Employment Projections

Estimating Occupational Replacement Needs

Projections of job growth provide valuable insight into future employment opportunities because each new job created is an opening for a worker entering an occupation. However, opportunities also arise when workers leave their occupations and need to be replaced. In most occupations, replacement needs provide many more job openings than employment growth does.

To project the magnitude of replacement needs, the Bureau of Labor Statistics (BLS) calculated an estimate of openings resulting from workers retiring or otherwise permanently leaving an occupation. Because workers entering an occupation often need training, these replacement needs, added to job openings due to growth, may be used to assess the minimum number of workers who will need to be trained for the occupation. This estimate of replacement needs does not count workers who change jobs but remain in the same occupation.

Developing historical replacement rates

To develop estimates of replacements, BLS used occupational employment data from the Current Population Survey (CPS), a household survey that collects demographic and employment information about individuals. BLS analysts measured the net change in occupational employment for 13 different age cohorts over a 5-year period.(1) For each occupation, employment data for each age cohort in 2007 were compared with corresponding data in 2012. For example, the number of licensed practical and licensed vocational nurses aged 20 to 24 years in 2007 was compared with the number of licensed practical and licensed vocational nurses aged 25 to 29 years in 2012. (See table 1.) The larger employment in 2012 indicated that there were more entrants than separations among individuals aged 20 to 24 years in 2007. The net entrants were recorded as a positive net change for this cohort. Employment of licensed practical and licensed vocational nurses in the cohort aged 50 to 54 years in 2007, however, showed a decline. Declines in employment for an age cohort measure net separations; increases measure net entrants.

After calculating net change by age cohort, BLS analysts estimated historical replacement needs. Replacement needs were equal to net separations unless total employment for the occupation declined between 2007 and 2012. In these cases, declines in employment were subtracted from the net separations because not all workers who left the occupation were replaced. For each age group, replacement needs were divided by 2007 employment to calculate a historical 5-year replacement rate.

In most occupations, net separations occur mainly in the older age groups, usually above age 40. However, large numbers of net separations of young workers may occur in occupations that have relatively low entrance requirements and pay relatively low wages. Young workers may take jobs in such occupations while obtaining additional education or training and then leave when they qualify for higher paying occupations. Customer services representatives are an example of this type of occupation; net separations occurred for all except the youngest age cohort. (See table 1.)

Developing projected replacement rates

Historical replacement rates were used to estimate replacement needs during the 2012—22 decade. First, replacement needs were calculated for the 2012—17 period. Then employment was estimated for 2017 by applying the cohort’s historical rate of change to its 2012 employment. Next, the 2017 employment figure was multiplied by the historical replacement rate to calculate replacement needs for the 2017–22 time span. Finally, projected replacement needs for each 5-year period were summed to compute 10-year replacement needs for each occupation. Following are some examples of the process used to project replacement needs by occupation.

Replacement needs were calculated for 2012—17 by multiplying 2012 employment for each age group by its historical replacement rate. For example, in table 2 (numbers in thousands),

2012 employment
(age 50-54)
2007—12 replacement rate
(age 50-54)
2012—17 replacement needs
(age 50-54)
71 &times .244 = 17

An estimate of 2017 employment for each age cohort was calculated by applying the cohort’s historical rate of change(2) to its 2012 employment. (3) Because the 2012 workforce will age by 5 years by 2017, it is necessary to age the cohort into the next older age group. Continuing with the same example from table 2 yields the following calculation:

2012 employment
(age 50-54)
2007—12 rate of change
(age 50-54)
2017 employment estimate
(age 55-59)
71 &times [1 - .244] = 54

The following example from table 2 illustrates a cohort with net entrants—that of to workers aged 40–44 years in 2012:

2012 employment
(age 40-44)
2007—12 rate of change
(age 40-44)
2017 employment estimate
(age 45-49)
67 &times [1 + .050] = 70

After estimating employment for 2017, BLS analysts calculated replacement needs for 2017—22 by multiplying the historical replacement rate for each age group by the 2017 employment estimate for that age group. Continuing the earlier example of workers aged 50-54 years in 2012, who will have entered the 55- to 59-year-old age group in 2017, results in the following calculation:

2017 employment estimate
(age 55-59)
2007—12 replacement rate
(age 55-59)
2017—22 replacement needs
(age 55-59)
54 &times .225 = 12

Summing the number of replacement needs for each of the 5-year periods provided an estimate of replacement needs over the 10-year projection period. The 2012–22 replacement rates were calculated by dividing replacement needs for 2012—22 by 2012 employment.

