US Labor Shortages of 2021: Challenges and Solutions

by Katie Sawyer, 8 minutes read
HOME blog labor shortage challenges solutions

There's a labor shortage in America. Or at least, that's how it seems. Economists are warning about it. Politicians are looking for solutions. And companies are struggling to adapt.

Some experts even state there is no worker shortage and that it's something else entirely.

Either way, there doesn't seem to be a quick or easy fix. And it's all thanks to a widening divide between employer and employee expectations.

Keep reading to learn what's really happening with America's dwindling workforce.

What does labor shortage mean?

labor shortage in the US

A labor shortage is when there aren't enough qualified workers to fill open positions at the wages set by employers. The causes of labor shortages can vary. Some common factors include:

  • Not enough people learning a trade

  • Low population in a region

  • Health risks associated with the role

  • Child care costs are too high

  • Early retirement

But are these the reasons behind the growing number of unfilled positions in America?

Is there a labor shortage in the US?

It depends on who you ask. When you look at the reports, it appears this may be the case. For example, in April 2021, 266,000 jobs were added to the economy (bringing it up to 9.3 million total job openings). Then in May, another 559,000 jobs opened up (short of the 671,000 predicted by economists).

This seems promising, but not when there are still an astounding 9.7 million people unemployed.

So on paper, finding candidates to fill roles shouldn't be an issue. But digging deeper, we see companies in various industries still have a massive number of job openings.

Take, for instance, the restaurant industry. Staffing for full-service restaurants is down 20% from a year ago, equating to 1.1 million openings. Brands like Taco Bell have thousands of open roles. And because of this issue, McDonald's is keeping its dining rooms closed throughout 2021.

It's an unfortunate trend that's causing restaurants across America to delay reopenings. Roughly 198 permanently chose to shut down for good. Sadly, this isn't the only food industry affected.

In agriculture, farmers are also feeling the pressure of the labor shortage. It's so bad that they turned to training and hiring high schoolers for summer work.

Hospitality and leisure (the sector hurt the most by the pandemic) witnessed a surge in job availability (nearly 33%). However, payrolls only increased by 278,000 when economists expected growth of around 1 million.

So is there a labor shortage in America? The simple answer...yes. But it's not for the reasons some may think.

Why does the USA have a labor shortage?

construction worker shortage in the USA

There are millions of Americans out of work. And job openings are surging. Yet, businesses can't fill roles, even after increasing hourly wages by 9% to $15.87.

Why is this happening?

Based on recent reports, there are several factors.

A shrinking number of working-age people

In 2020, the 16 to 64 age group declined by 0.1%. Doesn't seem like much, but it's worrisome since it's the first time the number decreased in decades.

And it may have something to do with a slowing birthrate, steep fall in immigration, and a vast number of newly retired baby boomers.

Not enough high-skilled workers

Some will argue this isn’t a shortage of skilled workers. But there is evidence that high-skilled workers in certain industries are lacking. For instance, in computer-related jobs.

In 2020, there were seven openings for computer-related roles for every unemployed math or computer worker.

So to fill the gap, employers are looking for immigrant talent.

Unemployment benefits are disincentivizing working

President Biden signed a $1.9 trillion stimulus plan that includes $300/week payments to the unemployed. And it's been extended to September. Some lawmakers believe this is much-needed, while others fear it'll set back the economy.

The argument is that the unemployed won't return to the workforce, especially if they're getting more than they're typically paid.

Covid health concerns still exist

covid-19 pandemic affecting workers

Some workers are worried about contracting COVID-19 and are deciding to stay home. This is especially true in the medical field, where there's a shortage of health workers.

However, sentiment about the pandemic is shifting positively now that vaccinations are accelerating.

Child care remains an issue

child care in the USA during the pandemic

During the pandemic, millions of students were forced to homeschool. This placed parents in a tight position of choosing between working and providing at-home care.

Unfortunately, this is still a problem now that some students are still homeschooling mandatorily (or voluntarily because of COVID concerns).

Workers feel optimistic about finding opportunities

One survey shows worker confidence in finding other employment rose exponentially to 3.95 million (a 10.8% increase). So although job openings are on the rise, Americans feel optimistic about finding new positions. So employees are quitting their jobs to find work with higher salaries, working conditions, flexible work schedules, and other incentives.

Retail witnessed an increase in "quits" from 3.6% to 4.3%. And total separations rose to 5.76 million.

