It is Labor Day weekend. No better time to reflect on the state of the workforce in the Hudson Valley. The most obvious observation is that there are “Help Wanted” signs everywhere. There seems to be a shortage in every sector of workers. Back to school. Not enough bus drivers. Warehouses ramping up distribution…not enough workers. Tourism springing back to life. Not enough workers. And on and on. The National Federation of Independent Businesses said that 50% of their firms could not fill job openings in August.
Recently I was having lunch with someone and they asked why are there so many employers looking for help? After all there are still millions without a job and plenty of jobs available.
My lunch mate suggested that the extra federal unemployment benefits are due to expire next week, won’t that solve the problem? I answered, “Some economists say yes and some say no.” I am one and the answer is typical. The ones that predict it right are the “smart” ones. There are already studies of states that ended the federal subsidy early and it made very little difference.
The workforce has been severely disrupted due to the Pandemic. History books will be writing about all the ways that the Pandemic affected our lives and the state of the workforce is but one. This once in a lifetime event will change us in ways that we have only just begun to understand.
It is important to remember that prior to the Pandemic unemployment numbers were historically low and everyone was looking for workers. The economy was doing well, yet there were vacancies everywhere. So logically, as my lunch partner suggested, you might say that while the economy has somewhat returned to normal and the unemployment rate is now higher than before the Pandemic, there shouldn’t be a problem filling jobs. If only it were that simple.
This past Friday, after large increases in June and July, the job numbers for August were released and they were much lower than predicted. Just about all economists were disappointed.
So what’s going on?
There are two groups of explanations I would offer. Those related to the Pandemic and those that were at work prior to the Pandemic. Both sets are important as they have long term implications (or at least this economist thinks so). The two sets get a little blurry, but here is my best shot.
The Pandemic Impact Upon the Workforce.
There is no precedent for shutting down an entire economy and then restarting it. As part of that we needed to incentivize people to stay at home for their health and safety as we attempted to figure out the Pandemic and create vaccines. So I understand when people say that now that the incentives are ending the workforce problems will be fixed. But let’s examine what also happened.
We introduced a whole economy to working remotely. So you might say that they are still working. Mostly. Getting a taste of a new work/life balance has led many to say they do not want to return to “in person” work. Employers are faced with new expectations and have delayed the return to the office. This is going to have to play out over the next few years. HR manuals will have to be re-written.
Then there is the growing spread of the delta variant.
The upsurge in the number of cases and deaths was not anticipated at these levels. Employers and employees were thinking the Pandemic was over. But that is not what happened. There are still people afraid to return to their workplace. To fix that, some employers are mandating their employees get vaccinated or not return to work. Employees who refuse to be vaccinated and are not going to work result in new vacancies.
The increasing presence of the corona virus is having an impact on children returning to school. While it is true that most school districts are trying to avoid offering a virtual alternative, plenty of parents are still worried over sending their children to school and contracting the virus. We learned in 2020 the degree to which k-12 also is a primary source of daycare for families. With a cloud over the return to school, there are still parents who cannot return to their jobs.
Automation. Covid accelerated the pace of automation and the integration of technology which made some jobs more difficult and eliminated others. If businesses cannot find sufficient numbers of workers, then out of necessity, they will seek to automate where they can.
Retirements. As the boomer generation continues to reach age 65 and above there are natural retirements. As a result of the Pandemic there has been an upsurge in the number of retirements and not just the boomers. These 18 months took an emotional and physical toll on many people. So much so that they decided, “I was close to retirement so I am just calling it quits now.” Some have a pension and unfortunately some have no support.
The competition for workers is enormous. Sign on bonuses are cropping up everywhere. Not every employer can compete. And some employees have learned to “surf” the bonuses, leaving as the mandatory time expires.
Some of the reasons for the difficulty in finding workers are coming from a good place. During the Pandemic new businesses have been created while others have expanded. These have led to net new jobs. This is normally viewed as a sign of a healthy expanding economy, except, what if you can’t find the workers to fill the positions.
Work visas. There are some companies such as in hospitality that rely on overseas workers here on special work permits. These have been especially restricted due to the reluctance to bring in people from countries with higher infection rates. Or people reluctant to come to the US due to our numbers being higher than theirs. Until the virus is reduced to acceptable numbers worldwide this back and forth is likely to continue.
There were many new large tourism projects planned for the Hudson Valley that came to fruition during the Pandemic. Both their operation status and the ability to find a workforce is still being challenged.
Labor Force Participation Rate. This measures the percentage of the working age population in the labor force. Those employed and those actively seeking jobs. The pre-pandemic peak was 63.4% which was far below the all-time peak of around 67% in 2000. In August that percentage was 61.7. You have to go back to the mid to late 70s to find it so low. More people have left the workforce.
Let’s start with the overarching problem. While we are adding more jobs, for decades we have been producing less children. I know this sounds wonky, but if the average family used to produce 2.3 children and now that number is 1.7, we have a very big problem. For years Pattern for Progress has been writing about the declining enrollment in k-12. To maintain a healthy economy the replacement rate needs to hover around 2.0 percent. If you add in the low labor force participation rate you start to understand the complexity of why there are so many Help Wanted signs.
Prior to the Pandemic we had a skills gap between the level of skills the workforce had and the level of skills employers needed. The gap did not get better over the last 18 months. In fact, it got worse as businesses needed to integrate technology at a faster pace.
Retirements were already playing a role as the boomers were aging out. Many sectors already knew that they did not have the replacements in line for key positions. As mentioned above. The pace of retirements has quickened bringing with it a great deal of institutional knowledge.
So this Labor Day weekend if someone asks you, “Why are there are so many Help Wanted signs?,” tell them with authority, “It’s complicated.”