How to Overcome the Labor Shortage in 2021
There are more jobs than workers.
That’s the simplest definition of a labor shortage, and it’s something we’re hearing about a lot in 2021. You need help. There’s opportunity for growth. There’s lots of work to be done. And there doesn’t seem to be anyone to help you.
Labor shortages aren’t new.
They’ve occurred throughout history for a variety of reasons. Large numbers of generational workers periodically retire, leaving a worker and skill gap that upcoming generations eventually fill. Demographic and geographic population shifts create localized shortages. Jobs may require skills that the current pool of workers aren’t interested or qualified in. Seasonal businesses experience labor shortages if they depend on a workforce that has other factors acting on it (e.g. school hasn’t let out yet, foreign workers aren’t able to travel into the country).
Right now, we’re hearing stories of businesses who are trying to spring back after the pandemic, but due to the labor shortage, are having to cut hours and services instead. They could grow, but instead, they’re contracting.
We’re going to take a look at what’s happening, and provide you with a few tips on how you can attract workers and get your business back on a growth path.
Is there currently a skilled labor shortage?
Right now, there are more jobs available than before the pandemic hit in 2020. Yet there are fewer workers available to fill those jobs. That sounds like a labor shortage. Strangely enough, though, there isn’t perfect agreement on whether or not there’s a labor shortage.
Some of the discussion has become political, debating the effects of pandemic relief payments on the ability to find workers. Industry groups and business owners say there is a problem, pointing to the strange reality of still-significant unemployment rates even while job openings continue to grow. Others say the labor shortage is an illusion or not completely verified by the data, and that something else is going on.
A recent report from the U.S. Department of Labor shows that the unemployment rate is much lower than a year ago, during the peak of the pandemic closures. However, the current unemployment rate is still noticeably higher than it was before the pandemic. While long-term joblessness is dropping, the mix of other data doesn’t tell us where a labor shortage might come from.
Even if there’s no agreement on whether there’s a labor shortage, or whether it is a geographically-isolated or industry-specific problem, the amount of talk is enough to make any business owner concerned about their own workforce.
Keeping their workers, and finding new ones, looks to be an uphill challenge.
Who is impacted by the shortage?
The industry getting most of the ink in the press, in regards to a potential labor shortage, is the service and hospitality industry. In particular, the restaurant industry.
This doesn’t bode well for restaurants, as the U.S. Bureau of Labor Statistics says that there will be a 6% increase in demand for chefs and cooks in the coming decade. According to the Federal Reserve, other industries are feeling the pinch, too, particularly manufacturing and construction.
There are also demographic impacts, with some workers affected more than others. In April, most of the job growth went to men, while women lost jobs or stopped looking for work.
Why are these workers not returning to their previous jobs?
- Changes over the past year mean some workers left the industry for good. They began training for other industries during lockdowns. Time away from work during lockdowns caused them to re-evaluate their career.
- Some feel unsafe, and don’t feel that the wages they receive offset the risk. In areas where customers are slow to return, workers have a reduced income if they rely on tips.
- Employers are impatient to hire while the workforce isn’t moving as fast to accept the jobs. There are two different speeds at work, and some employers want pre-pandemic normalcy while potential workers aren’t going back.
- Some are being paid better through unemployment programs, and aren’t accepting jobs that are paying less.
- Some are still waiting for their previous job to open up, and aren’t looking for other work until then. Bottlenecks in the supply chain have caused some businesses to face the strange problem of high demand, but an inability to meet it. They aren’t hiring because the supply chain can’t meet the demand yet.
- Some workers are caught in limbo, trying to manage child or elderly care with some pandemic restrictions still in place, even if their workplace is going back to normal.
When there aren’t enough workers, businesses don’t grow and are forced to adjust how they operate by either over-working their current employees, or reducing their ability to serve customers. This may have negative long-term effects for workers in the long run, as businesses might adjust to successfully operating with fewer employees.
How to attract skilled shift workers
Since many of the industries affected by a potential labor shortage are service industries, attracting shift workers is critical to closing those gaps. There are several creative ways to attract new workers.
A labor shortage means it’s a workers’ market. They can shop around for the job that offers the best benefits. Why work for a restaurant when the one down the street is a better deal?
Benefits might be anything from healthcare to paid vacation to child care assistance. You may want to offer hiring incentives, or bonuses when workers refer a friend. You know your workers best, and what would be most helpful to them.
