The Great Resignation trend seems to be here to stay. With millions quitting their jobs in 2022 alone, many professionals agree there's a distinct labor shortage. But the truth is, employees who have quit their jobs are rehired in other places, pointing to the fact that hiring rates are still outpacing quit rates.
So, what's really causing the labor shortage? The answer is in the complex contributing factors. This guide breaks down what's causing these talent shortages, which industries are most impacted, and how you can overcome hiring challenges in a competitive market.
Factors influencing the labor shortage
Labor shortages, in varying degrees, are affecting multiple industries. While many different factors lead to higher unemployment, some are major contributors. Here are the major influences behind the current shortage:
Demographic factors
One of the biggest contributors to the ongoing labor shortage is the large number of workers retiring. According to the Social Security Administration, there are more people aged 65 and older than working-age Americans. This makes finding and keeping qualified talent challenging long term. As employees retire from the workforce, there are fewer working-age people to replace them, making it harder to fill the vacant roles.
Declining birth rates have also become a contributing factor, resulting in fewer workers. The younger generations growing up and entering the workforce don't have the population numbers of the older generations.
Economic factors
Even though inflation has fallen from where it was just a year ago, the higher living costs in various areas are leading some workers to relocate to other places where their salaries go further. As the cost of essential goods and services rises, many people find it challenging to meet their financial needs at their current salary levels. This situation leads to workers taking higher-paying jobs to support their living expenses.
When the cost of living outpaces wage growth, potential employees are more selective in their job choices and prioritize positions offering higher compensation. As workers leave for higher-paying opportunities, many businesses struggle to attract and retain staff, further exacerbating these shortages. The rising cost of living puts additional pressure on individuals and businesses, so it's crucial for employers to consider competitive wages and better benefits to combat this challenge.
Skill gaps and mismatch in the labor market
Another leading factor contributing to talent shortages is the skill gap between workers 50 years old and the younger, less experienced workforce. As more senior professionals retire from decades-long careers, they take all those years of knowledge with them. This leaves vacant roles requiring extensive experience and expertise across many sectors, resulting in more open jobs than skilled workers.
Changing workforce expectations and preferences
The shift to remote work during the COVID-19 pandemic isn't a short-term trend. Many workers have made it clear that they'd take a job elsewhere if required to return to an office. And salary has taken a backseat to well-being and office culture for those working in person. More in-office employees prioritize flexibility, work-life balance, and supportive company cultures, leading to higher quit rates among those leaving their current jobs.
“One of the biggest contributors to the ongoing labor shortage is the large number of workers retiring.”
Talent shortages impact these industries the most
Nearly every industry has experienced some fluctuations in employment numbers, but these industries are seeing the most impact from talent shortages:
Education
The education sector has seen a high volume of teacher shortages spanning kindergarten through high school and into post-secondary education, with universities and colleges also experiencing the effects of the economic downturn. The employment rate of public K-12 teachers has fallen nearly 7% since the beginning of the pandemic. However, local and state policymakers continue implementing strategies for overcoming talent shortages in public education.
Health care and social services
Surprisingly, the health care and social services sector is experiencing much higher quit rates and labor shortages than before and during the pandemic. Even so, millions of health care jobs were lost during COVID-19, with employment rates falling by 0.2% since the beginning of 2020. While this industry is seeing a quicker comeback of job availability, talent shortages are still a major concern. Burnout and challenges in recruiting and retaining employees are the primary causes of the labor shortage in these services.
Leisure and hospitality services
Unemployment rates in the food, leisure, and hospitality services industry skyrocketed over 8% during the pandemic due to massive business closures, layoffs, and voluntary resignations. Although that number has slowly declined since, the industry's 5.2% unemployment rate still rises above the national average. Much of this is caused by workers finding jobs elsewhere and leaving the industry entirely. Another major contributing factor is that many people are reluctant to return to in-person service roles because of health concerns, leading to a smaller pool of available workers for these positions.
Manufacturing and construction
The manufacturing industry suffered high unemployment rates at the start of the pandemic that still haven't caught up to the prior numbers. This speaks to the skill disparity between experienced workers and those with fewer years in the field — the number of open jobs far outweighs the number of skilled workers to fill them. It's the opposite in the construction sector, though, where there's a surplus of skilled workers but low job availability.
Retail and wholesale trade
A slowing economy, rising inflation rates, and higher costs for essentials mean people are spending less on retail goods. Retail brands and wholesalers also reduce spending as consumers spend less on leisure items. This leads to cutbacks in non-essential operations, including jobs. Another contributing factor to worker shortages in the retail and wholesale industry is the rise of e-commerce and online purchasing. Many brick-and-mortar businesses are losing out to the quick convenience — and frequently lower prices — that e-commerce offers consumers, leading to more closures and job loss.
Financial and business services
The finance and business sectors are also experiencing talent shortages as skilled professionals leave long-term roles for more flexibility, higher pay, or complete career transitions. Many finance and professional service employees moved to remote work, which saw a rise in job availability as employers expanded their recruitment and hiring efforts. But with the shift back to normal, many companies require employees to return to the office. This, in turn, results in professionals leaving the sector altogether for more flexible opportunities.
Effects of remote work on labor shortage
The massive shift to remote work has left many professionals unwilling to return to in-person work. While it was previously thought that the remote nature of many of these roles would mean increases in hiring rates after the pandemic, this hasn't been the case. Because of the higher demand for remote and hybrid work arrangements, shortages across the finance, IT, business, and professional services industries are slowly rising. Employers can combat this with strategies to improve compensation plans, provide higher salaries, and offer fully remote or hybrid arrangements.
There's no golden rule for attracting and retaining top talent. The strategies that work for one company might not be right for yours. CareerBuilder can help you navigate the current market and labor shortage with our Sourcing Solutions. CareerBuilder can help you find, attract, and recruit qualified professionals for your open jobs by becoming an extension of your team.
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