Challenging assumptions: The nuances of labor shortages in a post-pandemic world

The nuances of labor shortages in a post-pandemic world

"Challenging Assumptions: Exploring the Nuances of Labor Shortages in a Post-Pandemic World"

Over the past weekend, I spoke with a fellow baby boomer who was incredulous about the current labor shortages. It’s a too-common topic of conversation these days, and the script is well rehearsed. The pandemic spawned stimulus checks and generous unemployment benefits, then people left the job market early while others simply became idle and complacent. The conversation usually concludes with some cynical form of “nobody wants to work anymore.”

In a world where younger generations are associated with wokism, privilege and a basket of unfamiliar sociological trends, it’s easy for people of my generation and older to fall into the old “kids these days” conversation. When we begin sounding like our parents and remember that we promised ourselves we would never be this way, the conversation usually shifts in a more positive direction or just drops off into an awkward silence.

As someone who hires and fires in this market, I confront labor shortages daily, so I’m forced to take a more nuanced view of the situation and challenge assumptions. My first question is whether it’s true that no one wants to work anymore.

The pandemic was named “COVID 19” because it began impacting our lives in the fall of 2019, but we are now soon to enter 2024. Businesses have reopened, and Uncle Sam mailed the last stimulus check in March of 2021. Extended unemployment benefits and supplements established under the 2020 CARES Act expired in September of 2021, but in Nebraska, we wrapped ours up in June of that year.

Some social programs expanded, never to retreat. Workers who were teetering on the edge of eligibility left the job market and are unlikely to return. Still, enough of the COVID-era gravy train has dropped off that it’s difficult for us to argue that the government is underwriting our labor shortage. The scarcity of workers, however, remains.

Nationally, unemployment now sits at about 3.8% and is expected to peak at 4.2% in 2024, but as of September, our rate in Nebraska is only 2.1%. That should come as no surprise. In the last three decades, Nebraska has been at or near statistical full employment except for a post-2008 (AKA “the great recession”) peak that never quite made it to 5%.

No discussion of unemployment rates is complete without consideration of the labor force participation rate, the percentage of working-age people who are actually in the job market (i.e. working or seeking work). It does not include stay-at-home parents, students, retirees, or people collecting disability benefits.

Nationally, the current participation rate sits at 62.8%, which is down from a pre-COVID rate of 63.2%. That’s less than half a percent, which may seem like a small number, but nationally it adds up to about 8.3 million people. Those are the people who don’t want to work anymore. The labor force participation rate in Nebraska, however, is considerably higher at 69.2%, down from a pre-covid rate of 70.6%, and consistently one of the highest rates of the 50 states.

A low unemployment rate combined with high participation makes it tough to fill jobs, and our demographics only exacerbate the situation. We all know that baby boomers, those of us born between 1946 and 1964, have left the workforce faster than we have been replaced. Nationally, the people in the 25-44 year age bracket have declined while people aged 45-64 continue to grow. It’s why Levi Strauss sells Dockers and flip phones are making a comeback, but it also puts pressure on entry-level labor markets.

Those of us who have not left the working world, either expecting to live longer or because our investments have been wiped out, hang on to senior, higher-paying positions. The jobs remaining tend to be in less skilled sectors or those that serve a disproportionate number of older consumers.

It’s true that some people have left the labor market, but the larger problem is a convergence of shifting demographics and a lop-sided distribution of job opportunities. Wage inflation in some sectors has surpassed 25%, but employers can’t fill essential positions.

We can still have curmudgeonly conversations about multiple piercings and pronouns, but it’s not entirely fair to say that no one wants to work anymore. The problem is that there are fewer people available for work in specific sectors, and we need to seriously open our minds to the eventuality that many of the functions now performed by people will, and must be replaced by technology.