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  • Writer's pictureChuck Cusumano

The Labor Shortage: Are We Really Short on Workers?

By Chuck Cusumano and Jillian Broaddus

So, you are wondering what the rest of the world is wondering – are we really dealing with a labor shortage?

Like most things we discuss in this blog – and like most things in life, if we are being entirely honest – the answer will all depend on who you ask.

But, in this case, it is also a little more than that.

It will depend on which industries you are examining and, of course, what specific definition you are using to describe the term “labor shortage.”

According to the US Bureau of Labor Statistics, there are more people looking for jobs than there are jobs available.

In purely economic terms, that description does not exactly meet the definition of a “shortage.”

That being said, if you are in the leisure and hospitality sector (which restaurants fall into), then the answer is more than likely yes – you are probably experiencing a shortage of low-wage, entry-level workers.

If you are embedded in the construction industry, you may be experiencing a shortage of skilled craftsmen.

And, of course, if you are looking for entry-level retail employees, you may be struggling as well.

With the current unemployment rate at 5.2%, the fact of the matter is that there are workers out there – they are just not distributed as we are normally accustomed to.

And like all things on our planet now, we are interconnected. That means a shortage in one sector puts more pressure on other sectors. This is especially true when it comes to the topic of remote work.

Working remotely allows almost anyone to apply for a job, but it also takes jobs out of the areas that cannot be done remotely.

Speaking on the macroeconomics of things, it all works out in the end. However, we live in the here and now and cannot always deal with things from a macroeconomic lens. As a result, we desire here-and-now solutions to match – we are very rarely looking for let-us-see-how-this-play-outs solutions.

So, when Amazon announces it is paying up to $18.00 an hour for a delivery driver, it is likely the person who has been working in Walmart as a stock clerk wants to move to the delivery driver position – hence, the shuffle of the marketplace commences, and so begins the adjustment.

And you know what? That marketplace shuffle can be painful and challenging – ultimately, it can cause some hard-to-manage imbalances.

Where Exactly Do Labor Imbalances Come From?

Some people might say the reason for the specific shortages we are talking about is because of extended and enhanced unemployment benefits that are provided by the federal government.

Others might say it is because customer-facing, entry-level jobs expose workers to a higher risk to COVID-19 and many are not willing to work in those environments.

Then, of course, there are some that might say overall availability of the part-time and entry-level workforce will be restricted until childcare and education is stabilized.

Like we mentioned at the start of this blog – often, answers will depend on who you ask.

What do we think? Well, in our own opinion, even with all of those reasons combined, the real labor challenge catalyst (which was an issue both before and during COVID-19) has not been adequately addressed.

In other words, there are bigger reasons at play.

Here is a brief explanation of why we believe this. An article in Forbes discusses how stagnant wages have been a major problem for decades.

As the article states, “To put things in perspective, in 1968, the federal minimum wage was $1.60 an hour. In 2021 dollars, the equivalent federal minimum wage would need to be $12.38. But instead, it’s only $7.25. So even before the coronavirus hit, workers were already being underpaid. Yet they had little leverage to demand higher wages.”

In an op-ed piece from CNBC, it is stated that the skills gap between what is needed in this economy and what the current workforce offers in the way of technical skills continues to grow faster at an alarming rate.

And, lastly, many workers feel sidelined because the pandemic reevaluated their reasons for work and the shift is being felt now. In other words, baby boomers are not coming back into the job market.

There are younger (potential) workers extending their educational qualifications in an effort to try and make themselves recession-proof. Further, many workers who held a part-time position or a second job reevaluated why they were spending so much time working and decided it was simply not worth it.

How Did We Get Here?

In case you missed it, the labor game has entirely changed.

In this day and age, playing by the old rules of the labor game is bound to get you in trouble.

Consider this as a sign of the times: there was a headline in Harvard Business Review that stated confidently, “The War for Talent is Over, and Talent won!” We agree with this sentiment!

It still amazes us that we see signs that flash with urgent notices like “now accepting applications” or “hiring now” as if the company is allowing or granting permission for workers to apply.

News flash, companies – if you are not aggressively and persistently recruiting the talent you want, then you are going to lose.

Think about it this way – let us pretend you sell apples for an apple business.

