US Labor Shortage: What You Need To Know

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Sam Seo

November 23, 2021

A lot of US businesses had to shut their doors when COVID-19 first surged in March 2020. But after 19 months, businesses have reopened and the US economy is finally starting to come back to life, despite the US labor shortage. 

Here’s everything you need to know about this shortage. Plus, some advice on how your business can continue to find new talent during this hiring crisis.

What is the US labor shortage?

The COVID pandemic has disrupted the course of all our lives since the beginning of 2020. And in those early days, the economy stalled because of mandated business closures and stay-at-home orders. 

Because many businesses had to shut down, a lot of people lost their jobs. In fact, about 9.6M Americans lost their jobs in 2020 alone. 

Thankfully, we’re at the point where businesses are re-opening their doors. The public is safe enough for people to go out in numbers reaching pre-pandemic levels. And consumers are eager to spend their money after going so long without visiting their favorite restaurants and stores.

But there’s one huge issue: many US industries are dealing with a labor shortage. Meaning, there are a lot of unfilled job openings at businesses across the nation. And additionally, there aren’t enough people to fill those job vacancies.

According to the Bureau of Labor Statistics, there were over 10.4M job openings in the US at the end of September 2021. Those vacancies are happening in a range of industries, from manufacturing to hospitality to food and beverage retail. 

And this job opening statistic is much higher than the number of unemployed people, which hit 7.4M at the end of October 2021. Even if every unemployed person found a job, there would still be a few million open positions.

Now Hiring in Scrabble letters
Photo by amtec_photos / CC BY

You may have seen “Help Wanted” and “Now Hiring” signs popping up in large numbers in your community – that’s because this phenomenon is happening across the country.

Why is the labor shortage still a huge problem?

Many front-facing businesses (AKA businesses where workers have in-person contact with the public) have had the opportunity to reopen since the summer of 2020. Opening dates have ranged depending on state mandates

Initially, that reopening had to fall under strict guidelines regarding social distancing and limited indoor capacity. So, these businesses didn’t need as many workers. 

But now, those restrictions have fallen away with the rise of vaccinations and enforced mask mandates. And as business has picked up with a rise in customer numbers, company leaders are looking for more help. 

And yet, despite searching for months, these businesses are still struggling to fill their labor force. As of August 2021, 51% of small business owners stated they couldn’t fill their job openings at this current time.

Plus, front-facing industries aren’t the only businesses suffering from a lack of labor. Sawmills, long-distance trucking, and mental health practitioners are some of the other industries desperate for more workers. So where did the labor force go?

The labor shortage isn’t due to unemployment benefits 

Following business closures in March 2020, the US government recognized the high number of job losses in the country. And the financial impact that job loss would have on the newly unemployed.

So, the government enacted the Coronavirus Aid, Relief, and Economic Security (CARES) Act. This program brought increased payments and better benefits for unemployed workers. These payments included an extra $600 per week from March to July 2020, before dropping down to $300 per week. 

Over half of the country’s governors believed that workplace shortages were due to these improved unemployment benefits. These states actually ended the benefits plan as early as June 2021 in a bid to increase their labor force (the CARES Act lasted until September 2021).

But studies showed those states didn’t actually see a significant rise in employment. Only 1 in 8 unemployed people found new jobs in the period after the unemployment benefits ended.

So, even though unemployment benefits have ended across the country, we’re still dealing with a significant lack of workers.

Where did the labor force actually go?

The labor shortage can actually be connected to a combination of factors. The first major factor: retirement.

More specifically, when the pandemic forced businesses to close, older workers were given the opportunity to retire early. And a good chunk of these workers took it. 

Research from Goldman Sachs shows that about 3.4M workers who left the labor force during the pandemic were over the age of 55. Of that number, 1M are considered normal retirements; another 1.5M are early retirements.

Another factor in the labor shortage is COVID-related health concerns. COVID is still affecting countries across the globe, including the US. The symptoms of COVID can be incredibly stressful on the body, and post-COVID conditions can last for months.

In a Census Bureau survey from October, 3.7M respondents stated the main reason they weren’t working was that they or someone they were caring for had COVID symptoms. 

And that number is in addition to the 2.5M people who didn’t work because they were concerned about getting or spreading COVID.

The last major factor behind the labor shortage is what some people are calling “The Great Resignation.” The pandemic is forcing people to reassess their priorities. And for many, that reassessment includes their relationship with work and how they can further their careers.

Commuters on a subway in San Francisco
Photo by Corey Agopian / CC BY

So, millions of people are quitting their jobs, looking to find better job opportunities. In fact, 4.4M people in the US quit their jobs in September 2021 – the most ever in a single month.

When you add all those numbers together, it’s no wonder the US is currently in a labor shortage crisis.

