May 28, 2021
Labor shortages are returning as the Covid-19 pandemic appears to be easing, according to a new report from the Conference Board’s Conference Board that examines the unique factors and long-term forces behind this comeback extremely tight labor markets.
Large segments of the economy continue to open up at the same time and labor supply is limited, resulting in shortages that are expected to persist for most of 2021, according to the report. Employers have been deeply affected. Skilled workers are again hard to find and retention rates are low.
“Just as the job losses during the Covid-19 recession were unprecedented in speed and severity, the post-pandemic recovery has triggered a historic set of recruitment difficulties,” said Gad Levanon, vice president of Labor Markets at the Conference Board. “Some of them reflect unique factors that may fade away by the end of 2021, which will alleviate acute hiring issues. But with them comes a return – if not an acceleration – of the same long-standing drivers behind extremely low unemployment before the pandemic. “
Together, these structural and short-term causes will keep labor markets tight until the next recession, according to Levanon.
Additional conclusions of the report:
Recruitment and retention difficulties are more pronounced in blue collar and manual service jobs. These workers are at high risk of infection, and high unemployment benefits are an attractive option for workers with relatively low wages. Tech professions are also experiencing a tight labor market as the U.S. economy shifts to more online activities and digital transformation expands.
Wages are accelerating. Businesses are responding to labor shortages by raising wages, especially in the leisure and hospitality industries and other blue collar and manual service occupations.
After a break in 2022, tight labor markets will persist until the next recession. Labor shortages could ease by the end of 2021, but they could reappear by the end of 2022. And for the first time in US history, the working-age population decreases as many baby boomers retire. While this demographic shift will create increased demand and employment opportunities, as young job seekers take up these positions, the unemployment rate will decline.
A combination of recruitment strategies can help alleviate labor shortages. Some of the fastest and most effective solutions involve making changes to the recruiting process, such as adding or changing employee referral programs, contracting with recruiting firms, or implementing technologies to streamline recruitment. Another strategy is to develop new demographics, populations and geographic areas of recruitment.
Businesses should reassess and possibly lower credential requirements. To increase the pool of available candidates, organizations could reduce the requirements for previous experience and skills / competencies. However, reducing hiring requirements often creates a need to invest more in upgrading skills and developing new hires.
Remote hiring offers the opportunity to recruit candidates who were previously out of reach. Including candidates who can work remotely means employers can cast a wider net.