Navigating the labor shortage: Understanding underlying factors
By: Paul Villella
It’s been called “The Great Resignation” by some. A talent shortage by others. Global labor market data company Emsi has deemed it the “sansdemic” (“sans” meaning without and “demic” meaning people). Regardless of what you call it, this labor shortage is real, and it’s built upon lasting, foundational issues.
This article is the first in a series of three discussing and addressing this talent shortage and the cross-section of hiring demand versus labor supply. Before examining the ways in which both employers and individuals are affected, it’s necessary to understand the underlying reasons why we’re facing such an unprecedented labor shortage.
A Shrinking Workforce
Think of the job market as a house. Every house needs a solid foundation, and when that foundation cracks, you’re faced with serious issues. For years, the job market was built upon a thriving workforce consisting largely of the Baby Boomer generation. However, cracks in the foundation were apparent even before the bulk of the pandemic. Now, as more boomers retire daily, we’re faced with a serious shift in demographics and, ultimately, a demographic drought.
This drought is a reflection of the fact that millennials and Gen Z’ers cannot adequately replace the number of boomers rapidly leaving the workforce. And before you think we’re shaking our fists and blaming millennials, you should know that is not the case. This was a problem long before the pandemic brought it to light. The baby boomers were given that name because they were born during a literal baby boom—a high uptick in birth rates brought on by a number of factors. But those birth rates proved unsustainable and later generations, including adult baby boomers, did not have and raise as many children, resulting in the workforce shortage we see today.
Changing Attitudes Brought on by the Pandemic
This labor shortage is as much a product of shifting demographics as it is a product of changing attitudes. Labor force participation dipped sharply at the beginning of 2020, and, while this is largely due to the pandemic, improving conditions and better management of the pandemic did little to return labor force participation to pre-pandemic levels. Women, who were disproportionately affected by the pandemic in comparison to men, face challenges with re-entering the workforce, taking on different roles, and deciding the next step in their careers.
This time period also gave rise to an increased understanding of professionals’ own importance. Professionals overwhelmingly realized the value they bring to companies, and many individuals with expendable income (or a newfound expendable income in the case of some who received pandemic assistance) took this as an opportunity to analyze their career goals and make a change. This, however, was not the only reason for the great resignation and the resulting dip in labor participation. With less rigidity in workplace structures and environments, and wage inflation brought on by the labor market, many individuals are simply holding out until they find the perfect fit, valuing life outside of work and the freedom of less structure. Until then, many businesses, including a large number of small businesses, will struggle to find solutions to their labor needs, especially if they go about it in a pre-pandemic fashion.
What does this all mean?
The combination of shifting demographics and changing attitudes has helped to create the current labor shortage we’re facing, and there is no one solution to these problems. Despite the current issues within the labor market, there is still good reason for both employers and candidates to be optimistic. How we learn to navigate this new labor environment, and how employers and professionals choose to do so, will affect which direction the labor market moves going forward.
With so many different aspects of the current labor market, it’s important to examine the effect on both organizations and professionals. Part two of this series on navigating the labor shortage will focus on the employer side of the labor market, and part three will examine what this all means for professionals. Visit our site to stay up to date on this series and to find more news and insights about the hiring market.
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