The severe labor shortage of 2022 has most of us vexed. The question I keep hearing is “Where did everyone go?” If you look deep enough (and I have), the answers present themselves. And it’s not just one thing. Or even two or three. It takes a lot of converging factors to tighten the labor market this much. And that’s exactly what we’ve got. A lot of factors.
Every few days for the next little while, I’ll tackle one or two of the elements of the perfect storm that has US employers scrambling to find talent.
Answer #1: Rosy Retrospection is coloring how the labor shortage feels. In the song “Keeping the Faith”, the great philosopher-composer Billy Joel says, “The good ol’ days weren’t all that good, and tomorrow’s not as bad as it seems.” In other words, recruiting and retention was no picnic before the pandemic.
The June 2022 US Unemployment Rate was 3.6%, which cuts into the quick of the labor force. How much lower is that than the rate on the eve of the pandemic? None. In fact, it’s a touch higher. The unemployment rate in February of 2020 was 3.5%, and even then, employers everywhere were hoping, though not necessarily trying all that hard, to compete for a labor force marked by scarcity. So many jobs. So few workers.
This is not a new problem. To be clear, today’s workforce is smaller than it was right before the pandemic began, and that impacts a lot. But it doesn’t tell the whole story.
OK, so why DOES it seem so hard, especially for smaller employers, to find workers?
Answer #2: We laid them off. And they didn’t much appreciate that.
We can learn a lot about why smaller employers are having an especially hard time finding workers by comparing how the US handled the pandemic-related collapse of business to the way it was done in the UK and Europe. Calm down. I’m not America-bashing. Just looking at the facts. And they’re interesting.
It boils down to this: Americans were laid off and collected unemployment. When things got better, these workers, seeking greater security, were reluctant to return to the companies, and industries, that dumped them. Once burned, forever shy. Many sought that additional perceived security at either extreme of a continuum – large corporations, and doing their own thing.
Yes, there was the US Paycheck Protection Program (thank goodness), and that kept the bleeding controlled to a degree. And some industries, notably airlines, were propped up in a HUGE way by the US Government. But the fact remains that many (as in tons of) workers were severed from the slashed payrolls and received meager, but better-than-nothing checks directly from the government.
The British and Europeans, on the other hand, were more likely to be furloughed, in the true sense of the word, and enormous payments were made by the government to employers (not individuals), to keep workers on the payroll, even if they had little to do. Either way, governments supported idled workers. But the relationship between worker and employer was fundamentally different between over here and over there.
As much as 75-80% of employers’ payrolls were subsidized – nationalized, if you will – by British and European governments. When things improved, it was easier for people to “come back”, because they’d never really left in the first place. Britain and Europe, too, are experiencing labor shortages, but they’re less severe than ours.
This isn’t a value judgment. It’s just how the respective systems are set up. But they resulted in very different consequences once the crisis abated.
In the next few posts on this blog, I’ll reveal some of the other reasons we find ourselves in the current pickle.
Where Did All the Workers Go?