U.S. spending is skyrocketing, businesses and industries are rebounding, unemployment claims are plummeting, and the future of the economy is looking good. The state of the country is looking promising… almost too promising. What could possibly be the problem when things are going so well?
Well… Businesses can’t find workers. Yes, I said it. There is a labor shortage in America. According to the Labor Department and the influx of jobs on Job Searcher, there are more job openings across the country now than when the pandemic initially surged in March 2020. Despite the 6% unemployment rate at the beginning of April, businesses are struggling to find people to fill the empty slots that were created at the beginning of the pandemic. Now everyone, mostly employers, are scrambling to figure out why this labor shortage exists and what can be done about it.
Why Don’t People Want to Return to Work Just Yet?
Government Assistance – Jobless Benefits
As well all know, President Joe Biden signed a huge Covid-19 relief bill to assist Americans during one of the most troubling personal and economic times in history. The goal of this bill was to not only help boost the economy, but also to provide a saving grace for Americans who were in dire need of income.
As part of this bill, the American Rescue Plan Act (ARPA) added a $300-federal bonus to state unemployment compensation. With this bonus, people who are without work are raking in anywhere between $300-$800 per week.
Before Biden signed the bill, Mitch McConnel, among other Democratic and Republican Senators, were loudly voicing opinions that increased unemployement insurance would be a detriment to the economy. Why? Because it would be difficult to get people to go back to work and potentially cause a labor shortage when the economy opened back up.
To put things into perspective, the industry that is leading the job boom is in leisure and hospitality. This would include food services, drinking places, amusement, gambling, recreation, and accommodation. Most of these jobs require little training and education. Employees typically earn around minimum wage, if not a couple of dollars more per hour. You may have read that, and said “Okay, what does that have to do with a labor shortage?”
Well let’s do the math.
The state with the highest minimum wage rate in the U.S. is Washington at $13.69/hr. Even in Washington, employees would only be earning a gross pay (before taxes) of $547.60 for a 40-hour work week as opposed to the potential $747 dollars per week of unemployment. People are able to make their typical paycheck, if not more, by staying home and collecting unemployment insurance.
With some business owners denying the true existence of a labor shortage, it is difficult to outright say whether people would rather sit at home and collect unemployment or if people are tired of working for less than what they feel they deserve.
How confidently can we say that the elevated amount of unemployment insurance from Biden’s bill plays a monumental role in the current labor shortage when we also have to consider the fact that unemployment claims are steadily declining?
Though it is unclear how big of a role unemployment insurance is playing, it is definitely worth a thought.
Attitudes About Going Back to Work
It is easy for employers and people in the upper echelon to blame the labor shortage on lazy Americans who don’t want to go back to work. However, I think there is possibly another angle to look at this situation from.
As mentioned earlier, the industry with the largest boom is the leisure and hospitality industry, which include jobs/careers such as
Usually the common denominator of these job descriptions are long work hours on your feet, constant contact with people, physical labor and sometimes undesirable working conditions. More importantly, many jobs in this sector are heavily reliant on tips.
Brutality. Many would say this is such a dramatic description, but have you ever worked a low-paying job in the hospitality industry? Many descriptions include double shifts with no breaks, being forced to come in when sick, managers restricting the amount of hours one can work, lack of respect, and so much more.
So the million dollar question is: Why would people go back to harsh work environments that can not only be toxic, but also potentially don’t pay very much money?
Restaurants, bars, and hotels across the country are experiencing instances of labor shortage being caused by their workers walking out and closing shop for the day.
However, rather than blaming the labor shortage on people unwilling to go to work. I think it may be time to consider that it is not the actual work that people are avoiding. It is the low pay, the grim work environments, or it could be a combination of the two.
Also many workers – low and high wage – are still very protective of their health. Though the vaccine is rolling out in large numbers, many people are still worried about being infected with Covid. To add on to that, there are even primary and secondary schools across the country that are still virtual learning, which means adults are needed in the home for the majority of the day.
