January 2023 saw a 3.4% drop in the U.S. unemployment rate, following trends from previous months where the rate continued to drop. Despite these record low unemployment rates, many businesses still suffer from a labor shortage.
During a labor shortage, employers struggle to hire qualified applicants for job openings.
The recent labor shortage started during the COVID-19 pandemic. Many employers were unable to find employees willing to work in potentially dangerous conditions. Existing employees demanded higher pay rates and additional safety measures.
Employers who were unable to meet these demands were faced with waves of workers leaving their positions. In certain career fields, it was more profitable for employees to stay at home and collect COVID-19 unemployment benefits instead of working.
While COVID-19 is still a risk, most businesses have safely opened up. COVID unemployment benefits ended toward the end of 2021. Many other benefits from the relief package, such as foreclosure protection, have also ended.
Despite all these factors, the labor shortage continues. But what is carrying the movement? Here’s what we know.
Fight for $15: Raising the Minimum Wage
One of the reasons the labor shortage has continued past the quarantine is that many employees are unhappy with their wages. The cost of living has steadily increased, while the minimum wage has remained the same.
Many employees are demanding a substantial increase to the federal minimum wage, which has stayed at $7.25 per hour for several years.
Now, people across the country are pushing for a $15 per hour minimum wage to help offset the rise in cost of living. However, when this was first proposed, it was considered a reasonable living wage. By today’s standards, though, many economists argue it is still not enough for most families to comfortably live.
At the height of the pandemic, many minimum wage workers ended up leaving their jobs because they were being paid too little to risk their health. While some ultimately returned to work when unemployment benefits ran out, others realized how unsatisfied they were and decided to find better employment.
Economists have dubbed this group “epiphany quitters.”
Most of the focus is on minimum wage jobs, but these are not the only types of careers affected. Schools and healthcare facilities are also having a difficult time finding new hires. Hospitality jobs are also experiencing a significant labor shortage.
These careers were more impacted by the pandemic, which explains why some workers are hesitant to return. Even before the pandemic, the food industry was in the beginning of a labor shortage.
The Rise of Remote Work
Most economists predicted that the pandemic would lead to a huge jump in unemployment. However, the rise of remote work quelled that rate and kept many workers employed in a safe manner.
This is one of the reasons why business and professional services are not experiencing as steep of a shortage as other industries. With the pandemic over, some jobs have transitioned into a hybrid format, requiring some participation in the office, but most performed offsite.
Some companies have even downsized their offices and shifted to a largely remote model. There’s even some debate on whether this could save money in the long run, since it reduces expensive rental costs and utilities. However, there are other expenses to consider, like:
- Cloud data storage
- Expanded tech support
- Equipment for remote workers
A Gallup poll conducted near the end of quarantine found that 91% of workers wanted to continue working at least some hours remotely, while 30% said they’d consider seeking a different job if they were called back to the office full time.
Working remotely is not only about comfort. For many parents, it solves the dilemma of maintaining both a family and career. This was especially important during the pandemic, when schools and daycares closed their doors.
Even in 2023, schools are still experiencing issues with in-person classes. Many daycares either failed to reopen or drastically cut down the number of children they accepted.
While remote work has helped cut down on labor shortage in some industries, many employees in other careers are quitting their jobs to search for a remote position. Some economists refer to this as the “Great Resignation.”
Another reason for the labor shortage has to do with the way employees are valued. This was a growing issue before the pandemic, with employees feeling devalued by their employers. Workplace stress and burnout are serious issues. Many employees feel like they have no identity and aren’t receiving fair benefits, especially in lower paid positions.
Instead of working for an employer, more workers are becoming entrepreneurs and running their own businesses.