There is a real labor shortage

Published 07/12/2021
 
 
There is a real labor shortage. It's unclear where, exactly, all the workers have gone, but experts are divided on what will motivate them to return.
 
A drive on just about any highway reveals dozens of “Now hiring” signs from desperate employers, some offering hundreds of dollars in signing bonuses. Manufacturers, restaurant chains, agribusinesses, and health care organizations are among the many companies that say they’re in dire need of workers. “Help Wanted” signs hang from windows of independent restaurants, cafés, auto repair shops, and countless other businesses.
 
It’s a remarkable about-face from a year ago, when government-mandated shutdowns and a temporarily contracted economy forced many Americans out of work. It’s also a phenomenon that has produced headline after headline about the ongoing worker shortage. “Millions are unemployed,” read a May 6 headline in The Wall Street Journal. “Why can’t companies find workers?”
 
It’s a complex situation, but not entirely unfamiliar many areas of the country. What’s notable about this worker shortage is the lack of clarity over what’s driving it, and how much of it is a temporary phenomenon of the pandemic and how much is structural.
 
Some have argued that extended unemployment insurance benefits are keeping workers on the sidelines. Others theorize that people won’t return to work because they provide child care in the absence of in-person school. Still others say the pandemic has prompted workers to take higher-paying jobs in more stable industries.
 
 
While analysts and pundits debate the precise reasons for that drop, many companies have begun retooling their compensation packages and rethinking recruitment efforts. For some, that’s involved boosting wages and benefits. Others are tapping into populations that are often overlooked for jobs, such as people with criminal backgrounds or disabilities.
 
In a recent article in Workforce Institute, there are 3 ways to fix your labor shortage.
 
Fix #1: Increase wages
 
The first solution is to increase wages. Companies like McDonaldsUnder Armor and Bank of America have all announced wage increases to attract workers – moves that have been well received by both employees and the public at large. In principle, it is easy to throw money at the problem, but in practice, it may not be possible. Higher wages cut into profits so you will need to make a strong case that wage increases will pay for themselves, and then some.
 
Another approach might be to examine the risk of not increasing wages by equating labor shortages to decreased customer service and, in turn, reduced sales. No matter what, you face an uphill battle to get the executive support needed to raise pay.
 
Fix #2: Increase hours
 
The second option is to ask your existing employees to work more hours. Giving more hours to your current workforce reduces the need to hire new workers, along with the training and onboarding expenses associated with hiring.
Two big hurdles need to be cleared for this solution to work:
  1. Your employees need to be willing to pick up more hours. Some may be happy to do this others will not or cannot due to childcare, other commitments such as school, or lifestyle. Therefore, offering more hours can soften the labor shortage but may not fully eliminate it. It is helpful to provide your employees with technology that allows them to see what shifts are available and let them choose the shifts they want to work.
  2. Those most likely to take the extra hours will do so to get paid overtime. For many organizations, overtime is a four-letter word and something to be avoided at all costs. The fact is that overtime can be less expensive than hiring new workers. This is due to recruiting costs, benefit costs, and the higher productivity of experienced workers. Fellow Workforce Institute advisory board member John Frehse talks about this in his white paper “The Overtime Lie”. Organizations that are able to overcome their hang-ups with overtime will be well-positioned to keep operations running during a labor shortage.
 
Fix #3: Increase productivity
 
The third solution is to increase the productivity of your existing workforce. Increasing the output of workers already on staff reduces the need for more workers and the need for overtime.
There are two paths to improving productivity:
  1. Productivity gains can come from big ideas like eliminating tasks, reducing the frequency with which certain tasks are performed, or redesigning tasks entirely. The bigger the idea, the more time it may take to implement. So, recognize that this path may not have an immediate impact on your labor shortage but should have a large, sustainable impact when implemented.
  2. Big gains can come from small changes. Unlike the big ideas mentioned in the last point, small changes can often be implemented quickly. To find such opportunities, look for tasks that are performed frequently. Eliminating just one step in a frequently performed task or moving a piece of equipment closer to where the task is performed to reduce travel time can have an outsized impact on productivity. Saving a few seconds may not seem like much but when that savings happens thousands of times a day in each store across your entire portfolio, it begins to add up quite quickly.
 
One size does not fit all when addressing a labor shortage. Each organization and its workforce is different, and what works for one may work differently for another due to culture, demographics, geography, industry and more. The good news is that each of the solutions outlined above can be used alone or in combination with others. They can be implemented in parallel or sequentially. The important thing is to act because one thing is certain: You won’t solve your labor shortage by waiting for more workers to appear.
 
When you're ready ASN is here to help you get over the labor shortage hump. Our professionals are ready to provide you with the workers you need, when you need them. Just give us a call.