Suddenly, your supply chain stopped producing a ready supply of apples. This can only mean one thing: you will be out of business.

If you have human workers and you run out of a ready supply of qualified human workers, you are also out of business.

However, when the cost of raw materials in a product goes up, a business can recover – they are not necessarily doomed to go out of business because they can pass along the cost to the customer, or the company can absorb it.

So, by this standard, why is it so hard to adjust when the cost of raw labor goes up? Why do companies fight so hard to keep labor fixed? We know the reason, but we are now all seeing what happens when you try to constrain markets. The pendulum has now swung fast the other way and it is hard to adjust to such a quick rise in wages especially when the skills are not always even present.

Most stable companies mitigate against the risk of single sourcing. They purchase stand-by generators, multiply supply-chain vendors, hold raw materials in inventory to flatten out supply disruptions, and retain finished products in inventory to allow for demand imbalances.

And not all that long ago, companies did the same with employees.

Companies invested in management training programs. They hired workers based on character and work ethic. They invested in training workers to their specifications.

Yes, the cost of overhead was higher, but stability and survivability were the key drivers behind these intentional choices. The market valued companies that reinvested in their infrastructure, technology, and workforce. Today, the market only seems to value the instant return on an investment. Reinvesting will crash your stock price. We want to be lean. Less capital invested, quicker return on capital, and maximum margin for the shareholder. Reinvestment, retraining, and building for the future does not seem to sell stock.

The companies that were slow to pivot to the new faster, leaner, ‘just in time’ mentality became slow, bloated, and inefficient. Competition came in and the internet boomed! ‘Just in time delivery’ of raw materials was king because it dropped the cost of carry and the cost of entry.

Speed wins in most instances, as we know; but like most things, if the pendulum swings too far one way, it will swing just as far in the other direction.

As a result, we outsourced all that we could. The process of training our workers and hiring them was downsized, outsourced, and – in some cases – dropped altogether.

Tie all that in with a global pandemic and it is no wonder we are where we are.

So, What Can You Do About It?

The short answer? A lot. The longer answer is a little more complex. But ultimately, there are plenty of actions you can take to right some of these imbalances.

  1. Stop trying to just hire. Recruit talented people. Recruiting is an action word!

  2. Stop outsourcing the process. Bring it back home. Yes, getting specialized assistance from outside companies can help, but if you think that anyone can explain and sell your vision and culture better than you, you are missing what top talent wants. Top talent wants to know the boss AND they want to know that the boss knows them! Get personal.

  3. Stop relying on the algorithms to sort people. Why? Because people are not algorithms. If one search criteria is off, you may never see the applicant. Artificial intelligence simply is not that intelligent yet – do not rely on the algorithms to help you find top talent.

  4. Stop requiring the advanced educational credentials. Sure, maybe an MBA will do wonders in a position, but a Bachelor’s degree and several years of quality business experience most times will get more done. At least, that has been our experience.

  5. Stop using processes from the last decade. If you have a multi-interview process, then it needs to happen at the same time or on the same day. Remember, speed wins! The faster you connect with the prospective candidate and move the process forward, the more likely you will make it to the finish line. No, we are not suggesting that you short-cut what you do – just try condensing it. This process is no different than speed to market for your product.

  6. Stop thinking like it is 1999! Why? Because it is not 1999! Consider facets like remote work, flexible scheduling, job sharing, and beyond. Embrace the new age of labor.

The marketplace is shifting faster than ever and alongside it, technology is advancing every second. We are leveraging tools and processes at an ever-increasing rate to give better quality products, faster delivery times, and payment flexibility to our customers – things we never could have imagined just ten years ago.

If we are embracing technology this new way, then why are we still accepting applications like we did years ago? If you are thinking, “But at least my application process is online now,” know that this is simply not advanced or flexible enough to win the talent you need.

You should be innovating your people-sourcing just as you do on sourcing your customers and products – it matters just as much, if not more, to your company.

If you need help understanding how to win the talent war, we suggest giving Mark Miller’s book Talent Magnet a read. Please feel free to drop us a line at to discuss how to source better talent, revolutionize the way your company looks at labor, and invest in your top talent in more meaningful ways. Good luck! It is a war out there!

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