Everyone's Talking About a Labor Shortage - But What Does it Mean?
The US economy, stifled and shuttered for over a year, is finally coming back to life - but will there be enough workers to revive it? That's the question economists are asking as widespread labor shortages grip the country.
Fueled by a combination of factors, these staff shortages are forcing firms across many industries to adjust their operations, becoming leaner and more resilient.
What is the US labor shortage?
As the term labor shortage hits the headlines, it's important to define what it actually means.
Just because a company is struggling to find staff, doesn't necessarily mean that the economy is in the throes of a labor shortage. For that to happen, demand for labor at current wage levels must exceed the supply.
The US is currently seeing record job openings alongside high unemployment. According to the latest report from the US Bureau of Labor Statistics, there were 10.4 million available jobs in August and 6.3 million hires.
The numbers don't look good. But there's still some controversy over whether we can declare a full-blown labor shortage. The Economic Policy Institute argues that these labor gaps are occurring in scattered pockets of the country and are too isolated to affect the entire, complex network of the US labor market.
They also claim that it's not so much a labor shortage as a wage issue. If employers can't fill their positions at the wages they're offering, they need to offer workers a more attractive salary. This theory is borne out by the fact that while job openings are substantially increasing, wages are not seeing a corresponding jump.
Labor shortage or not, there is definitely tension in the market. And there's no quick fix in sight. While some of the contributing factors for the current crisis are pandemic-related, others are longstanding issues that remain unresolved.
A shrinking workforce
The pandemic caused a massive shift in the way we work. Coming out of lockdown, many employees took the opportunity to reevaluate and decided that it wouldn't be business as usual.
Some decided the new format of remote or hybrid working was preferable and quit their office jobs for a home-based set up. Many who were looking at retiring in a few years chose to vacate their positions ahead of schedule for an early retirement.
Some realized they didn't want a job at all, relying on passive income or starting their own businesses to build a better work/life balance. Women, especially, left their jobs in droves to take care of their families and many of them never returned. Others decided it's still too risky to go back to an office, or found themselves shut out by pandemic policies such as vaccine mandates.
But the pandemic can't take all the blame.
The labor market was in steady decline long before COVID as aging baby boomers retired out at a faster pace than new graduates were hired. In 2001, nearly 200,000 workers joined the workforce each month. That number is now closer to 50,000, according to analysts at JP Morgan.
Labor down, productivity up
As the labor shortage bites, the worst-hit industries appear to be hospitality, leisure, restaurants, and accommodation. But with an aging population and an economy still trying to regain its equilibrium, very few industries will remain unscathed in the years to come, which is why it's important to take steps now to prepare. The good news is that, managed correctly, labor shortages could lead to productivity gains.
As companies address staffing gaps, they'll need to prioritize the workers they have – investing in their training, giving them access to more technological tools, and reskilling some employees so they can be utilized where they're most effective. Getting rid of unnecessary meetings and shortening the work week are also techniques companies are looking at to streamline operations.
A lean team knows what it can outsource and automate, and what must be left to human ingenuity. As software solutions become more advanced, we may well enter a boom time for creativity and innovation.
Prodoscore can help you maximize your workforce by ensuring every employee is engaged in the right way. Our easy yet innovative platform is a productivity intelligence tool that can revolutionize the way you work and ensure consistent returns. For more information on how we can transform your business, contact our team today.