Or, benefits may be something less concrete, such as a flexible work schedule (which we’ll talk about in a bit). The point is to offer something that offers additional value to the employee, beyond the hourly wage.
Yes, you’ll probably have to increase wages from what you used to pay. There’s been a lot of focus in recent years on the viability of the minimum wage, with many workers feeling seriously underpaid for the amount of work they do. Consider that some states have a minimum wage as low as $7.25. That’s hard to live on.
Businesses are reluctant to increase wages for many reasons. Increases in supply costs, reduced or unpredictable customer demand, and industry-specific profit margins. Restaurants are known for having tight profit margins, for example.
There’s also a competition problem.
While the restaurant industry is increasing pay, warehouse workers are also experiencing an increase in pay that far exceeds the restaurant industry. It’s difficult to attract workers when you’re competing against other industries that pay better.
Increasing pay is possible. You don’t have to go out of business doing it if you adjust elsewhere:
- Cut your costs. You will have to watch your budget like a hawk. If you can cut a cost somewhere, do it. Whether it’s in supplies, services, or even advertising, look for what you can trim.
- Raise your prices. When the cost of supplies goes up, your prices reflect that. The same applies when the cost of payroll increases.
- Adjust your operating hours. It’s possible you could help your bottom line by adjusting when you’re open. If you’re struggling to find staff, you’ll probably need to do this anyway.
- Trim the excess. In a different time, you may have offered a ton of services for customers. It’s time to rethink your core business and streamline what you offer. Too much extra costs in time and energy for management.
- Find new revenue streams. See if you can find new revenue streams, particularly passive revenue that doesn’t require intense labor to bring it in.
Think of this as an investment. It’s an investment in your people and your business’s future growth.
Create a safe and respectable work environment.
Post-pandemic safety is still important to workers, so find ways to show them that you are trying to keep them safe. Some employees are looking for a place to work where the employer is clearly concerned with safety, such as requiring workers to be vaccinated.
Safety is also about feeling welcomed and valued, and that the work they do is contributing to something good.
The past year has been riddled with emotional stressors, chaos, unease, and fear. Not everyone handles that the same, and that’s why you’ll have to work to create a respectful work environment
What you do now, in regards to safety, is an indicator of what employees can expect down the road. Your employee handbook of last year is going to need some revisiting.
Offer career growth opportunities.
We all want a little hope.
This is a workforce that has been forced off work for part of a year. They’ve been thinking about their work, their life, and what they want. In the past they went from job to job and didn’t have the time to re-evaluate because they needed income. But now they’ve had time to decide they want a job that has a future.
Think of it as part of your benefits, the idea of offering career growth opportunities. Paid training, industry certification, conferences, a clear path to promotion, regular raises—anything that shows where they start isn’t where they will stay forever until they get bored and move on.
Not every business can offer the same growth opportunities, but there is always something you can do to show your employees you don’t think of them as cogs in the wheel. Even if it’s as simple as letting them rotate through tasks and duties so they get a feel for different types of work, it helps break up the monotony of what otherwise might seem like a “dead end” job.
Make the job application process easy.
Lower the barrier to entry, and make it easy for candidates to find and apply for jobs.
This means providing clear information on the job, duties, and pay so they can easily see what is on offer. Don’t make them dig for information or require them to get far into the process before they can find that out.
You may even need to consider axing college degree requirements, or creating internships or apprenticeships that are attractive to a different pool of potential employees.
Offer flexible scheduling and work environment.
Getting your shift scheduling right is critical. Wages alone aren’t enough, because there’s a quality of life issue on the table.
Workers re-entering the workforce have gotten a taste of work-life balance, and they aren’t going to give it up. They want more flexibility from their work, and one of the best ways to do that is offering employee self-scheduling.
Using a shift scheduling tool like When I Work is a good way to make that happen. It makes it simple for you to create open shifts, letting workers request shifts that fit their schedule and swap shifts with each other. By making shifts flexible and giving some control to your employees, you let employees have control over their life while you get the shift coverage you need.
Emerging from a pandemic into a changed work world with a potential labor shortage is not at all easy.
Start by doing all you can to keep your current employees and implement strategies to retain new workers once you’ve hired them. Reset your way of doing business with an eye towards increased benefits and wages. And then, because you’re already dealing with enough, start using a shift scheduling tool that both empowers your employees and reduces your management load.