The U.S. labor shortage is real, but what is actually causing it?
By Allan Klepfisz, Co-Founder of WatchOut Group
Recently a conversation has been stirring in the news about the severe labor shortage in the United States. In April, the Bureau of Labor Statistics reported the number of job openings had hit a record-setting 9.3 million, with over 600,000 of those openings appearing after February of 2020, right when a global pandemic completely changed everyone’s world. In many regions, industries like retail, restaurants, and warehousing are now desperate to fill jobs. The shortage is real, but plenty of CEOs are failing to understand the true cause. Companies are rightly blaming the pandemic and expanded unemployment benefits, but are totally misunderstanding or willfully denying the role they play in the ongoing labor shortage.
What these discussions are missing
It’s important to understand what these superficial discussions and loud headlines are missing. When business leaders bemoan the labor shortage or their inability to fill roles, they tend to gloss over the simple yet catastrophic fact that 605,000 Americans died from Covid this year. Most business leaders fail to point out how eerily this number correlates to the 600,000 new job openings, serving as a stark reminder that there are certainly harsh consequences involved when a country loses over half a million of its people. It is disrespectful to not bring up these numbers, and while vaccinations have tapered the infection and death rate significantly — the pandemic is not over and this number is still rising daily.
The rise in homeschooling and its effect on women
Another important factor for the shortage that plenty of public discussions are missing is the toll staying home with kids took on parents everywhere. In many cases, this involved the sacrifice of one parent’s career to make sure their children were getting schooling from home. This disproportionately affected woman, many of whom found themselves as the defacto educator that was always available to teach when their children’s school was inevitably shut down again. The pandemic had a significant effect on women’s employment, with one in four women considering leaving the workforce or downshifting their careers versus one in five men. Fewer men consider downshifting their careers because they often are higher earners, which is another major disadvantage for women. This immense pressure on women to put their careers on hold to ensure their children receive a proper education is certainly accounting for part of the labor shortage.
Automation cutting work hours and benefits
Also, most of these jobs in demand are actually contract or part-time work, rather than full-time roles with benefits. This is making people completely disregard jobs that were widely undesirable before the pandemic to begin with. One major factor behind these roles being reduced from full-time is that workforce automation is accelerating rapidly. At this point, we’ve all experienced self-checkout at a grocery store — whether we like it or not — and surely we’ve all gotten at least something delivered to us by Amazon. But what’s new is how many people are starting to understand that self-checkout equals reduced hours for cashiers and getting everything delivered by Amazon equals the destruction of malls and retail businesses all across the nation, along with the jobs they used to offer the public. The main consequence of this newfound level of automation is that employers simply don’t need as much full-time staff as they used to. The pandemic has only sped up this transition, where businesses have been scrambling to use automation to remove as much human interaction as possible to meet CDC guidelines. It’s obvious that employers should pass the benefits of automation on to their employees, and use this new era of technology to improve working conditions. Maybe then they’d start seeing applications instead of wondering why no one wants to work a part-time split shift that only totals 15 hours a week.
Working in person is still not worth the risk
It’s hard to blame anyone for not wanting to risk working in person again, especially when wages for most jobs in demand aren’t even high enough to pay rent. The United States is currently having a major problem with people working for wages that can’t cover their basic needs. These are called starvation wages, which are endemic to the job market and the service industries in particular. Whether you’re for or against increasing the minimum wage, one undeniable fact is that the minimum wage is not nearly as high as it should be when you account for inflation. While many CEOs get defensive and pat themselves on the back for raising pay to $15 an hour, they conveniently leave out that minimum wage would be $20 an hour if it kept up with inflation since 1968. When these facts are taken into account it’s impossible to ignore that the minimum wage is a starvation wage. People know they can’t live on it, and they’re rightfully not willing to work for it. It may have taken a global pandemic and some extra unemployment checks for them to realize their one-sided work arrangement, but that’s more than understandable given how hard it is to financially leave a job when you’re so dependent on it.
