So where have all the workers gone? It’s challenging to get your business up to speed if you don’t have enough employees to operate at pre-pandemic levels.
The coronavirus sent the job market and economy into a freefall. Now the rapid pace of the rebound has caught many companies off guard. The situation is problematic for retailers and manufacturers who must fill jobs quickly to keep the supply chain flowing and meet the demand for new inventory. Consumers are buying again. Home prices are rising dramatically, and stocks are making healthy gains. However, there is little precedent for what businesses are currently experiencing. So, at best, answers from industry experts fall into the realm of educated guesses. While government reports are helpful, employment rates, consumer prices, and housing trends tend to fluctuate and require study over time.
Baby Boomers Exit the Job Market
For the first time in American history, the job market shrank in 2020. This reduction was due to several factors that worked in combination to make a sizable impact on the workforce.
- The population of ages 16 through 24 fell by 0.1 percent
- A sharp decline in immigration
- Retirement of large numbers of baby boomers
- Slowing birth rate
- 8 percent rise in the death rate due to coronavirus
According to the Federal Reserve Bank of Dallas, 2.6 million people employed before the pandemic plan to retire and are no longer looking for work. Gains in stock prices and home values opened up options many people had not considered before. For some, the pandemic led to a new perspective on life and gave them a desire to pursue the things they’ve placed on hold.
The exit of boomers from the workforce is going to continue at unprecedented levels. William Frey, a demographer at the Brookings Institution, says the retirement rate by those ages 65 and over will increase 30 percent in the next decade. “We’ve never really been in this type of situation before,” he said. There’s just not enough (young adults) to replace people who are leaving.”
Demand for Higher Wages
With fewer employees in the workforce, individuals are in a position to leverage the shortage to their advantage. Economists believe that with fewer working-age adults, companies will work harder to hire and retain employees. This shortage could lead to higher pay, better benefits, and other inducements that employees find attractive. The June job report shows wages jumped 3.6 percent compared to a year ago—faster than before the pandemic.
Some employees choose to be proactive and deal with the situation head-on. In an interview with the Associated Press, Gina Schaefer, who owns 13 Ace Hardware Stores on the East Coast, describes how her business increased staff for the spring and summer. Schaefer has hired 120 people since March and pays them $15.50 an hour. After six months on the job, employees also receive health insurance, paid vacation, sick leave, and a 401(K) plan. “We firmly believe that better workplaces do not have a problem finding employees”, Schaefer says.
Delay in Returning to Work
Businesses are opening up, but many people are still resolving personal issues at home that prevent them from returning to work. Still, others take their time before pursuing a new job since they receive more unemployment benefits than they earned in a paycheck. Or jobs are being created faster than candidates can respond. Safe and affordable child care is a challenging problem for working parents. Some schools have not fully reopened, and families are still deciding on the best option for educating their children.
Also, when jobs vanish overnight, it creates uncertainty about the future. People who were previously employed and making good salaries are carefully considering their options before committing to positions with limited long-term potential.
Some economist thinks that solving the labor-shortage is relatively simple—raise pay and offer more benefits and improve working conditions. Historically, it works time and time again.