Supply chains everywhere are running short on their most important asset: people. The United States, the United Kingdom and parts of Asia have all hit record-high job vacancies. But what’s driving these numbers? Is it a labor supply gap? A skills gap? An interest problem? The simple answer is yes — to all of these.
Labor losses
In many cases, employers are still feeling the effects of COVID-19. The pandemic reshaped the way the world works. It spurred greater demand for workers in health care and supply chain, specifically to support the increase in e-commerce. In other cases, workers quit to avoid COVID-19 exposure and picked safer jobs or left the job market altogether to stay home to care for children or elderly parents as safe care options dwindled. Of course, the death toll also tragically reduced the number of available workers around the world.
While the U.S. unemployment rate was at an all-time low of 3.9% in 2021, it does not reflect the fact that the participation rate, or the percentage of working-age people that are employed or seeking work, fell from 63.3% in early 2020 to 61.5% in 2021. This represents a loss of 4.7 million workers from the job market.
The pandemic also boosted the retirement rate, which accounts for a significant portion of the labor shortage. An analysis by The Washington Post found that about 1.5 million more people retired in November 2021 than would have been expected based on pre-pandemic trends. With one of the United States’ largest generations in and approaching retirement, labor gaps were to be expected, but the pandemic inspired some members to retire early for safety.
Pandemic restrictions also cut off a critical labor force for many industries: immigrants and migrant workers. The U.S. economy has more than 1 million fewer immigrant workers as a result of pandemic travel restrictions. The foodservice and health care industries, which both depend heavily on immigrants, have more than 1 million job openings. In addition, there are thousands of openings in the trucking and warehousing industries, in which roughly one in five workers is from another country.
Skills mismatch
As mentioned, the COVID-19 pandemic reshaped available jobs, with more workers needed in e-commerce supply chains. These jobs require a different skill set than some other service jobs. Of course, the skills can be learned, but this does take time, and some people may not be inclined to invest the necessary time and effort. For example, operating heavy machinery and driving trucks requires special training or licensing, which can be an obstacle for some.
Meanwhile, jobs have been changing. Automation, particularly in the manufacturing and distribution industries, has phased out some types of manual labor and created a need for workers with digital skills. In manufacturing, employees might now need to interpret the output of artificial intelligence-based systems or use augmented reality or virtual reality tools to repair an automobile or jet engine. In addition, McKinsey & Co. predicts that 10% of today’s manufacturing processes will be replaced by additive manufacturing by 2030, which will also require new capabilities. As products evolve, the skills for making them will do the same. For example, as production shifts from internal-combustion-engine cars to electric ones, workers will need to support different manufacturing and maintenance processes.
Lastly, robots are taking on more manual labor. McKinsey & Co. expects that 600,000 industrial robots will be installed this year, up from 450,000 in 2015, representing a 33% increase. This means that manufacturing companies will have to upskill workers to program, maintain and repair robots — or hire workers with that experience already, if they can find them.
Skill gaps have slowed employment growth in manufacturing and, in some cases, resulted in supply chain disruptions. According to a survey by Deloitte and The Manufacturing Institute, 46% of manufacturing employers found it difficult to fill their positions in 2020 because of skill mismatches. Reported gaps in manufacturing predate the pandemic, but the pandemic made them worse. According to the same survey, 34% of employers reported difficulties in hiring qualified workers in 2018.
At a time when more highly trained workers are needed, undergraduate enrollment rates are also dropping. The U.S. National Student Clearinghouse Research Center reported the undergraduate enrollment for fall 2021 was down 3.1%, or 465,300 students, compared with a year earlier. Since 2019, the enrollment rate has dropped by 1 million undergraduate students. Should this trend continue, it will put even more pressure on companies that need high-skill workers.
Lacking inspiration
In some cases, workers just are not interested in the types of jobs available or they’re enjoying a new taste of freedom. Since millennials joined the workforce, attitudes toward work have changed, with millennials wanting more work-life balance. For at least a decade, younger people have been pushing for flexible schedules, hybrid work options, shorter weeks and a reduction in unnecessary meetings.
Additionally, one of the top reasons workers were quitting their jobs in 2021 was because they felt stuck in their roles with no clear path forward. People are looking for employers who can give them new career opportunities within the company or at least upskill them through training or by paying for certifications or soft-skills classes.
Most importantly, employees want to feel appreciated and fairly compensated for their work. If they have a choice, they will weigh how strenuous, high-pressure or boring the work is compared with the rate of pay. If they don’t feel the compensation is enough, they’ll take their talent elsewhere.
This particular situation has been improving, though. As demand for workers has exceeded supply, wages have increased as much as four times faster than before the pandemic. Indeed, for employers who need to fill their ranks, it’s clear that compensation must be competitive.
Become an employer of choice
To attract people who can help keep your processes running smoothly and deliver excellent customer service, become an employer of choice. Here are five key strategies for being the type of employer people want to work for:
1. Train: People likely won’t have all of the requirements for a job before you hire them. They may be unfamiliar with your software or specific processes. Be prepared to give them all of the support they need to succeed. Likewise, keep training your current employees as you add new technology or as processes change. A survey by McKinsey & Co. found that building the skills of your current workforce is a more effective way to close talent gaps than hiring or contracting new employees. In addition, cross-training benefits you and your people. You will have more workers who can help out as demand increases in different areas, and your employees will learn about all types of roles around your company. Then, rather than leaving your business and taking their skills with them when they’re ready for a change, they can apply for different positions within your organization.
2. Educate: You can further develop your workforce and invest in their futures by paying for their continuing education — whether through classes related to soft skills, advanced degrees or professional certifications. Take this even a step further by investing in your future employees’ education. Consider partnering with local colleges and universities to guide their curricula to ensure students are receiving the real-world knowledge and skills they will need to succeed at organizations like yours. Offer internship opportunities and mentorship programs for college students. By developing relationships with people while they’re still in school, they’ll be more likely to pursue employment with your organization.
3. Automate appropriately: Mundane work is unfulfilling for humans. Figure out how you can automate more mundane tasks and reassign people to more rewarding work that requires critical thinking or customer service skills, for example. However, be careful not to over-automate for the sake of reducing payroll costs. If workers see jobs being eliminated as their peers are replaced by robots, they’ll worry about their own job security and seek employment elsewhere.
4. Embrace flexibility: The pandemic proved that many professionals can successfully work from home. As your organization returns to the office — if it hasn’t already — consider offering remote or hybrid programs. If that’s not possible for your organization, then perhaps establish flexible schedules that allow workers to balance family care or personal interests with work hours.
5. Involve: Employees want to be a part of something bigger and feel like their work is meaningful. Host regular meetings with your employees to discuss company performance and plans for the future. When people are informed and included, they’re more likely to embrace the company vision. Furthermore, give workers opportunities to volunteer for special cross-departmental projects or committees dedicated to improving the organization. For instance, you could form employee-led groups to direct facility improvements, diversity and inclusion efforts, employee engagement and recognition programs, and the organization’s involvement in the broader community. These committees can give employees opportunities to explore their interests and leverage their skills outside of their immediate jobs while forming valuable relationships.
In a market where workers have many choices, it’s critical to give people a satisfying work experience. Those companies that fail to acknowledge the importance of their workers and compensate them accordingly will continue to be part of the Great Resignation and struggle with labor issues. Use these five steps to ensure you are an employer of choice.