While employees in the leisure and hospitality industry are grappling between low wages and harsh working conditions, white-collar workers who lost their jobs during the pandemic are fighting all of the ideas and repercussions of prolonged unemployment.
Many times we think of white-collar jobs as “recession-proof” and only experience a labor shortage when levels of education are declining. We know their work is essential to the functioning of society, so we pay most of our attention to low-wage employees and their woes.
In the beginning of the pandemic, higher-wage employees were relatively unaffected by mass layoffs, but as Covid ravaged through Summer of 2020 and for months after, they started to feel the heat.
For most people working in white-collar industries, their main concern isn’t necessarily losing their job. Their problem is what to do when the job is lost. Unlike jobs in the leisure and hospitality industry, most losses in white-collar industries are more prone to permanent elimination due to businesses closing or downsizing by eradicating particular positions. And this, my friend, is where the consequences become weighty and contribute to the overall labor shortage.
According to data, the number of long-term unemployed people (4.2 million) remained relatively unchanged. As the months roll on, we see increased employment in sectors considered white-collar; however, the amount of jobs and employment rates are still below what they were in February of 2020. Because white-collar workers are most often faced with permanent job loss, it is likely that they make up a considerable percentage of people who have remained unemployed for 27 or more weeks.
According to a Harvard Business Review article, long periods of unemployment are just one cross road of intersectionality that makes getting a job for white-collar professionals that much harder. Not only does it hurt job-searcher confidence, but it works with factors such as age and previous success to stunt job-searchers chances at finding work.
The combination of the stigma of long-term unemployment, lower job-searcher confidence, and other factors that intersect with a job-searcher’s ability to land a new job can lead to three different outcomes:
- a very qualified candidate to search for jobs in which they are over-qualified
- candidates decide to change career paths and enter a new industry in which they are under-qualified
- lengthen the gap of their unemployment by remaining unemployed
1. Look Past Gaps In Unemployment
Gaps in unemployment have always carried a negative stigma in the hiring industry. As mentioned before, the industries that white collar workers are most prone to seek entry into are the ones that typically carry some sort of bias against people who have gaps in employment. Though it is against the law, it is something that is very hard to prove; therefore, many hiring manager and employers get away with it.
After the year and some months that we have had in dealing with Covid and an unstable economy, it would make sense for hiring managers to overlook gaps in employment. The available jobs in these industries are growing, but they are still not at the level they once were pre-covid. This means that the economy and its businesses are still not in the clear yet. Considering most jobs in white-collar industries demand a certain level of education and/or skillset, hiring managers should lean toward the best option that would help their business recover.
Would businesses rather hire someone that is “disposable”, would require training, and could potentially pay less? Or hire someone with more “recent” experience, a foot in the door already, and is hungry for a new opportunity? If you or a hiring manager you know chose the second one, then it may be time to look past the candidate’s gaps in unemployment.
2. Invest in Training
Another industry that is suffering through a labor shortage right now is the skilled-labor industry. Right now, there are many people who are unemployed and there are many skilled-labor positions to be filled, but what’s missing is the actual skill.
Careers in skilled-labor industries such as
are high in demand right now because there are many job openings and not enough people to fill those roles. The skilled-labor workforce is built around specialized “know how” and training that requires expertise or education.
Over the course of recent years, there has been a massive decline in apprenticeship programs and shop classes that pass on training and education for people who want to enter the skilled labor workforce. In addition, according to Census.gov, 10,000 Baby Boomers reach age 65 every day. Not only are Boomers not being replaced fast enough by younger workers, but it also creates a gap in knowledge.
As the video from McKinsey & Company mentions, Covid-19 has propelled the world even further into the digital age, which has inadvertently driven the growth of the need for skilled labor. For example, while stuck at home, many people online shopped and relied heavily on the e-commerce. Little did they know, that reliance directly impacted the labor shortage in the manufacturing industry.
With the growth of e-commerce, traditional manufacturers have decided to transition into digital manufacturing. Not only does that have the potential to displace employees with technology, but it also creates new positions that will need to be filled.
