For the last two years, there has been a labor shortage in the United States amid the Great Resignation and even after it. This situation has been in play for several months, as recruiters are finding it hard to fill those positions. Currently, there are more than 10 million positions open in various sectors in the US. To learn about what is causing the labor shortage in the US, read on through to the end of the article.

What is Causing the Labor Shortage in the United States?

A labor shortage happens when there are not many available workers who want to participate in the labor market. Hence, there is a big demand for talent.

Some of the major reasons for a decreasing workforce, according to economists, include:

• workforce challenges
• health and safety concerns
• remote work preferences
• higher demands in benefits and flexibility
• willing to switch career
• requirement for higher wages

Furthermore, with the rise in automation and the use of AI in work processes, it has become difficult to find people with the right skills for the future. Hence, there is a shortage of skilled workers, and unemployment is also due to a talent gap.

In addition to that, employers also added close to 4.5 million jobs in 2022. Although it is a good thing to have a strong job market. However, most of these job openings are unfilled since the US does not have enough workers to fill the number of workers.

Top Reasons for Labor Shortage

According to the US Chamber of Commerce,

“At the height of the pandemic, more than 120,000 businesses temporarily closed, and more than 30 million U.S. workers were unemployed. Since then, job openings have steadily increased, while unemployment has slowly declined.”

1. Retirement of the Major Workforce

As compared to pre-pandemic rates, the labor force is now less. This is because a major part of the labor force is retired. Furthermore, the pandemic also had a big impact on the participation and recovery of older workers.

2. Shortage of Skills

On the other hand, the younger employees do not have enough experience to make a big impact on the job market. Hence, many organizations are facing challenges during recruitment, as most people do not possess the required skills.

3. Employee Burnout

Many existing employees have complained about burnout in their 9-5 jobs. In many cases, employees have to take on extra duties to ensure the proper running of systems. Hence, due to massive burnout, there has been discontentment among employees who want to quit their job positions.

4. Employees are Asking for Higher Wages and Benefits

During the pandemic, there was a lot of panic buying and impulsive buying. Hence, there has been an increased demand for goods and services. Therefore, employees who want to change their existing situation are asking for higher wages and more benefits. Furthermore, many stimulus aid from companies change the mindset of workers after the pandemic.

Why is there a Decrease in the Core Workforce?

In general, the talent that is available on the market depends on two factors: (1) how many people of working age are available?, and (2) are these people willing to work?

However, you will also need to understand here that the willingness of people to participate in the job force might change from place to place.

Furthermore, the steady work behavior of the adult workforce also plays a big factor. However, in the US, people are becoming less willing to participate in the job market. In addition to that, the working-age population is also on the verge of decreasing. Since early 2010, the US has seen a decline in activity rates by 3%. On the other hand, in Europe, the working-age population is steadily decreasing.

Impact on Mental Health of the Unemployed

Due to higher work pressure and burnout, mental health challenges are also on the rise. This is resulting in many workers leaving their full-employment jobs. According to many reports, a large chunk of employees who left the workforce from 2020 to 2023 did so because of their mental health problems.

According to the World Health Organization (WHO),

“More than half the world’s population are currently in work and 15% of working-age adults live with a mental disorder. Without effective support, mental disorders and other mental health conditions can affect a person’s confidence and identity at work, capacity to work productively, absences and the ease with which to retain or gain work.”

Almost two-thirds of all the millennials who quit their jobs in 2021 have mentioned mental health as their primary reason. Furthermore, there has also been a rise in depression and anxiety in recent years.

What is the Impact of Labor Shortage on Industries?

TechTarget adds –

“America’s labor shortage is not affecting industries uniformly. There are several sectors that have been affected much worse than others, either because they are no longer as desirable to workers or because there is a lack of skilled talent for that sector.”

The following are some of the major industries which faced problems due to labor shortages in the US:

Manufacturing

Many economists actually predicted a global labor shortage in the manufacturing industry even before the pandemic. The current situation actually fragmented the labor shortage. Also, as manufacturing has led to major job creation in the US, the impact is much higher. However, since the end of 2023, the US is moving closer to recovery.

Supply Chain

In recent years, supply chains have also struggled to attract talent. This is leading to supply chain delays. However, due to strong global demand in the last two years, logistics is on the verge of recovery. Furthermore, there are still challenges when it comes to seafaring and the movement of heavy vehicles due to recent international conflicts.

Healthcare

The healthcare industry is also facing labor shortages due to burnout and stress. Apart from that, workers also complained that they risk their own lives as well as those of their families. Hence, the vacancy rate in the US Healthcare industry also saw a sharp increase.

Impact of Labor Shortage on the Society and Economy

The following are some of the major impact of labor shortage on the society and economy:

1. Slower Economic Growth and Inflation

The ongoing labor shortage had a strong impact not only on the economic growth of the country but also on the society as a whole. In many areas, shortages in labor led to the closure of restaurants and stores. Moreover, various supply chain disruptions also led to product shortages in the economy.

Apart from that, the rising inflation in the economy is another problem. Today’s labor shortage is resulting in higher prices and increased wages. Hence, this has also led to a slower recovery since the pandemic.

2. Skill Gap: Lack of Implementation of New Technology

According to global tech leaders, there is a shortage of candidates with the necessary skills and experience. This is leading to a skill gap in the job market. Hence, due to such a shortage of skills, emerging technology is slow to be implemented.

Hence, there are huge challenges for employers, and reversing this trend of shortage of candidates will require a long time.

Dealing with Labor Shortages: Future Solutions

Although there are labor shortages and related challenges, many agile employers can also find talent in the meantime. They can do that through the creation of skilled migration and talent hubs. Hence, the hiring managers can also create new pools of candidates with the necessary skills.

However, for long-term results, policymakers and business leaders must make joint efforts. This will help reverse the negative trend of labor shortages.

Wrapping Up

Hope this article was helpful for you in getting a better idea of what is causing the labor shortage in the US. One of the best ways is to create talent pools and allow skilled migration. This will help reverse the trend in the long run.

Frequently Asked Questions!! (FAQs)

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