Understanding America’s labor shortage requires considerable introspection and an active investigation into the shifting workforce, especially in these last three years. The labor force participation rates are quite astounding, with Trading Economics reporting that the numbers have decreased to 62.7 percent in October 2023. The highest point of the labor force participation rate reaches all the way back to January 2000 when 67.3 percent of the country was fully engaged but the numbers have been falling since. There are many reasons for the labor shortage but the disruption from the pandemic is one of the biggest triggers for this shift, having led to what has been dubbed “the great resignation” that significantly changed how people looked at work.
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Understanding America’s Labor Shortage
A robust job market that constantly opens up new positions and roles is usually indicative of a healthy job market rife with opportunities, but when the labor force participation rates stop matching up, then businesses start to suffer. Currently, not only is there a changing trend of the workforce no longer actively looking for work, but there is an entire shortage of able hands compared to the number of jobs available. The U.S. Chamber of Commerce reports that there are currently 9.5 million job openings in the U.S. with only 6.5 million unemployed workers.
The progress of technology and productivity has been a boon in many ways but it has also led to the possible creation of jobs at such an accelerated rate that the population just can’t keep up. Considering the fast-paced nature of most industries today, an open position interrupts the workflow to new degrees, hurting a company on a much greater scale than ever before.
The Great Resignation—Why Are We Having a Labor Shortage?
Coined by Texas A&M University Associate Professor Anthony Klotz in a Bloomberg Businessweek article in 2021, the term “Great Resignation” sounds rather grand for the consequences we’ve seen globally since then. The term was used in reference to the large number of employees who began to quit their jobs around that period, choosing to leave unfulfilling positions rather than cling on to jobs the way the workforce has for years now. The COVID-19 pandemic was a time of great upheaval across the globe and most workers did their best to ensure their income sources remained intact during times of such extreme uncertainty. The nature of work also shifted and many found themselves working long hours without any separation of work life and private life.
“When there’s uncertainty, people tend to stay put, so there are pent-up resignations that didn’t happen over the past year.”
—Anthony Klotz
When the vaccines came and the cases began to decrease in terms of intensity and frequency, many finally had a chance to set down their struggles for a bit and their jobs appeared to be one of the things they no longer wanted to hold on to. According to the U.S. Bureau of Labor Statistics, approximately 47 million workers quit their jobs in 2021, while 2022 saw 50 million leave their workplace—a record high since these numbers were first tracked in 2000. This is one of the primary reasons for the labor shortage.
While many companies hoped that this would be temporary and that the workforce would join back sooner rather than later after taking a breather, the participation rates have not picked up to the levels we need. Experts have said that this phenomenon, also called “The big quit” or “The Great Reset,” is dying down and the number of workers quitting has reduced to early 2021 levels—3.9 million in March 2023 as opposed to the 4.5 million in November 2021. Understanding the reasons behind employees quitting is key to understanding America’s labor shortage.
Shifting Priorities and Concerns
Looking at the current workforce through the lens of the past, you might wonder how employees can consider making such extreme moves and stepping out of the workforce, even temporarily, but the shifting pressures of work and evolving priorities have made it possible. It is important to acknowledge that not only has the nature of work changed but the overall life experience of individuals as well. Childcare is one of the big reasons why we are having a labor shortage, and unlike the big families in the recent past that allowed childcare to be a joint effort, today’s independent families do not have that luxury. While the options for childcare have increased, so have the costs, making it a considerable expense, even for dual-income households.
Employees are also now prioritizing their well-being over holding on to a job. FlexJob found that 25 percent of employees have previously resigned due to toxic work cultures. Viser’s respondents reported that 89 percent of employees have experienced burnout and 70 percent would consider quitting because of it. McKinsey found that 40 percent of their survey respondents were leaving jobs due to a lack of growth opportunities in their careers. Employees are more certain of what they want or precisely what they don’t want and are willing to look for new roles that support those choices.
The Great Reshuffle
Not all hope is lost however as workers are not just quitting permanently though. To understand America’s labor shortage and the reasons behind the great resignation, it is important to reflect on the fact that many workers were quitting because of their exhaustion from their previous jobs and a desire for something better. Having established that there are better opportunities out there and companies willing to pay for their services, many are rejoining the workforce for better compensation and work cultures that are supportive of their careers as a whole.
Employers who have paid close attention to why we are having a labor shortage have realized that the nature of work and the surrounding conditions need to change. Many have begun with flexible work benefits as the basis for attracting new talent. Other companies have prioritized employee retention over everything else, holding on to existing employees rather than allowing them to move jobs instead.
Deloitte identified three factors that have been disrupting work in recent times and recommend that employers begin addressing these in order to see improvements in their workforce. Growth opportunities, employee experiences, and rapid adoption of technology to create a digital workplace are some critical considerations to keep in mind in consideration of changing times. Strengthening the resources available for internal mobility is a top way to attract talent that is currently looking to grow rather than earn big right off the bat. Gartner’s top HR trends for 2024 also predict the rising importance of internal mobility, making it a critical factor for the future of work.
Overall, understanding America’s labor shortage comes down to understanding the workforce and their immediate needs and requirements. With time, their purpose has greatly shifted and so has the close-mouthed acceptance of toxic work cultures and poor working conditions. Workers are prioritizing their health and personal values now more than ever, and if companies want to retain a productive workforce, these components should be essential priorities for them as well.