as pursuing an education.
It is important to note that occupational separations are not the same thing as all job separations, such as those measured by JOLTS (the Job Openings and Labor Turnover Survey). For example, in 2016 there were 60.4 million separations per JOLTS which compares to an estimated 17.6 million occupational separations for the same year. The JOLTS job separations include workers leaving one job for another with a different employer, regardless if it represents a different occupation.
Similar differences apply to measurements of openings. In 2016, there were 62.7 million hires per JOLTS, comparable to an estimated 18.7 million occupational openings (“occupational openings” equals occupational separations plus occupational growth demand).
These national numbers suggest a good rule of thumb to keep in mind: overall job openings are roughly three times larger than occupational openings. (A corollary of this, however, is that job openings overstate occupational demand. For example, at one point in time, three firms in a region may be advertising to replace a welder. It could well be that one of those ads is to replace a worker who retired, but the other two ads can be simply due to churn—openings created as welders move from one company to another. The true labor pool of welders in a region is not just the employed welders, but includes the unemployed as well.)
In JobsEQ, we show both the occupational transfers as well as the labor force exits. This is done so our clients have flexibility in applying these data. “Occupational demand” can be examined in total as well as broken into its three components: labor force exits, occupational transfers, and growth. For an example, let’s take a look at two occupations of similar size in one community, Olmsted County, Minnesota.
|SOC||Title||2017 Empl||Total New Demand||Exits||Transfers||Empl||Avg Ann Rate|
The training requirements for these two occupations are very different. Childcare workers typically do not need education beyond the high-school level. Nurse practitioner jobs, on the other hand, typically require a master’s degree.
Having the demand numbers for these occupations broken into their details allow us to have a better picture of what is happening and how we—for example, as workforce planners—may need to react.
Of these two occupations, the highest overall occupational demand is for childcare workers: 125 in projected new occupation demand per year. Using our rule of thumb, we can estimate that overall job openings for this occupation could be on the order of 375 per year. Roughly 250 of those openings, however, are likely to be filled by childcare workers moving from one employer to another.
Of the 125 occupational openings expected for childcare workers in Olmsted County, about 70 will be due to labor force exits. It is unlikely that all these 70 will be due to retirements. The average age of childcare workers in the nation is 36.5 years. Given the age mix in this occupation, we can expect about 13 retirements per year in Olmsted County. This means the other 57 labor force exits are people who may be going back to school or perhaps dropping out of the labor force for some reason such as raising a family.
Since our other occupation, nurse practitioners, typically requires longer, formalized training, we may ask ourselves how many newly trained workers for this occupation are needed per year in Olmsted County. The nurse practitioner occupation has a quick expected growth rate putting its growth demand at about 28 jobs per year. At minimum, we’ll need at least 28 new labor force entrants to support this projected growth. Given the typical age mix of the nurse practitioner occupation, nearly all the 18 labor force exits may be due to retirements. That brings our training demand to at least 46 annually.
There are projected to be another 28 annual separations among nurse practitioners due to occupational transfers. Will all these openings need to be filled with newly trained workers as well? The answer depends on the particular occupation under consideration.
First, note that these 28 occupational transfers describe workers moving out of the nurse practitioner occupation, not into it. These workers who transfer out are likely primarily moving up career pathways, such as into management (e.g. SOC 11-9111, medical and health services managers). If we ask ourselves, “how likely is it that a worker who has long had the proper credentials will make an occupational transfer into the nurse practitioner occupation?” The answer is: “not likely.” If someone has nurse-practitioner credentials, they are probably: (1) already in the occupation, (2) have moved up a career ladder after having been in that position, or (3) if they are moving from another occupation into a nurse practitioner job, it is probably because they have recently attained the needed credentials. Thus, in this case, it is reasonable to add all the 28 transfers to the total training need in Olmsted County, bringing it to 74 per year.
This means we should expect to need about 74 new entrants to our workforce with the training credentials to be nurse practitioners. It is likely all will either be newly trained or need to be recruited from outside the region. (Measuring this supply is of course the next step, but how we can do that is beyond the scope of this article.)
Occupational demand data help us break down the supply of new workers needed to support job growth in our regions. Especially, these data help us identify the demand for trained, skilled workers.
This puts us into the position of being able to take the next step of comparing this demand to the training output and capacity that supports our regional economies. Knowing the components of occupational demand allows us to further refine our view of this demand and develop appropriate strategic plans in reaction.
 See: Employment Projections, Occupational Separations Methodology FAQs. Growth demand is the positive or negative change in the overall employment level of an occupation. For example, if welder employment in a certain city is 120 in 2018 and forecast to be 140 in 2028, growth demand from 2018-28 would be 20.
 Typical entry-level education is defined here: https://www.bls.gov/emp/ep_table_112.htm. Note that for childcare workers this is the “typical education needed for entry”—some positions may certainly require higher-levels of education.
 Using national age mix data, about 182 thousand childcare workers are in the age 55-64 cohort. As a proxy for retirement, we can use the estimate of how many people exit that age cohort per year. Roughly, that would be about one-tenth of that group: 18.2 thousand workers which is 1.49% of all childcare workers. Applying that percentage to the current employment in Olmsted County (846) yields an estimate of 13 retirements per year.
 Per the same calculation method used above for childcare workers, we estimate about 18 retirements per year in Olmsted County for nurse practitioners, which accounts for all of the estimated labor force exits.