How the Labor Shortage Is Affecting the Staffing Industry

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It seems the last 3 years have been filled with contradicting information and ideas. Once something seems to be on its way up, a corresponding facet falls face-first into metaphorical dirt. It’s as if the cause and effect of economic and labor-based situations are no longer as clear as we imagined. In a country (and world) shellshocked by a life-altering pandemic, we are still attempting to grasp any resemblance of positivity and stability, but shaky ground may have become the norm for the time being. And, with a labor shortage still throttling the workforce, we are looking at a future of uncertainty.

It’s as if the labor shortage (prevalent since the genesis of the COVID-19 lockdown in 2020), has been cast aside by main news outlets. It exists, but at the same time, it’s still kept under hushed breaths. Even Tier2Tek, a staffing company with a plethora of news articles, has seemingly omitted the ongoing problem. It hasn’t even crept into any of our information regarding the ongoing trends in the staffing industry.

The labor shortage seems to not exist until it affects you or your business directly. But, is it truly affecting the staffing industry going forward? Will it affect your business in the near future?

A Plethora of Jobs. A Plethora of Layoffs

We start our story in the midst of confusion. As we stated, it seems as if the normal A-to-B relation of cause and effect has become skewed, not making clear sense and accumulating a plethora of outside factors.

Confusing? Here are two articles we posted within the month of January:

Jobs are being added at a fairly normal rate. The 223,000 jobs added in December are on par with the norm. For example, the country added over 312,000 jobs in December 2018, long before the days of the pandemic crisis. Though 223,000 is a third less, it’s still significantly more than the 140,000 jobs lost in December 2020.

Needless to say, the amount of available work is on the rise (at least slightly).

On the other hand, industries are seeing a significant increase in layoffs due to a multitude of factors. For example,

In 2022, over 964 tech companies laid off over 149,876 workers globally. Though the numbers may seem skewed, surrounding an industry with millions of workers and thousands of companies, the significance is as crucial as you could possibly imagine. So critical, in fact, that WRAL Tech Wire created an entire list for ‘Layoff Watch’ last year.

Amazon dropped 18,000 workers. Microsoft cut 10,000.

Robert Frick, corporate economist at Navy Federal Credit Union, told CNN, “While layoffs from high-profile firms make the headlines, plenty of firms are desperate for more workers, especially tech workers. Those workers are in high demand from the auto industry to the Department of Veterans Affairs to not-for-profits.”

If workers are looking for new jobs and new jobs are being created, how is a labor shortage in effect?

It’s Not Just Tech, Technically

The immediate thought would be that of sectors. Sure, there are an array of tech workers looking for jobs, but other industries are the ones impacted. In a way, you’d be correct. The labor shortage is hitting other markets more so than tech and tech-adjacent sectors, but it isn’t as clear of a situation as you’d imagine.

As we said, causality isn’t as simple as it used to be. We’re in the Twilight Zone now.

Here is a list of other companies that made significant labor cuts in the last year:

  • BuzzFeed cut 180 employees, about 12% of its workforce.
  • Morgan Stanley laid off about 2% of the workforce, about 1,600 people.
  • BloomTech laid off 88 employees, half of the workforce.
  • PepsiCo is laying off hundreds of corporate employees.
  • Lyft is laying off around 700 employees, about 13% of its workforce.
  • Amazon is looking to lay off up to 20,000 employees globally.
  • Coinbase announced that it would lay off 18% of its workforce.
  • DoorDash is letting go of 1,250 employees.
  • Kraken let go of 1,100 employees due to the crypto meltdown.

Industries Hit the Hardest

Let’s break it down. Though the aforementioned list involves some blue-collar gigs, the majority (barring Lyft, Amazon, and DoorDash, are white-collar. Therefore, it’s easy to assume that more labor-necessary industries are being affected by the labor shortage.

As of 2023, the industries that have experienced the biggest labor shortages are transportation, healthcare, and food.

For transportation, the American Public Transportation Association released a report indicating that 96% of the agencies surveyed reported a workforce shortage, and 84% of those said it was affecting their ability to provide service. 

As for the health industry, AMN Healthcare found that 85% of the facilities they surveyed are still experiencing a shortage of allied healthcare professionals. Overall, this isn’t a surprising situation following the crushing work environments created in response to the pandemic, with overwork and burnout being the overarching cause for healthcare resignations (46% of the surveyed facilities reported that burnout was the main factor in quitting).

Food and amusements are at the top of the list, though less important than the other industries.