For some small occupations, the CPS sample was deemed too small to give trustworthy results using the cohort method. In these cases, the occupation was assigned the replacement rate of a summary occupational grouping which included the occupation and had enough observations to provide more reliable data.

The CPS data used to calculate replacement rates were coded in accordance with U.S. Census Bureau occupation classification systems. However, the occupation classification system changed during the historical period for which data were used. To account for this, BLS analysts matched the old coding system to the new coding system, sometimes combining occupations from one or both classification schemes to make groups which had comparable occupational coverage. Calculations were then performed using those groupings.

The occupational employment projections use occupational codes from the Standard Occupational Classification (SOC) system, which are often more detailed than the U.S. Census Bureau’s occupational classifications. To apply CPS data to the occupations in the projections matrix, analysts identified the CPS occupations that were equivalent to, or that included, a given detailed SOC occupation. The calculated replacement rate was then multiplied by the 2012 employment figure found in the National Employment Matrix to determine projected replacement needs for SOC occupations.

Table 1.10 presents projected 2012—22 replacement rates and replacement needs for SOC-based matrix occupations.

Frequently asked questions about replacement needs

Q. How should replacement needs be used?

A. Replacement needs often are used to learn what job opportunities will be like for future workers, to help with career guidance, and to estimate training needs for future workers.

Q. Why are the estimates of growth and replacement needs described as providing a minimum measure of training needs?

A. The number of new entrants needed in an occupation is underestimated because replacement needs are based on net changes and do not capture the gross flows into and out of an occupation. Even if growth and replacement needs perfectly measured the need for new entrants, training needs would still be underestimated because some people who complete training do not enter the occupation for which they qualify.

Q. Do the 2012—22 projected replacement needs assume that future labor market behavior will differ from past behavior?

A. No. The projected replacement needs assume that workers will continue to retire and otherwise exit an occupation at ages similar to those which have been observed in the recent past. Occupation- and age-specific rates for 2007—12 are used in calculating the projected rates. The 2007–12 rates are applied to current occupational age-distribution data to estimate replacement needs for the future. The result is an occupation-specific replacement rate that captures the impact of demographic, but not behavioral, changes.

Q. Are net separations the same as replacement needs?

A. In most occupations, yes. If employment declined during the historical period, however, net separations exceeded replacement needs by the decline in employment. When employment is declining, not all people who separate from an occupation are replaced.

Q. Should a projected decline in employment be subtracted from replacement needs to estimate job opportunities?

A. No. If employment is projected to decline, the number of opportunities resulting from growth is zero and replacement needs constitute the only source of opportunities. When employment declines, net separations increase both because it is more likely that individuals lose their jobs and because fewer are entering the occupation. Replacement needs already capture these effects by reducing net separations by declines in employment. They should not be further reduced by projected employment declines. In the 2012—22 projections, 151 occupations are projected to decline in employment; all are projected to have replacement openings.

Q. If employment is declining rapidly, is it possible for replacement needs to be zero?

A. In the extreme case, yes. For example, assume that, in a limited geographic area, a single firm is the sole employer of tool and die makers. If the firm ceases operation, all tool and die makers in the area will leave the occupation; net separations will equal the decline in employment, and there will be no replacement needs. On a national scale, however, a situation like this is highly unlikely because not all areas of the country share the same market conditions.

Q. Are there any data on replacement needs by industry?

A. No. Estimates of replacement needs are created only for occupations. The BLS does have a survey that collects data on current job openings and labor turnover by industry. (For more information, see the Job Openings and Labor Turnover Survey.) The BLS also has a program that estimates gross job gains and losses by industry. (For more information, see the Business Employment Dynamics program.) Note that the concepts and methods used by these programs differ from those used by the Employment Projections program.

Footnotes:

1 To increase the sample size and reduce cyclical fluctuations, employment data from 5 years (2003, 2004, 2005, 2006, and 2007) were averaged and the resulting average was used as the employment figure in the first reference year. Similarly, employment data from 2008, 2009, 2010, 2011, and 2012 were averaged to represent employment 5 years later. To simplify the discussion that follows, the 2003–07 averages are referred to as 2007 data and the 2008—12 averages are referred to as 2012 data.
2 To apply the historical rate of change, multiply 2012 employment by the sum of 1 and the rate of change found in table 2.
3 Note that, for this occupation, the replacement rates equal the absolute value of the negative rates of change. This is true for any occupation with increasing employment over the historical period. However, as discussed in the previous section, if employment in the occupation was declining, then the replacement rates were adjusted downward to account for the fact that not every worker who separated was replaced.

Last Modified Date: February 7, 2014

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