What is causing the U.S. labor shortage?

It’s now more common than ever to see “for hire” signs going up in store windows across America due to the U.S. labor shortage we are currently experiencing. Companies are desperately searching for qualified talent to recuperate from the major streak of resignations and employees quitting in 2021.  

According to the Bureau of Labor Statistics, by the end of September 2021, the U.S. had 10.4 million available jobs, and approximately 4.2 million Americans quit their jobs in October of the same year. Therefore, even though there were, and still are, many open positions, people are still wary of joining the labor force again for many reasons, including the lack of flexibility, attractive job offers, health issues, and salaries.

Main Reasons for the US labor shortage

But why is this happening? The answer lies in the shift of attitude among Americans and generally across the globe after the pandemic.  

• Covid 19

The covid 19 pandemic caused many issues and it’s one of the major reasons for the US labor shortage we are currently experiencing. In 2021, over 47 million people quit their jobs, which was a phenomenon called The Great Resignation. Many people started to value the importance of flexibility in their workplace, increased compensation, and job opportunities that generated actual value to their professional and personal growth.

• Low salaries

Even though there has been a slight increase in wages, employees still feel their work is not compensated for with a fair wage. As employers try to attract talent by increasing salaries, the difference isn’t as significant since the economy is still recuperating from incredible economic loss during 2020 and 2021.  

• Benefits of working remotely

At the beginning of the pandemic, many were worried about working from home. But, after a while, people got used to the idea. Once the time to go back to the office arrived, many decided that they didn’t want an office job and searched for new opportunities in more flexible industries where they could still leverage the benefits of working remotely.  

According to a study conducted by Pew Research Center, “54% of workers would want to work from home after the coronavirus outbreak ends.”

• Parents exiting the workforce

Many parents had to leave the labor market to care for their children during the pandemic. There was a period when daycare centers were unavailable, or the parents could not afford them, so they decided to take matters into their own hands and exited the workforce to take care of their children.  

According to the PEW research center, “the shares of mothers and fathers who were employed and at work in September 2020 were smaller than in September 2019. Among mothers, this share decreased from 69.0% to 63.4% and, among fathers, it decreased from 90.5% to 85.6% over this period.”

• Higher stress levels

As many quit their jobs, the remaining reduced workforce had to take over the missing positions, adding more stress to their work and causing complete burnout. With added responsibilities and stress even more employees quit their jobs.  

According to a survey conducted by the American Psychological Association, “the majority of adults reported the future of our nation (81%), the coronavirus pandemic (80%), and political unrest around the country (74%) as significant sources of stress in their lives.”

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How does the US labor shortage affect the supply chain?

Even though labor shortage is a general phenomenon occurring in most industries, it is not distributed equally. The manufacturing and transportation industries have seen a significant decrease in their workforce during the past few years due to employees’ shift in mentalities and their new needs. This industry is not as attractive as others, like technology or healthcare.  

Many see these industries as outdated, especially for the younger generations entering the labor market. Therefore, there’s a big gap in the capacity required to operate critical parts of the entire supply chain. This, in turn, has generated slower deliveries and delays, contributing to the current supply chain disruption.  

Additionally, companies within the transportation and logistics industry are now requiring a blend between frontline employees and qualified professionals to become part of the team. This new need is increasing since companies are now implementing technology into their processes; therefore, they require professionals with specific knowledge and skills to make these systems work. Finding more specialized workers has become a challenge that’s part of the shift within the entire supply chain.    

The US labor shortage was aggravated during the past two years due to the pandemic, and it’s likely to continue. Therefore, companies must understand what is happening and act taking into consideration employees’ new needs. Companies within the supply chain must search for alternatives and change the conversation around the industry to attract talent and secure candidates for their operations.