Employer strategies that address current labor challenges
By Joshua J. Malancuk, CPA
November 21, 2023
For many reasons, U.S. businesses are facing an unprecedented shortage of workers, and that’s having a profound impact on where companies choose to locate, how they price their products and services, and how they recruit, train and retain workers while trying to stay competitive nationally and globally.
The current labor shortage
A
recent RSM survey of 460 middle market companies found that 94% of respondents are struggling to find the people they need and two thirds are struggling to attract experienced talent. For example, economists projected that 500,000 new jobs were created in September 2021, but just 194,000 were filled — a significant gap that has profound implications for the economy.
According to the U.S. Bureau of Labor Statistics, the average U.S. manufacturing worker earns
almost $27 per hour — that’s more than four times the federal minimum wage and amounts to over $50,000 per year, plus benefits. Yet, the U.S. manufacturing sector faced a major setback after
losing roughly 1.4 million jobs at the onset of the pandemic, according to National Association of Manufacturers (NAM) data. Since then, the industry has struggled to fill job vacancies. As of March 2023, NAM said there were 693,000 open manufacturing jobs.
The shortage of workers is even more pronounced here in the upper Midwest where manufacturing is the backbone of the economy. The millions of Americans now opting to stay home rather than return to work is driving the massive labor shortage.
So, what happened to all the workers? Not only are 10,000 boomers reaching retirement age every day, according to U.S. census data, but exceptionally generous government welfare programs introduced during COVID, combined with record high costs of childcare, eldercare and vehicles, has made staying at home more economically feasible for millions of Americans than returning to the workforce.
Lingering effects of the pandemic has slowed hiring in many areas
Many working-age adults have been slow to reenter the workforce because of lingering factors driven by the pandemic (fear of getting infected, vaccination mandates, the need to take care of young children during school closures/remote learning or eldercare). The pandemic also drove many boomers from the labor force, reversing a 25-year trend of rising participation among mature workers. These factors further reduced the labor supply. Unlike the global financial crisis of 2008-2009, stock and home prices rose sharply during the pandemic, giving older workers a bigger financial cushion for retirement. Unlike 15 years ago, most mortgages today are fixed rather than variable; many homeowners are in a much better position to withstand an economic downturn and the recent spike in interest rates — again, more rationale for staying home.
Employer strategies to address labor shortages
An analysis of online job posting data by The Conference Board and Lightcast (formerly Emsi Burning Glass) confirms that labor shortages are influencing how employers are attracting, paying and investing in workers. To address worsening labor shortages, employers are attracting candidates by offering sign-on bonuses and increasing the transparency of salary information in job ads. Further, they are lowering educational requirements and offering more initial job training to expand the pool of candidates. More employers seem to be making these adjustments for manual, on-site jobs that do not require a college degree.
Some industries are less impacted by labor shortages than others but must still grapple with the rise of remote work because employers must remain competitive to attract and retain talent. Many businesses have embraced remote or hybrid work models and flexible scheduling. Gallup research found that,
nine in ten U.S. workers hoped they could continue working from home at least part-time, and three in ten workers signaled they would seek new employment if they were recalled to the office full-time.
Investing in automation is also essential for companies looking to expand capacity while reducing their reliance on labor. Additional investment in technology and automation such as self-service checkout in stores, menu ordering kiosks in restaurants, and the use of robotics in manufacturing may be viable solutions to ongoing labor shortages. As organizational leaders embrace technology, current employees will require continuous “upskilling” to be successful in their jobs. This longer-term view will cause employers to reevaluate their workers’ skills continuously and will create entirely new worker roles that do not exist today.
The lay of the job-market land
Growing businesses are responding to unprecedented labor challenges, especially for low skill positions, through flexible working arrangements, increased compensation and reduced educational requirements. These moves will bolster growth while maintaining a competitive landscape with other entities.
States are also competing between other states, leading to policies that incentivize workforce relocation to help build local and state economies for remote workers and overall worker levels in support of local economies.
Josh Malancuk, CPA, CMI is President of JM Tax Advocates, a service organization who advocates for property tax reductions and maximum level incentives for leading U.S. manufacturers and commercial property owners. He brings 28 years of specialized knowledge and experience to his clients. Josh can be contacted directly at joshua@jmtaxadvocates.com or at 317-674-8390 x 100
