Is There Really a Labor Shortage?

A Brandon Motor Lodge displays a 'Help Wanted' sign in Brandon, Florida, on June 1, 2021. (Octavio Jones/REUTERS)

You’ve probably seen the “help wanted” signs in shops and restaurant windows. Owners and managers complain that they can’t find help. And you know it’s true because it usually takes twice as long to get served as it did before COVID-19.

There doesn’t seem to be enough people to fill the jobs. But is that really what’s going on? The answer is more complex than you might think.

Unemployment Rate Pre- and Post-Pandemic

The last couple of years have been a rocky road for workers. The economy was thriving in 2019, with unemployment at 3.5 percent. That was the lowest rate since 1969. But then the walls came crashing in when COVID-19 hit.

The pandemic shut down the economy, and the unemployment rate spiked to 14.7 percent. America saw 5.3 percent unemployment in 2021 as the country strived to return to normal.

When things started loosening up and the masks came off in 2022, the unemployment rate decreased to 3.7 percent.

Now America sits at an unemployment rate of 3.6 percent. And the news media is lamenting the labor shortages that employers are facing. But the labor shortage appears to be selective, starting with the Great Resignation.

Is the Great Resignation a Factor?

The Great Resignation began after the pandemic. In 2021, 47.8 million people quit their jobs. This was followed in 2022 by a record 50.5 million people quitting.

The pandemic spurred many people to leave the labor force. Older workers moved up plans to retire, and others, who enjoyed enhanced unemployment benefits, were unwilling to take the lower-paying jobs they had previously. Still, some enjoyed working remotely, but when the call came to return to the office, they quit instead.

But many of these 50.5 million people never left the workforce, they just took different jobs than they had held previously. Workers changed their attitudes, goals, and jobs.

Good-Paying Jobs Shortage

It may not necessarily be fewer potential employees; rather, it’s what these applicants want from a job. The new job searcher doesn’t want to settle for a low-paying job.

Workers are quitting and switching to higher-paying jobs. In some instances, they are switching industries. Many cite better pay, benefits, working conditions, and impaired physical and mental health for the switch.

This has put a strain on those good-paying employers.

And with the layoffs from tech firms like Google, Meta, and Microsoft, good-paying jobs are diminishing. These firms saw a boom during the pandemic and, as a result, overhired. With the down economy, the tech firms and others who rely on consumer spending just don’t have the high-paying jobs available.

But still, many potential workers are holding out for the good pay and forgoing lower paying options.

Hospitality and Leisure Labor Shortages

Those help wanted signs are abundant in restaurants and leisure industries. For example, restaurants that offer table service were down 311,000 jobs as of December 2022, according to the National Restaurant Association. Sixty-two percent of restaurants have claimed to be understaffed.

According to the U.S. Travel Association, two million jobs are available in the U.S. travel industry.

Still replenishing these openings has spurred national employment figures. In February 2023, this sector added 105,000 jobs.

But despite employment growth in these industries, many participants in the Great Resignation are holding out for higher-paying jobs with better working conditions. Many learned, from the pandemic, that they are the first to go when there’s an economic problem.

Construction Industry Looking for Employees

The construction industry workforce shortage comes in at 500,000. In 2023, the industry must attract an estimated 546,000 workers on top of normal hiring to meet demand. Some employee shortages are attributed to older workers retiring during the pandemic. One in four construction workers is over 55.

But this is an industry that’s not attracting young workers. Many potential candidates cite work conditions as one of the reasons for not going into construction.

Employer-Caused Labor Shortages

Recruitment intensity also drives employment. For example, if an employer is in a hurry or desperate to fill a position, they’ll sweeten the compensation pot. But if they aren’t trying hard, they will keep compensation packages low. This keeps job openings and gives the appearance of a labor shortage.

Recruitment intensity tends to be stronger when the labor market is strong and less intense when the labor market is weak. The labor market is currently weak.

Under a labor shortage, you should see wages driven up to attract qualified candidates. But this isn’t the case. In 2023, the emphasis on increasing wages is diminishing.

In 2022, 92 percent of employers planned on increases in base pay, but in 2023, that dropped to 80 percent.

Fewer firms say they'll give pay raises higher than 5 percent, and the average is likely to decrease to 3–4 percent.

Industry Determines Labor Shortages

The saying, “It all depends on whose ox is getting gored,” applies to the labor shortage. If you are in a high-paying industry, you probably have an abundance of applicants. Hundred of applications pour in for a job opening to the point that HR directors use artificial intelligence to filter through the resumes.

But if you are in a lower-paying industry, like restaurants and leisure, there’s a shortage of those people willing to apply.

The Epoch Times Copyright © 2022 The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.