Understanding current workforce shortages
27 Jul 2022
In the year 2021, more than 47 million workers quit their jobs. The pandemic caused a major disruption in the country’s labor force, with many people choosing to go in search of an improved work-life balance and flexibility, increased compensation, and strong company culture.
Factors Contributing to the Labor Shortage
An increase in savings
Enhanced unemployment benefits, stimulus checks, and not being able to go out and spend money during the Lockdown all contributed to a lot of savings. 68% of claimants earned more on unemployment than they did while working. In a survey by the US Chamber of Commerce, 28% of women cited others in the family making enough money that working full-time is not as critical as the reason they have not re-entered the workforce. Higher incomes and savings bolstered people’s economic stability—allowing them to take a break from the labor force.
Lack of access to childcare
Even before the pandemic, a lack of access to high-quality, affordable childcare was an issue. Research from the U.S. Chamber of Commerce Foundation found that due to breakdowns in the childcare system, the states surveyed (Alaska, Arkansas, Arizona, Missouri, and Texas) missed an estimated average of $2.7 billion annually for their economies.
New business starts
In the spirit of entrepreneurship, some employees either left work or stayed unemployed to open their own businesses. Over the last two years, nearly 10 million new business applications were filed and in 2020 alone more than 4 million new businesses were started.
Foodservice and hospitality struggle to retain workers
During the pandemic reshuffling, jobs that require in-person attendance and traditionally have lower wages, have had a more difficult time retaining workers. For example, the leisure, hospitality, and retail industries have had the highest quit rates since November 2020, consistently above 4.5 percent.
Remote work has changed the game
Some industries have been less impacted by labor shortages but are grappling with how to deal with the rise of remote work. For example, the rise of remote work might explain why there has been less “reshuffling” in business and professional services.
To remain competitive and attract new talent, employers have started to shift their corporate models. Many businesses have embraced remote or hybrid work models and flexible scheduling. Yet, no one solution to industry labor shortages or employee retention exists. Nor are any solutions appropriate for all industries or employers.
Some workforce solutions for business owners and employers
To address worsening labor shortages, employers are attracting candidates by offering starting and sign-on bonuses and increasing the transparency of salary information in job ads. To remain competitive and attract new talent, employers have started to shift their corporate models. Many businesses have embraced remote or hybrid work models and flexible scheduling.
Additional investment in technology and automation, along with skills training, is a viable solution to ongoing labor shortages. Leaders must look ahead and consider how the nature of work will change to get ahead of the talent shortage. The increase in automation and technology has greatly accelerated during the last 18 months as businesses have been forced to think differently about their operating models.
Employers are also lowering educational requirements and offering more initial job training. As bargaining power shifts from employers to workers, companies will not only face higher wage and benefit costs but will need to alter their definition of an ideal new hire. This means focusing on candidates who have competencies such as adaptability and problem solving and are able to work in teams.
As remote and hybrid workplace models change the recruitment landscape and the way work gets done, future hiring, retention, and innovation will depend on organization-wide clarity around these issues. Flexible work is highly desired by workers and similar in importance to career advancement and better pay.
Ongoing reskilling and upskilling are becoming more important, especially for manual workers. For many manual jobs, employers are having to lower education and experience requirements to meet recruitment goals. As a result, workers are entering the organization with a lower level of proficiency than in the past. Employers should provide ongoing as well as initial training and advertise this training in job ads to make positions more attractive.
Yet, no one solution to industry labor shortages or employee retention exists. Nor are any solutions appropriate for all industries or employers. It is only by thinking differently about how to hire, engage, develop, and retain their workforce that businesses will remain agile and resilient to create the workforce of the future.
Montgomery County Action Council works collaboratively with local and regional partners to attract new business investment, encourage expanding existing industry and small businesses, align workforce education and training with in-demand jobs, locate new markets for Montgomery County products, and plan and mobilize resources for economic development. For more information about our projects and programs, visit us here.