An Unprecedented Labor Shortage in America
The US is currently facing a labor shortage, which can be attributed to a variety of factors. The U.S. Bureau of Labor Statistics data shows that job openings in 2022 have risen to near-record levels of 10.9 million, while the "Quit Rate," that is, the number of people voluntarily leaving their jobs, is at its highest since 2000, with 4.3 million recorded in the same survey. The Great Resignation phenomenon has resulted in significant challenges across numerous industries. But what are the underlying factors contributing to the labor shortage in the US?
The US labor market continued to remain unsteady through March, as employers grappled with the challenge of pairing a limited number of available workers with an unprecedented number of job openings. According to the Job Openings and Labor Turnover Survey, the number of job openings surged to a record-breaking 11.5 million at the end of March.
Additionally, 67% of business owners sought to hire workers in May 2022, and a staggering 92% reported struggling to find qualified applicants. These ongoing trends have also compounded pressure on firms to keep raising wages, as companies attempt to alleviate the job opening pressure. The data reveals that worker pay rose the most over the first quarter, surpassing levels from at least 2001. However, even with the labor shortage and the Great Resignation, inflation-adjusted pay failed to remain on par with inflation, falling 3.7% in the year through March. Thus, despite enjoying increased bargaining power, soaring prices serve as a stark reminder to workers that their wallets are still taking a hit.
According to CouponBirds, the food and hospitality industry had the largest number of departures between January and August 2021, accounting for 157,000 of the total 242,000 resignations (excluding layoffs or firings). The resignation rate in the food service sector was the highest at 6.8%, followed by the retail trade industry at 4.7%. Additionally, the durable goods manufacturing, education, and health services industries are experiencing a labor shortage as they have more unfilled job openings than unemployed workers with experience in their respective fields.
In fact, even if every unemployed person with experience in the durable goods manufacturing industry were employed, the industry would only fill 65% of its vacant jobs. On the other hand, the transportation, construction, and mining industries have a labor surplus, with more unemployed workers with experience in those fields than there are open jobs.
While there are no federally mandated policies to reduce labor shortages, states are taking action. In Los Angeles, many restaurants are focusing on retaining their current staff by improving their work environment. For example, some restaurants are implementing a more generous tipping culture that allows servers to share their profits with back-of-house workers at the end of each night.
Additionally, some restaurants are offering healthcare benefits to their full-time employees, which is not commonly seen in independent restaurants. In New York City, many restaurants have started offering hiring bonuses to attract new staff. Stephen Starr restaurants, for instance, are offering $300 signing bonuses. However, despite these efforts, the desire of residents to work has declined due to the unpredictable economic situation. Therefore, not only should enterprises take action, but the government should also focus on this issue.