The December jobs report showed that the most significant gains were in leisure and hospitality (rising by 67,000). Food services, drinking establishments, amusements, and gambling all say big gains.

Ultimately, this is due to consumers moving toward in-person services, something that had become a rarity during the pandemic phase. Now people want to go out and experience life, raising the need for employment in the sectors.

Georgia diner owner, Ronda Sherwood, told the Washington Post, “When the economy is great, it’s very hard to staff restaurants and lower-wage jobs,” she said. “But when the economy is getting worse and companies do start laying off, that’s when we’re able to staff better-quality people.”

Why Is a Labor Shortage Happening?

The overarching question remains: why are we seeing a decrease in available labor in these blue-collar sectors? Where have all the workers gone?

Unfortunately, there isn’t one specific reason harkening over the working world. It’s impossible to place the blame on one facet or emotion. Though the wave-starting pandemic may have been the catalyst, it’s likely that a labor shortage would have happened eventually. The pandemic may have been more of a kick starter than a genesis point. Over the past 15 years, birth rates have dropped dramatically. It was only a matter of time before we began running out of workers, especially those that are blue-collar.

In 1960, there were six working adults for every person over 65. In 2030,
we’ll hit 2.8 working adults for every person over 65.

Furthermore, from 2011 to 2021, the percentage of adults aged 25 and older with a bachelor’s degree or higher increased from 34.0% to 41.9%. Meaning the amount of workers aiming toward blue-collar jobs has also dropped significantly.

We are running out of able bodies to throw at labor-intensive jobs. What a shame.

More Than Just Willing and Able

If birth rates started dropping within 20 years, we shouldn’t be completely out of workers yet. Therefore, there are a plethora of other factors causing the labor shortage.

Firstly, Baby Boomers are leaving the working world. On average, 10,000 baby boomers reach the average retirement age every day and around 2 million workers retire each year in the U.S. (though many are starting to unretire).

Secondly, an extreme increase in childcare costs (and a decrease in available services) has caused a significant amount of parents to take the stay-at-home route.

Long COVID Still Crushing

Though we may have believed that the disastrous effects of the COVID-19 pandemic were behind us, it seems that the possibility of labor effects is still upon the economy. Long COVID, the lasting effects of COVID upon some unfortunate individuals, have caused many to permanently leave the workforce.

The U.S. Department of Health and Human Services stated that up to 30% of Americans develop long COVID after a COVID infection, affecting as many as 23 million Americans. These unfortunate patients continue debilitating symptoms like brain fog and fatigue, hampering their ability to work (especially blue-collar jobs).

This may be an underlying reason for the missing workforce.

Jerome Powell, U.S. Federal Reserve chair, said in November, “Millions of people left the labor force in the early days of the pandemic, due to factors like illness, caregiving, and fear of infection. But workers haven’t returned as quickly as imagined, particularly those outside their prime working years.”

About 3.5 million workers are still missing, Powell said. He attributed at least “some” of that gap to long Covid.

In theory, this makes sense. If workers are still ill and are experiencing mental and physical fatigue, jobs like transportation, healthcare, and food service become impossible. It’s no surprise they have become the industries struck by ongoing illness.

Some Workers Just Aren’t Working

And now we’ll dive into our final reason for labor shortages: people have given up on the normalcy of capitalistic behavior.

Let’s look at two recent trends. In one corner we have the Great Resignation. In the other, we have Frugality.

Definition of the Great Resignation:

Sandwiched between pandemic-forced isolation and at-home working policies, people had more time for introspection. After a year-long bout of battling against boredom and seclusion, a mass thought process swept the nation like a refreshing broom. According to The Bureau of Labor Statistics, 47.8 million U.S. workers quit their jobs in 2021.

Ultimately, people decided that they were no longer happy with getting by. Workers realized with rightful thought that they are worth more than paid. Why work a job you don’t enjoy when life is so short and crucial? Why waste precious life doing something you don’t like just to get by.

Consider it a renaissance, if you will. A great awakening in the minds of the common employee. Workers have taken over the power, holding higher and reasonable expectations for future employers. Regardless of your opinion on the matter, it’s impossible to overlook the numbers. A sizable shift in the job market did happen. The Great Resignation truly lived up to its title.

Definition of Frugality:

Despite the term being popular for decades, it was recently coined by Bloomberg regarding work-life balance.

Fundamentally, workers are spending less money so they can work fewer hours.

As an example, Bloomberg spoke to Marie Crespin, a 31-year-old HR worker in Nantes, France. She now makes 1,600 euros ($1,608) a month, while she used to make 2,300 euros. To combat this, Crespin has spent significantly less money on take-out and clothes. Now, she works 20 hours instead of 40.

