Labor Shortage Sign of an Evolving Workforce

After vaccines became readily available and the health and safety restrictions for businesses were relaxed, everyone expected available workers to scramble for new job openings. COVID put many people out of work, and shuttered businesses as well - the unemployment numbers due to COVID shutting workplaces down alone were astronomical (31.3 million in July 2020). But, as with most expectations about “returning to normal,” 2021 has realized a different outcome. Instead of being inundated with resumes, many industries remain understaffed, and across the country businesses are experiencing a general labor shortage. This trend shows no signs of stopping, steadily increasing each month, and employers are concerned that employees will continue to quit at faster rates for the rest of the year. The pandemic changed everything - socially, economically, physically, you name it - about our day-to-day lives, and one place we saw a massive effect was the workplace. We previously talked about navigating the “new normal” of working from home, and the growing popularity of a 4-day workweek, and it seems that there are still more workplace innovations to come. We explore what these labor trends suggest and their implications for employees and employers, especially small business owners. 

Some of the Numbers

In recent labor surveys conducted by Korn Ferry, statistics reveal that 45% of people are more likely to quit without a job than they would have been before the pandemic, and of the people who plan to quit, 36% of them said the pandemic has allowed them to re-evaluate what they need and the changes they want to make. So how are these new sentiments impacting the country’s overall job market?The Labor Department’s JOLTS Report, or the Job Openings and Labor Turnover Survey, tracks monthly changes in job offerings, job openings, and quits. As of August 9, the JOLTS report reflected that the job openings level had increased to a series high of 10.1 million - gaining more than half a million since the last month’s report. Social media is full of gripes from people who went to order from their favorite drive-thru, only to find it closed, a hand-made sign taped to the microphone box explaining the business is closed due to understaffing. Beyond the restaurant industry, the healthcare and other public service industries are being affected by understaffing as well. Understaffing creates a cumulative negative impact and a sort of domino effect, because a workplace that's understaffed negatively impacts the remaining employee’s workload and environment, which is reflected in the steady increase of people quitting over 2021. The JOLTS report stated that the quits level had increased by 2.7% from the previous month up to 3.9 million. Quits increased in professional and business services, durable goods manufacturing, retail trade, accommodation and food services, and state and local government organizations. The National Federation of Independent Business announced that 49% of small business owners have job openings that can not be filled, and 27% are increasing employee compensation in the next three months in retention efforts. These are both record highs in the last 48 years. So what’s causing all of this quitting, and reluctance to jump back into the workforce as if no pandemic had ever happened? 

The Unemployed Perspective

Many people are quick to blame the labor shoratage on the emergency relief unemployment supplemental payments, but surveys and research reveal that it’s not all about that money for the unemployed. BTIG surveyed 300 individuals from around the country and asked them about receiving unemployment benefits and returning to work. This survey revealed that work flexibility was also a huge priority to these employees, right after higher pay and quality benefits. Stagnant wages has been an ongoing issue in the US. In 1968, the minimum wage was $1.60 an hour. In 2021, the equivalent federal minimum wage would need to be $12.68, but instead, it’s $7.25. Workers were being underpaid before the pandemic, and only now have collective leverage and opportunity to do something about it and advocate for themselves to earn a fair wage. Prospective workers also want better working conditions. Many businesses put unreasonable demands on their employees, and until there was a labor shortage, the employees weren’t empowered to address these issues. Part of the improvement of working conditions includes enabling work-life balance and offering employees more flexibility. The pandemic proved that businesses are way more flexible than they previously let on to be, allowing people to telecommute and accommodating their childcare while schools were closed. Workers are now expecting flexibility and understanding to continue despite less severe lockdowns, or they’re quitting. Other people were able to use the pandemic as an opportunity to slow down and assess their career goals. After this reflection, many people found that they were not on a path that was fulfilling to them, and they wanted to build something of their own or pivot. 

Looking Ahead

There is no doubt that the workforce will evolve over the next couple of years, and this can be intimidating or it can be exciting. A NEST Financial Plan diminishes the uncertainty of the future so that you can look forward to the next chapter of your professional life. Are you an employee who has recently resigned to re-invest in yourself and build something new? Or are you a business still fighting in the wake of the pandemic, looking for methods to combat and resolve a labor shortage? If you're on either side of this equation, a NEST Financial Plan can help give you the big-picture perspective and insight to proceed with clear goals and confidence. We love to get creative with entrepreneurs, small business owners, and other savants to help smooth the bumpy road of a transitional period. Reach out at info@nestfinancial.net - Gloria is awaiting your message! Find us on:LinkedIn  Facebook  Yelp  TwitterDISCLAIMER: We are legally obligated to remind you that the information and opinions shared in this article are for educational purposes only and are not financial planning or investment advice. For guidance about your unique goals, drop us a line at info@nestfinancial.net.