And then there is the infamous delta variant of Covid, which is making people feel on edge again and already causing fresh lockdowns in several countries, most notably interfering with Japan’s Olympics. The CDC says the delta variant, which was first identified in India, is now the dominant strain in the USA, making up over half of all new infections. And even worse, in areas like the Midwest, that number is actually near 80%. The delta variant of the coronavirus is unfortunately much better at spreading between people. Remarkably, people that are double vaccinated are getting the delta variant, ruining confidence in a quick pandemic recovery and anyone’s desire to get back to working in person. Another harsh reality of the delta variant is that it’s devastating our kids, many of whom are too young to receive a vaccination in the first place. Many hospitals are reporting the country’s first pediatric infections – all of which are occurring in children under the age of 12. The result of this is an understandable hesitation to work in person, and many parents rethinking sending their kids back to school, which in turn makes them continue to be stuck at home playing teacher.
Reflecting on what’s important
People are also in general rethinking what they want to do with their lives. You may have already heard about the great resignation, but you may be surprised to find out that it is actually real. The push by employers to have workers come back to the office is leading to a dramatic increase in resignation letters, with four million people quitting their jobs this April alone — breaking U.S. Labor Department records. The pandemic gave many people the chance to reflect for the first time in their lives — even perhaps too much time given that the news originally told us the lockdown would be short. And in times of danger, families simply want to be together. This makes it fairly obvious why employees are trading a 45-minute-plus work commute for the uncertainty of seeking a new remote or hybrid home/ office work job. The current pandemic also made people future-minded in a new way, and they are correctly seeking jobs in fields that won’t get gutted in a future pandemic. Great examples of this are gig apps like Uber and InstaCart, which are strongly preferred over other minimum wage jobs because they offer independence, flexibility, and the certainty of the fact that they will never cease operations. They may not pay well, but people would rather deal with that than having to call out of work because their child was quarantined yet again. People are rightfully taking their time to reflect on the pandemic and choosing to focus more on family, demanding more work-life balance than ever before.
Despite what leadership high above the role of assistant manager at Denny’s seem to think, most people dream a little bigger than working their way up to assistant manager. The CEOs of these companies need to ask themselves where the loyalty to these employees was when they were shutting down at the beginning of the pandemic. Many businesses that were quick to throw away employees or cut down staff at the first sign of trouble are the same ones crying that they aren’t getting applicants. These employers, most of which had terrible and unsafe working conditions during the pandemic, are hypocritical to expect worker loyalty now. And they should take the time to figure out how they can make their workplace more desirable rather than blaming low-wage workers who just had one of the most challenging years of their life.
The only solution to the labor shortage is empathy
Employers shouldn’t be surprised they’re having a hiring crisis. Wages aren’t just stagnant — they are downright untenable. The pandemic might have spurred one of the worst US recessions since the Great Depression, but it is no excuse for a company to complain that their low wages, lack of benefits, terrible work-life balance, and disregard for employee safety aren’t bringing in applicants. There are new remote work opportunities popping up every day, where you aren’t seeing a labor shortage. People overall are making tough decisions on what they want to do with their lives. The world’s largest pandemic since the Spanish Flu gave them time to reflect on what’s important and put their lives in perspective, which is far from a bad thing. At the end of the day, everyone was affected by Covid in one way or another. The toll that takes on people’s minds and their decision-making should never be understated, and these CEOs need to fully grasp that before they will ever get applications rolling in again.
Allan Klepfisz is the Co-Founder of WatchOut Group, a company devoted to creating practical solutions to our new normal. A serial entrepreneur known for being ahead of the curve, Allan has extensive experience in establishing new ventures in a range of market segments, including the music, hospitality, textile, chemical, and marketing industries. Before founding The WatchOut Group, Allan co-founded Fenix Music, a blockchain company aiming to increase royalties for musicians. Allan also holds numerous patents, both pending and granted.