Labor Shortage: A Challenge for Businesses, A Sign of Workers Reprioritizing Their Values

Hawaii’s unemployment rate made a huge recovery from 21.9% last spring to Sept. 2021’s 6.6% (still higher than the national average). In real numbers, this amounts to about 67,000 Hawaii residents still unemployed.

But even as the unemployment numbers suggest workers are back at work, Hawaii’s businesses (like the rest of the nation) are reporting deep labor shortages.  Nationally job postings have reached their highest level on record dating back to 2000; and financial news media are commonly saying we are in a labor crisis.

As the Christmas season approaches – a critical time for retail and restaurants –  businesses are now resorting to both traditional and unique incentives to lure new workers.

Some of these incentives include: increased pay, benefits, sign-on bonuses, health care and/or expanded health care insurance (enhanced coverage for prescription drugs or eyes, dental, and hearing), flexible working schedules, employee discount programs, referral bonus programs, retirement benefits (prior to the pandemic most companies have already been phasing out retirement benefits for workers). To keep labor costs down in the long-term, some businesses are offering additional incentives, but only to temporary workers.

Blaming government is a poor excuse
The common complaint in business circles has been to blame government’s unemployment benefits (UB) for the labor shortage. But UB have already expired for many workers. September was the end of the federal government’s extended unemployment benefits.  In some states, UB had been canceled for months now (in states that declined the extended Federal UB).  Besides, those who received UB during the last extended period have said the reduced amount wasn’t much to delay employment.

So with labor shortage persisting even after UB has expired, this suggests workers in general are not holding out on employment just because they received UB, and certainly not during the last period of reduced benefits.

What workers are saying
So what could be the reasons why workers are not back in full force?

Some workers say they are waiting for the best job options before returning to work. Some say they’re not going back to a job they never really felt was fulfilling. Others have decided to seek new careers. Others are just taking time to reprioritize or rethink what their next move will be.  And though vaccinations already exist, some workers are still afraid of catching COVID-19 and choosing to delay employment.

Whatever the reason, in what appears to be the economy making adjustments to wage-inflation triggered by the pandemic, workers are welcoming this new trend of having greater options and potentially earning higher income and increased benefits. It’s a unique situation and is all possible due to basic supply- demand economics – that job openings (9.8 million job vacancies, demand) are exceeding the supply (8.7 million workers without jobs).

Big picture is encouraging
In spite of the labor shortage, overall, the big picture of the US national economy is encouraging.

Scott Hamilton, global managing director for the human resources and compensation consulting practice at Gallagher, a global insurance brokerage, risk management and consulting firm, said “All the big jobs numbers are great, but we’re still growing into lost jobs.”

Hiring at restaurants, bars and hotels that suffered the brunt of unemployment have reported steady hiring since the reopening of the economy. Retail picked up with new hires and jobs. The current labor shortage situation is not all encompassing to the entire economy. Some industries are not experiencing any labor shortage.

Economists mention delta is still creating uncertainties and having an influence on labor trends. The economy is in a transition period but moving parts are gradually settling. 

Economists say expectations for recovery could be set too high, too soon.

Beyond short term adjustments to the economy, others speculate the labor shortage could be a result of a new labor market unfolding in a way more permanently – one in which businesses must eventually adapt to meet new workers’ needs. An example, for a working parent, what incentive is it to get a job if the pay being offered is less than the cost of childcare?

Inflation exceeding income has become too wide a gap that ultimately wage must be adjusted at least in certain industries if business owners want to get the help they need.

This is not an endorsement for wage increase, just a fact off basic economics.

Widespread Trauma, Is it a factor?
Given the real trauma hundreds of thousands of people experienced (and is still experiencing) from Covid, it’s actually unrealistic for the labor market to just bounce back in full-swing. We are humans, after all. And trauma (especially for those who lost loved ones in the last year or so) often leads to making life changes, including how we spend our valuable time earning a living.

Having time with family, time for oneself — a routine during lockdowns and restrictions workers have become more accustomed to – is a greater lifestyle value today, since Covid, many have said. Also, health (not overworking 60-some hours a week and holding two-three jobs that could be damaging to health) is also something being reevaluated.  The current situation suggests workers are setting a higher price (wage requirement) where they feel either time or health (or both) is something that must be given up.

In this light, how can the current workers’ shortage possibly be terrible for some individuals, their families or society?  Their choices reflect their changing values. The labor shortage might be unfavorable for some businesses, but how well we are doing isn’t just about how businesses are doing or how robust our personal finances are — at least this seems to be what many workers are taking as a lesson learned from the pandemic.

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