Will the Labor Shortage Ever End?
By Bob Gershberg, CEO/Managing Partner, Wray Executive Search
A labor shortage refers to a condition where there is a lack of available workers to fill job openings. Labor shortages can occur due to various reasons, such as demographic shifts, changes in labor market conditions, skill mismatches, or economic factors.
Ever since the pandemic, US companies, both big and small, have been scrambling to find enough workers to stay fully staffed. They've been forced to offer bigger salaries and generous perks, while employees were free to shop for better offers or simply walk off the job to join the Great Resignation. But now, layoffs are up and job openings are down. The economy is slowing, and the Federal Reserve is hiking interest rates at the fastest pace in decades. By any objective measure, the balance of power in the job market should be tipping back to employers, however it is not. It remains incredibly hard to find and hire enough qualified talent for open roles. It may remain a candidates’ market for many years to come.
An aging population and declining birth rates can result in a smaller pool of available workers, leading to labor shortages in certain industries or regions. Rapid technological advancements and changes in the job market can create a mismatch between the skills workers possess and the skills demanded by employers. This can lead to a shortage of workers with the specific qualifications and expertise required for certain positions. The COVID-19 pandemic has significantly disrupted the labor market. Widespread layoffs, business closures, and disruptions to education and training programs have impacted the availability of skilled workers in various sectors.
Restrictions on immigration or changes in immigration policies can affect the availability of foreign workers who contribute to certain industries or occupations, potentially exacerbating labor shortages.
The retirement of baby boomers, who are individuals born between 1946 and 1964, is a significant factor contributing to the labor shortage in the United States. As this large cohort of workers reaches retirement age, it creates a gap in the labor force that is challenging to fill.
Baby boomers have made up a substantial portion of the workforce for many years, and their departure from the labor market can create skill and experience gaps in various industries and professions. Furthermore, the sheer size of the baby boomer generation exacerbates the impact of their retirement on the labor market.
To address the labor shortage resulting from the retirement of baby boomers, employers may need to implement strategies such as:
Workforce planning: Employers can engage in proactive workforce planning to identify potential skill gaps and develop strategies for attracting and retaining talent.
Training and development: Investing in training programs and professional development opportunities can help bridge the skill gap left by retiring workers and equip new employees with the necessary expertise.
Talent acquisition strategies: Employers may need to explore different recruitment strategies, such as expanding their candidate pool, reaching out to underrepresented groups, or considering alternative labor sources such as remote workers or freelancers.
Automation and technology: In some cases, businesses may turn to automation and technology to streamline processes and reduce reliance on manual labor, thereby mitigating the impact of labor shortages.
Immigration policies: Revisiting immigration policies to attract skilled workers from abroad can help address labor shortages in specific industries or occupations.
It's important to note that the labor market is dynamic, and various factors can influence the extent and duration of a labor shortage. Monitoring and adapting to changing conditions is crucial for employers and policymakers seeking to navigate the challenges posed by the retirement of baby boomers and the ongoing labor shortage.
Many factors could influence the duration of a labor shortage:
Population dynamics, such as birth rates, immigration patterns, and the aging population, can impact the availability of workers. These factors can vary over time and have implications for labor supply.
Technological innovations can both create and eliminate jobs. The adoption of automation, artificial intelligence, and other technologies can reshape the labor market and potentially impact the demand for certain skills.
Economic fluctuations and business cycles can affect labor market dynamics. Changes in economic growth, recessions, or shifts in industries can influence the demand for labor and the existence of labor shortages.
Investments in education and skills training can address skill gaps and contribute to a better match between available workers and job opportunities. Policies aimed at enhancing workforce development can have long-term effects on the labor market.
Government policies related to immigration, labor regulations, taxation, and social welfare can have significant effects on the labor market. Policy changes can potentially address labor shortages or exacerbate them.
Given the complex and dynamic nature of labor markets, it is essential to consider multiple factors and their interactions when assessing the duration of a labor shortage. Accurate long-term predictions are challenging due to the inherent uncertainty in future trends and developments.
Many will turn to a tried-and-true tactic offshoring. If businesses can't find enough workers at home, they'll just look overseas. Tech companies are already moving their software-engineering roles abroad, hiring coders in places like Latin America.
Others will attempt to eliminate the need for workers altogether. The leisure and hospitality sector no longer enjoys access to a steady stream of young, low-wage workers. Restaurants have started replacing servers with app-based ordering systems, and hotels have reduced the need for housekeeping staff by doing away with daily room cleanings.
Continued labor shortage will be more an ongoing battle than an enduring peace. Power never changes hands without a struggle. Millions of workers are going to benefit from the new demographic shift — but the greater the reward to employees, the greater the backlash from employers will be.
All the best,
Bob Gershberg |CEO|Managing Partner|
(888) 875-9993 ext 102
Finding tomorrow’s leaders today!