I read with interest a story in the Financial Times on January 23, 2024.
Japan is the first of the big, advanced economies to have experienced labor shortages, but they are clearly not the only one. Their problems date to 1997. Interestingly, the United States labor participation rate peaked a year later in 1998.
The problem is not a new one. It has been developing for about 25 years in both countries (along with the UK, Italy, Germany, and many others). There are multiple reasons and even more opinions about why, but they are consistent in their underlying causes - people are living longer, and the birth rate is falling.
Why should we care about something we are not able to control in the long run, and for which we can only make short term decisions to alleviate in the short run? The reason is we will be required to adapt in all we do. It will influence our jobs, and as a result, will determine how we earn a living.
In addition, it most certainly will affect the financial markets and how we invest if we are to be successful in securing our financial security.
As a result, the advance of artificial intelligence [AI] will continue to be headline news. The labor problem is not going away without a major contribution from a source to supplement direct labor inputs. That source could be technology, specifically AI.
Short-term labor shortages can be alleviated with sensible immigration policies, education, and training. However, the root problem is people living longer while birth rates decline.
Consider how Japan is working to solve their labor shortage:
https://ft.pressreader.com/v99e/20240123/281560885660858
Just as it is important for companies to adapt to the looming labor shortage, it is important we adapt as investors to the changes these shortages may bring. At Curran, we will continue to focus on quality companies with strong, stable, and discerning management inclined to adjust strategies as the market warrants.
Thank you,
Thomas Curran
Founder & Co-CEO
Curran Wealth Management
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