People being displaced by technology hasn’t only happened in the manufacturing industry. It has happened in many industries. As a result, there are many people who are looking for new jobs or even new industries to begin new careers in, including office workers who don’t want to return to their jobs post-pandemic.
Therefore, if the skilled labor division invests more in training, work shops, and education for potential employees, it can increase its chances of shortening the gaps in knowledge and increasing the number of people who are skilled enough to be qualified for the job. This would more than likely not solve the overall labor shortage we are experiencing, but it would be a potential solution to easing it.
3. Allow Remote Work
In January, USA Today reported that nearly 30% of working professionals would quit if they had to return to the office full time to work. This is a trend that is rapidly growing across the United States. The inability to work remotely is already contributing slightly to the labor shortage, and if it is not handled properly, it could cause the labor shortage crisis to be even more profound.
With Covid still lurking around and people having to invest so much time at home with children and elderly parents, employees and executives just don’t want to return to the workplace as it was pre-pandemic. Most of all people are afraid they will lose the flexibility their current schedule provides them.
In an April 2021 Bureau of Labor Statistics release, at least 59.8% of families had both parents employed in the year 2020. Surely this makes up a considerable percentage of our workforce. At the end of April, FlexJobs conducted a survey to investigate the pandemic’s impact on working parents and how they view remote work. FlexJobs found that 62% of parents would quit their current jobs if they can’t work remotely. These employees are even willing to give up some benefits just to work from home.
Although executives and employees aren’t completely sure how, it seems as if working from home will be here to stay. According to data gathered by PwC (PricewaterhouseCoopers), employees and employers both agree that remote work has had a high level of success. Less than one in five executives want to return to the workplace as it was pre-pandemic, and executives are beginning to consolidate their office spaces. However, there are many aspects of working from home that are unclear.
Though employees and employers are on board with working from home, very few executives believe that full remote work will be enough to keep their business afloat. Employees also believe that being in the office is important for certain tasks such as building work relationships and collaborative efforts. This leads to the thought of a hybrid schedule.
The problem with adopting a hybrid schedule is executives are unsure of what a healthy balance looks like.
In addition, there are other consensus problems that need to be addressed such as:
- when to return back to the office
- the optimal schedule for remote and in-office work
- childcare benefits
Office workers are not ready to return to the workplace full-time, and they may never be. Many claim they will quit if they are forced back and the conditions aren’t optimal. The way companies and executives handle this shift could either help the labor shortage in the long run or negatively contribute to furthering the shortage.
4. Well… Just Pay More
Increasing the pay of employees seems like such a simple solution to the labor shortage. The problem, however, is the cause of a wage-price spiral. Many business owners have been fearing this type of inflation from the time employees began demanding higher wages. To simply put it, if they pay the employees more, then businesses will then have to raise their prices, which indirectly creates inflation.
CNBC reported that inflation sped up in April and consumer prices rose by 4.2%. This is the fastest it has risen since 2008.
Now the question is: How is America going to address the labor shortage with demands for higher pay and inflation sharply rising?
With inflation rising, the high unemployment rate remaining steady, and the labor shortage persisting, we know the purchasing power of most Americans will decrease. In the past, the government has used inflation controls such as higher interest rates, higher taxes, decreasing money supply, supply-side policies, or even wage controls.
With people across the years debunking the “myths” associated with higher wages and inflation, it is unclear of whether raising the minimum wage at this point is beneficial or a hinderance to the growth of the economy.
The current labor shortage businesses are experiencing the US are a cause of a myriad of factors working together to change the attitudes of low-wage and high-wage earning Americans. Some are just tired of working for nothing and being treated like garbage. Meanwhile, others have a completely different set of problems, and if those aren’t addressed, it could further contribute to the labor shortage. The solutions set out aren’t going to solve the labor shortage over night. However, they will incentivize hard working Americans to want to seek employment, be ready for new employment opportunities, and remained employed.
Hopefully, those in leadership positions will find solutions to the labor shortage. In the meantime, if you are unemployed, don’t let the current state of the labor force derail your confidence. There are employers out there trying to do the right thing and accommodate employees. Go search them out on JobSearcher today!