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 from or 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, the 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 group in 2005 were compared with corresponding data for the group in 2010. Looking at the older group in 2010 is necessary
in order to follow the cohort of workers as they age over the 5 years of the study. For example, the number of financial managers aged 20 to 24 years in
2005 was compared with the number of financial managers aged 25 to 29 years in 2010. (See table 1.)
The larger employment in 2010 indicated that there were more entrants than separations among individuals aged 20 to 24 years in 2005. The net entrants
were recorded as a positive net change for this cohort. Employment of financial managers in the cohort aged 50 to 54 years in 2005,
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 employment declined between 2005 and 2010. 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 2005 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. Waiters and
waitresses 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 2010–20 decade. First, replacement needs were
calculated for the 2010–15 period. Then employment was estimated for 2015 by applying the cohort’s historical rate of change to
its 2010 employment. Next, the 2015 employment figure was multiplied by the historical replacement rate to calculate replacement
needs for the 2015–20 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 2010–15 by multiplying 2010 employment for each age group by its historical replacement
rate. For example, in table 2 (numbers in thousands),
2010 employment (age 50-54)
2005-10 replacement rate (age 50-54)
2010-15 replacement needs (age 50-54)
151
×
.087
=
13
An estimate of 2015 employment for each age cohort was calculated by applying the cohort’s historical rate of
change(2) to its 2010 employment.
(3) Because the 2010 workforce will
age by 5 years by 2015, 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:
2010 employment (age 50-54)
2005-10 rate of change (age 50-54)
2015 employment estimate (age 55-59)
151
×
[1 - .087]
=
137
The following example from table 2 illustrates a cohort with net entrants—that of to workers aged 35–39 years in 2010:
2010 employment (age 35-39)
2005-10 rate of change (age 35-39)
2015 employment estimate (age 40-44)
168
×
[1 + .082]
=
182
After estimating employment for 2015, BLS analysts calculated replacement needs for 2015-20 by multiplying the historical replacement rate for
each age group by the 2015 employment estimate for that age group. Continuing the earlier example of workers aged 50-54 years in 2010, who will
have entered the 55- to 59-year-old age group in 2015, results in the following calculation:
2015 employment estimate (age 55-59)
2005-10 replacement rate (age 55-59)
2015-20 replacement needs (age 55-59)
137
×
.316
=
43
Summing the number of replacement needs for each of the 5-year periods 2010–15 and 2015–20 provided an estimate of replacement needs over the
10-year projection period. The 2010–20 replacement rates were calculated by dividing replacement needs for 2010–20 by 2010 employment.
To ensure reliability, statistical testing was conducted on the CPS age cohort data. For some occupations, CPS input data were found to be unreliable.
In these cases, the occupation was assigned the replacement rate of a similar occupation or occupational grouping, referred to as a proxy,
for which the CPS input data were reliable. To select proxies, demographic data from the American Community Survey(4)
were used to help identify occupations with similar characteristics.
The CPS data used to calculate replacement rates were coded in accordance with U.S. Census Bureau occupation classification systems.
However, the occupational employment projections used
more detailed occupational codes from the Standard Occupational Classification (SOC) system. 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 2010 employment figure found in the National Employment Matrix to determine projected
replacement needs for SOC occupations.
Table 1.10 presents projected 2010–20 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 2010–20 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 2005–10 are used in calculating the projected rates.
The 2005–10 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 2010–20 projections, 173 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.