When will the labor shortage end?

The short answer is no one really knows. 

The longer answer is there are different opinions on when the labor shortage will end. Some people believed that the labor shortage would end with the end of federal unemployment benefits back in September 2021 – which turned out to be wishful thinking.

A recent study from the St. Louis Federal Bank found that only half of the missing jobs in the US could be filled by June 2022. Meaning, the labor shortage would extend through mid-2022, potentially to the end of next year.

There are even a few people who believe that the labor shortage could be permanent. The US population of working-age people (ages 15 to 64) has been in decline for the last few years. Plus, there are signs that the US population growth is starting to stagnate

Meaning that there will be fewer new workers entering the labor force as the population ages. And since we already have too many job openings compared to the number of people available, chances are that the US will never have enough people to fill those openings.

The bottom line: we can’t assume that the labor shortage will end any time soon. And as small business leaders, we need to prepare to keep our companies staffed.

So, how can your business find new workers?

The labor shortage can bring a lot of anxiety for businesses that are looking to hire some help. But despite the shortage, the good news is there is room for opportunity. 

According to an August survey from Bankrate, 55% of the workforce is planning to look for a new job in the next year. Meaning, a lot of people are looking for the next step in furthering their careers – and your business could be the option they choose.

Rebar worker
Photo by Tomas Castelazo / CC BY

So, what can your business do to entice new workers? A lot of companies have tried boosting their wages to find new hires and retain their current employees. For example, McDonald’s is increasing its minimum wage to a $15 average at all its company-owned restaurants by 2024.

And while a bigger paycheck is nice, some economists argue that simply raising wages won’t be enough to bring workers into a business. That’s because competition to attract workers is fierce due to the sheer number of jobs available.

So, here are some other ways to attract new employees during this labor shortage period:

1. Invest in work flexibility and benefits

The pandemic has taught us that we can make flexibility work for our businesses and our employees. A Pew Center study showed that the transition to WFH was relatively easy for most workers. And 54% of those workers want to continue working remotely after COVID. 

Employees want to keep that flexibility in their future positions. And flexibility doesn’t just apply to location. For in-person industries like manufacturing or transportation, sometimes remote work just isn’t an option. But that doesn’t mean work flexibility is impossible.

For people with family priorities, having a flexible schedule can be a crucial factor in their decision on where to work. In fact, 68% of parents surveyed by Syndio stated that having a flexible work schedule was more important now than before COVID.

Your company can also provide benefits that will make your employees’ lives easier. Beyond the standard health insurance, you can invest in some low-cost benefits, like more vacation hours. 

Plus, many parents need childcare support to return to work. In the US, over 10M mothers with school-age children weren’t working in January 2021. That’s 1.4M more than what was measured the previous year. So, try introducing childcare subsidies for employees who are parents. 

2. Prioritize COVID safety

We already know a good number of workers left the labor force because of COVID concerns. They’re scared of getting sick and spreading the disease to their loved ones. 

So, to attract more workers, you need to make sure your work environment is COVID safe – especially if you work in a front-facing industry like hospitality or food service.

Promote social distancing. Recommend all customers and employees wear masks. And if possible, conduct business outdoors. Or, if you have to work inside, leave your doors and windows open for better ventilation. The CDC also has a list of recommendations to help businesses maintain good COVID protocols. 

The end goal is to make sure your employees feel safe enough to work – whatever that means for your business. Set up these safety guidelines for your workplace and make sure you enforce them.

3. Provide opportunities for employees to grow

The pandemic has forced a lot of people to reassess what’s important in their lives. And that involves a reassessment of their relationship with work. 

A recent McKinsey report shows that workers want more purpose from their work than they’re currently getting. Meaning, people spend their time on work that brings them personal fulfillment. 

Your business has to invest in giving your employees that sense of purpose – or risk losing them to a business that can.

Your prospective employees want the opportunity to find fulfillment in what they do every day. So, offer those opportunities. Build a transparent promotion plan for employees so they can see the possible trajectories for their careers.

Or, incentivize the role by promoting employee development. You can provide leadership training, offer work opportunities across departments, and invest in development funding. 

You can even offer flexibility in work responsibilities. Meaning, your employee can develop their role based on how they want their career to progress. 

For example, the company Zenefits will ask their employees how they see their future at the company. Then, leadership will provide specific work opportunities based on their employees’ answers.

In conclusion

We just don’t know how long the labor shortage will last. It could be over by the end of 2021, or it could last for many years to come. 

In either case, chances are that you need more workers to keep your business running. So, you want to prove that you’re one of the best businesses to work for.

From increasing wages to providing better benefits to highlighting career opportunities – a combination of these changes will show job seekers that you’re serious about taking care of them. And in the era of COVID, showing you care is more important than ever.

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