Job seekers are ignoring openings they'd normally apply for.

It doesn't seem America has a worker shortage. It has a wage and benefits shortage. And businesses are wondering whether this is a permanent or temporary ordeal.

Experts say it's an indication that employers need to offer higher pay.

Some are already increasing low wages and reconfiguring jobs to appeal to more candidates.

How can we overcome the labor shortage?

Employees are looking for better work opportunities. What can employers do to meet their demands?

Here are several solutions to the US labor shortage.

Offer higher wages with benefits

There was a time when a paycheck was enough to convince candidates to apply. But now that wages are far behind inflation, unemployed Americans are rethinking the roles they want to work in and the wages they'll accept.

So if you want to appeal to more job seekers, then consider increasing your hourly rate and offering better benefits. This may include healthcare, childcare credits, and more paid time off.

This is what restaurant owners are doing. One ice cream parlor in Pittsburg increased its wages to $15 and immediately filled 15 positions. Another restaurant in New York eliminated tipping, added a 20% surcharge on all service checks, and offers perks to staff.

Worried about allocating funds to boost wages? Here are a few ideas:

  • Reduce overhead costs

  • Increase rates for products/services

  • Remove unnecessary expenses

  • Find opportunities for new revenue streams

Allow flexible working schedules

The pandemic changed the way businesses operated. And it shifted how employees worked. Now, people are accustomed to remote work life and don't want to let it go. At least not entirely.

So by offering a flexible work schedule, you can attract more job seekers. For instance, you can:

  • Allow employees to work from home a few days per week

  • Allow certain roles to work 100% remote

  • Switch to a 4-day (10-hour) workday

  • Enable workers to choose the days and shifts they work each week

Flexible working schedules are so important to candidates that they're willing to take a pay cut to continue working from home. If you can provide the same salary and allow remote work, then it'll make your offer more enticing.

It’ll also help to prevent employee burnout.

Make the workplace safer

2021 worker shortage

Companies with customer-facing positions are struggling to fill roles. But who wouldn't feel a bit worried about interacting closely with strangers during a pandemic?

Hopefully, the vaccination rate will ease worries and lure in more job seekers. Until then, you can make changes to your workplace to improve safety.

  • Implement social distancing measures for everyone to follow

  • Hang glass shields at service desks

  • Sanitize the workspace regularly

Or simply ask workers what would make the workplace feel safer.

Hire contractors and freelancers

Your business is ready to open, but it seems impossible to find workers. What can you do right now to fill the void? One option is to hire contractors and freelancers.

Depending on the role, you can find talent using platforms like Upwork, Fiverr, and Remote.com. This is also a way to find skilled workers.

Or, if you need physical workers, consider doing something like the rent-a-staffer movement started in the food industry. This is when you hire workers from out-of-state and board them. You'll find this is also prominent in the medical sector, where there are now traveling nurses.

Give incentives to new hires

Raising low wages and enhancing benefits may help attract job seekers to your company. But to sweeten the deal, you can offer other incentives to prevent employee ghosting.

Here are several ideas to make your job positions more appealing.

  • Offer reimbursement for long commutes

  • Give a sign-on bonus to new-hires

  • Provide workshops and paid courses to improve skills

  • Ensure career growth opportunities

Some businesses are using sign-on bonuses to lure job seekers. For instance, airport restaurants are offering $1,000 bonuses to new hires. And others in the hospitality and food industry are offering free hotel stays, $2,000 in bonus pay, free food, and paying applicants $50 to show up to interviews.

Train existing employees

If you have amazing employees, who show up on time and work hard, why not train them in areas you're short in? This way, you can quickly fill roles with people you know and trust.

Even better if the positions are similar or related to reduce the learning curve.

Partner with local educational facilities

new graduates enter the labor market

New grads are eager to put their new skills to use. So why not team up with local colleges, universities, and trade schools to find fresh talent?

Let the institutions know of the open roles you have (including internships), so they can drive applicants your way.

Find your way out of the labor shortage

Don't let the morbid economic landscape get you down. By employing the right tactics, you can attract and possibly even retain job seekers. Give the above tips a try and see how it pans out.

If you decide you want to offer flexible work schedules, then having the right tools is vital. Deputy is a platform that streamlines creating and sharing schedules, assigning tasks, and capturing time worked.

Want to give it a try? Then join Deputy for free today.

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