“Work shouldn’t be the most important thing in your life,” Crespin told Bloomberg reporter, Alice Kantor. “Having the freedom to do what you want with your time is today’s true luxury.”

July survey by FlexJobs found that 44% of workers surveyed would take a pay cut to improve their work-life balance.

Simply put: people are willing to make less and spend less to enjoy more time outside of work. Materialism has fallen by the wayside, while quality time with themselves and their family has risen. Humans desiring more time with life and significant others is a natural and understandable response to a two-year-long life-threatening excursion.

What’s Your Point?

People are beginning to move on from the once-established normalcy of the American workplace. Workers no longer want to work unsatisfactory jobs and are willing to cut down on their living expenses to avoid labor. It’s not necessarily an act of laziness or unwillingness to work, but a small revolution in the idea of capitalistic labor. People don’t want to spend the majority of their adult lives working for a company that doesn’t care about them, and the drama around the pandemic made it all clear.

Unfortunately, the majority of companies still haven’t put into place conditions that are suitable for those willing to resign.

The point is: people are leaving the normal workforce because they don’t want to work the way they used to. This, on top of all the other factors we’ve noted, has created a significant labor shortage.

Small Business Contradiction

Seeing the forest through the trees can be difficult. On one hand, you have a plethora of jobs formulating in the tech sector. On the other hand, you have a plethora of jobs open in blue-collar sectors. The issue is the competition. People are willing to soar and bombard the tech jobs, leaving the blue-collar ones open. No one wants to work those jobs anymore.

When speaking of the tech layoffs, we noted that small and medium businesses were scraping up all of the great workers fired by the big tech companies. Tech workers have no choice but to take the smaller jobs because juggernauts (like Amazon and Apple) aren’t hiring anymore. Therefore, small companies are reaming with new, experienced workers.

On the contrary, small businesses in other industries are struggling to find employees. Without a majority of juggernaut layoffs, there is not an influx of workers. Therefore, the bigger companies are offering higher pay to combat the labor shortage while privately-owned businesses are struggling.

Sarah Hauser, the general manager of Proof Wines in Denver, is struggling. Her small wine business, often run by 4 employees, is scrambling to find new workers. She told Fox 31, “The talent pool has gotten smaller and you have a lot of people waiting for a while to make decisions. They’re looking, re-prioritizing and for us that’s hard, it’s painful because we really need them. We need them in the store to help us. It’s put a lot more on me, shifting around responsibilities and taking on some buying roles that I never necessarily had on my plate before.”

The State of Labor

As the above section colors, the labor shortage is only truly affecting certain areas.

Small businesses in one sector are finding themselves overloaded with workers, while small businesses in another are desperate for labor. So, noting whether or not the labor shortage will affect your staffing and hiring depends on the industry you find yourself in.

The longer-term question is whether workers would be willing and able to jump into other industries, especially with a recession looming on the horizon.

On paper, it’s simple mathematics. If small tech businesses are currently getting too many workers and larger companies are firing, eventually all the jobs will be filled. If other sectors can’t find labor, their jobs will be open. Eventually, tech workers that didn’t get hired during this significant influx will have to move to other industries during the recession for income.

In theory, the difference in labor shortage should begin to balance eventually. The question is whether life-altering things like lack of humans, long COVID, and frugality will cause workers to not work at all.

For example, if a tech worker can’t find a tech job and misses out on the hiring influx, they may decide they’d rather cut their living expenses and work a small gig than move over to a labor-needy sector, causing the labor-needy sector to remain… Well. Labor-needy.

With such unforeseen changes and such unseen situations, it’s almost impossible to predict how the labor market will play out going forward. We’ve never had such a challenging pandemic alter our country. We’ve never had this much of a birthrate drop. Thus leaving us in unprecedented times.

What About Staffing?

As we noted, whether or not you’ll have problems finding great workers depends on your corresponding industry.

Staffing, on the other hand, will continue to see a significant amount of work. Companies will still go to staffing agencies for recruitment, especially if they are having a hard time filling positions.

The problem becomes whether the staffing agency can find the right person to fill the job during the labor shortage.

Luckily, employment agencies like Tier2Tek Staffing have a wide array of contacts in national markets and universities, giving us the leg up in finding workers, even during the most challenging of shortages.

As a nation, we also work through hard times. We are known to persevere. We can handle it.

“We will either find a way or make one.

— Hannibal (247-182 BC), Carthaginian General