Does the United States Have a Labor Shortage?

Over the past few months, large chains and independent businesses alike have made headlines by announcing wage increases, signing bonuses, and other perks for jobs that typically paid the minimum wage and were never associated with perks. 

But will those benefits be enough to entice people to take the open positions, or is the country in the midst of a true labor shortage? It’s still too early to tell, but experts point to signs that indicate either outcome could be possible.

CNBC reported that, according to May’s jobs report, the labor force stood at 160.9 million workers, which is 3.5 million fewer than in the pre-COVID days of February 2020. The reduction is a warning sign to some economists who worry that the lower numbers will become permanent.

“The rate at which adults are participating in the workforce has been flat since last summer,” said Michael Strain, director of economic policy studies at the American Enterprise Institute. “This is a significant issue. Workers are not coming back.”

There are several reasons why people might not want to return to work, particularly in sectors like retail, hospitality, and fast food. One that’s been debated a lot over the past few months is the impact of the unemployment insurance increases based as part of COVID-19 relief packages. 

Combining state benefits with an added supplement from the federal government meant that minimum wage workers could make more money staying home than they could at work.

“We began to see that some employees were in a position where they were literally making four, five sometimes $6 an hour more on UI (unemployment insurance) with the pandemic bonus,” Toby Malara, government affairs counsel at the American Staffing Association, told Business Insider. “It did not make sense for them to go back to work.”

With extra money in their pockets, workers formerly making the federal minimum wage of $7.25 per hour might be able to hold out and wait for higher wages, which companies from Chipotle to Target have already started doing to keep their doors open.

In addition, the pandemic also provided an opportunity for people to learn new skills and/or re-evaluate their current jobs to consider changing fields. The Pew Research Center found that 66 percent of the unemployed had “seriously considered” changing their field of work over the past year, noting that people who used to work in restaurants or travel are finding higher-paying jobs in warehouses or real estate.

Ongoing concerns about the spread of COVID-19 and its variants might also be preventing people from returning to work. The Washington Post reported that grocery stores lost 49,000 workers in April and nursing care facilities lost nearly 20,000 workers. Both of these industries were heavily impacted by COVID-19 and are still perceived by some as risky.

June’s jobs report showed that things might be starting to turn around slightly, as the economy added 850,000 jobs. In particular, the labor and hospitality sector added nearly 350,000 jobs, which is helping to alleviate the crunch for workers. 

It’s still too early to tell whether the pandemic’s impacts on labor will become permanent, but U.S. Labor Secretary Marty Walsh said the Biden Administration would continue to pursue policies that encourage a return to full employment and an end to any labor shortages that may exist.. 

“Americans are going back to work in large numbers, but this is no time to let up,” Walsh told Politico. “We are still down millions of jobs from pre-pandemic levels and the inequities heightened by the crisis persist. We need to be proactive in our policies to create good jobs and make sure all workers have access to those jobs.”

Grassroots Pulse covers public policy and political issues aimed at engaging highly-active policy makers, donors, and grassroots leaders at the forefront of the political process in America today.

Image Credit: Photo by Olivier Collet- on Unsplash

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