Where did all the workers go?
December 31, 2021
In between COVID surges, you may have noticed that it’s getting harder and harder to find salespeople in stores or staff in the supermarket. When was the last time you called an 800# and had the call answered by a human in a reasonable amount of time? In other words, while you may be itching to help the economy by spending some of your hard-earned money, you may have noticed there are fewer people around to take it.
When the pre-COVID labor force didn’t return in full after the first surge, some analysts concluded that enhanced unemployment benefits kept workers at home. They speculated that when enhanced benefits ended, the workforce would quickly return to normal. They were wrong, and you don’t have to read the news, watch the news, or walk by storefronts with “Help Wanted” signs to know that.
There are many reasons why we currently have a labor shortage. When, or even if, the shortage will soon be alleviated is subject to even more conjecture.
First, COVID appears to have forced many older Americans into early retirement. As noted in CNN.com1, “Last month, there were 3.6 million more Americans who had left the labor force and said they didn’t want a job compared to November 2019….Older Americans, ages 55 and up, accounted for (a) whopping 90% of that increase.”
The reasons why such a large number of seniors left the workforce are driven by both economics and health concerns. Fears of getting COVID certainly caused many to throw in the towel, but so did their improved economic situation. A rising stock market, a vibrant housing market, and increased savings (partially due to lockdowns and fewer avenues for spending) all enhanced the economic well-being of many older Americans. Unless their personal finances change, they’re unlikely to come back. (In the same article, Goldman Sachs notes: “Nearly 70% of the 5 million people who left the labor force during the pandemic are older than 55…”).
As for younger, lower-income workers, the data reflects they also have been impacted by enhanced savings. When we went into lockdown in April 2020, the personal savings rate (the amount of money saved from each paycheck) went from 8.3% to 33.8%. (It’s now back to 7.3%.)2 For some households, having an extra few thousand dollars in savings – easily accumulated between three rounds of stimulus and a suspension of student debt payments – may have provided all the financial incentive needed to postpone re-entry into the labor force. They’re likely to come back, though not necessarily to their former jobs.
As competition for labor has heated up, companies are offering higher salaries and more benefits. Why would anyone return to a lower-paying position when there is more money to be found from a competing company down the street? (With so many people working from home, the phrase ‘down the street’ is now a relative term. If you’re working from home, does it matter if the office is 2 miles or 200 miles away?)
And let’s not forget the number of families who lost childcare or whose children were put into remote schooling. Many families that used to have two working parents dropped down to one. As circumstances change, the second parent may return to the labor force.
Lifestyle decisions have also impacted the labor force. “Americans are also quitting their jobs in record numbers – more than 4 million each month since July – but much of that quitting is happening among young people who are leaving for other jobs or better pay. They’re not leaving the workforce entirely.” Some of these lifestyle changes have even fueled a boom in housing markets in certain parts of the country. When prices in New York City cooled after COVID hit, prices in the Hudson Valley – just north of the city – skyrocketed.
The takeaway is understanding that dysfunction in the workforce will continue until it reaches a sort of equilibrium. For now, job listings (and those ”Help Wanted” signs you see in storefronts) far outnumber comparable job seekers. Thus, when you read that there are X million people looking for work, and there are also X million jobs available, don’t assume everything is back to normal. Due to what has occurred over the past two years, people looking for work are demanding higher salaries, better benefits, and improved working conditions. Those employers that don’t respond accordingly will continue to be short-staffed and/or face high employee turnover. As a consumer, don’t expect customer service to improve any time soon.