Labor Shortages – The True CausesByRaymond D. Matkowsky
The United States economy is roaring back from the Covid-19 shutdown. However, this has caused problems for employers. They just cannot get enough workers. The problem is complex. Contrary to many things said, it has existed for a long time. The Covid-19 national lockdown did not create the problem. It only brought it to the forefront.
Before we go any further, I want to put one myth to rest. The myth says that additional government unemployment benefits gives people incentive to stay home rather than work. In most states unemployment benefits last for 26 weeks or a half year. We will base our calculations on a full year for comparison purposes.
The average state unemployment benefit is $320 per week. Benefits range from $44.00 a week to $497.00 per week. With the federal supplement, the average benefit would be $620 per week. That comes to $32,240 a year. About half of the states have already stopped giving the federal bonus. There was no massive exodus from the rolls of the unemployed.
The 2021 U.S. poverty line is $26,500. I believe that most of us would find it difficult to raise a family on the $32,000 figure. Remember, the figure represents a full year. Unemployment benefits generally last only 26 weeks. Therefore, claimants only get about $16,120. Very few people are going to stay home to live a little above the poverty line at best. There are other factors keeping people from filling all the jobs posted.
Foremost is the fact that there are more job openings than there are people unemployed. There are 9.3 million jobs posted and climbing. However depending on who you read, there are between 8.2 million and 9.2 million people unemployed. Even if the ratio was one to one, there would never be a perfect match between job openings and skilled people.
Employers have been complaining for a long time about this. I first wrote about this complaint in November 2017. If anyone is interest the article can obtained here. People should realize, by now, that it is going to take a different approach to solve the problem.
What Is Causing This Labor Shortage?
First of all, many employers and the jobs they bring have vanished over the last fifteen months. This may resolve itself since many of these employers will start new businesses. It may only be a matter of time; however the pain will be felt in the meantime.
Health issues present another problem. As I have learned from my own family expirence, recovery from Covid-19 may take a long time. It may take six months or more rehabilitation to fully recover.
With schools slow to reopen, child care becomes a problem. Many workers are also home makers. Most states have laws stating that any child under the age of 15 cannot be left unsupervised. Many child care centers have also closed or gone out of business during the pandemic.
Employers ramped up so quickly when they saw the pandemic subsiding, that their supply chains weren’t ready for it. The suppliers also had employee problems.
This describes only a portion of the problems associated with employers filling jobs. During past recessions, it took years to solve these problems. One should not assume it will be any different this time.
The labor pool is shrinking. Throughout the world births are down. The population replacement rate is considered to be 2.1. The present U.S. replacement rate is 1.8. China is expected to have its population cut by 50% in the future. This does not bode well the elimination of labor shortages over at least the next twenty years.
What Are Potential Hires Looking For?
Second only to compensation, workers want flexibility on how they work. They want the flexibility to determine where they work from, how they work and when they work. They are very likely to jump ship or give preferences to potential employers that give these job opportunities. Compensation is a factor, but it will be weighed against the candidate’s perceived value of the work flexibilities offered. An employer should see if some sort of compromise can be worked out with the employee. This is especially true for millenials who are quick to jump ship.
Remember, there is great deal of financial value in working from home. It can be the equivalent of several hundred dollars in compensation that will not be taxed as wages. There is a great deal of social value in working from an office. Some may want this. Different factors will have different meanings to different individuals.
Some employers worry that remote workers will take advantage of the situation and not work with the same dedication as they would in an office. Surveys indicate that the opposite is true. Employees can be trusted to conduct their duties in a high professional manner. They also indicate that productivity increases.
One thing which I would not do is offer greater compensation than my competition if you are already on an equal footing. Some do say that the labor shortage can be solved the old fashion way by raising pay. I differ. This only invites a bidding war and does not solve the underlying problems.
Some Other Underlying Problems
One profound effect on the ability of employers to fill jobs is the resignation of employees you presently have in the job. Job quits has been the highest they have been in a century. Some have estimated the cost of replacing an employee at $40,000. Whatever the cost, it is definitely cost effective to minimize the loss of employees. But, why do people quit?
Gallup Polls interviewed over one million workers that left their positions. 75% of them said they did so because of their boss and not the job itself. In another survey, 40% of those that left said they would return to their old jobs if the boss was replaced. The old adage that employees work for a boss and not the company seems to be true. However, very few people would admit to their company that they were leaving because of the boss.
If you do see a growing list of departures, it may be time for some leadership training sessions. It might be that the department head has a lack of clarity of his or her role. The people in the department get frustrated and productivity suffers. The leader may not be showing enough appreciation making the staff feel undervalued.
Another reason for leaving is the lack of career growth. The lack of future career development needs to be addressed. People want to learn new skills. At the same time that employers complain that can’t find people with the right skills, your employees want to learn those skills. It is much easier to train an employee to move up to a higher skilled job and then hire a lower skilled person to fill the position of the person moving up. It is a win-win situation for both the employer and employee. An employer can “kill two birds with one stone” by following that procedure.
Your Employees Are Your Wealth
Too many bosses forget that employees make their business viable and successful. They also make them look successful. Other than a one person operation, if you want to be successful you need them to be on your side. After all, they’re the face of your company.
If you have any further suggestions, do not keep it to yourself. Help your fellow readers!
If you have any questions, comments or suggestions drop me a line at rdm@datastats.com.
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