The United States economy is facing the most acute worker shortage seen in decades, and many economists believe this situation could last for years. More than 4.3 million workers have disappeared from the U.S. labor market. Some of them decided to stop working permanently.
Labor participation among the 16+ population went from 63.3% at the beginning of 2020 to about 61.6% in September 2021, a drop of almost two percentage points.
Millions of workers dropped out of the labor market during the pandemic, and data indicate that many of them will not soon, if ever, return to work. (BLS)
While a 2 % drop may not seem like much, this represents the largest decline in U.S. labor participation since World War II. All demographic groups were affected by the massive outflow of workers from the labor market.
While Asians have almost returned to their previous levels of participation, for all other demographic groups participation is slow to recover; for women the recovery is not slow, but appears to have stalled completely.
Companies have adapted by raising wages, reorganizing schedules, and increasing employee benefits. However, these measures have not succeeded in attracting enough people back to work and the country is suffering the consequences of the lack of personnel. Some companies, resigned to reality, are beginning to invest in automation to replace those employees who, it seems, will not return.
Warehouses do not have enough personnel to organize all the orders, and even if they did, there are not enough truck drivers to dispatch the massive amount of merchandise waiting in warehouses and ports to be distributed in the United States.
Meanwhile, restaurants have to rearrange schedules to be able to provide service without affecting the customer experience due to a lack of waiters. In the construction sector, thousands of jobs are delayed because there are not enough skilled laborers available to do the heavy work.
Economists debate the reasons why fewer people are willing to work. Some argue that because of unemployment benefits many low-skilled personnel have refused to return to work. However, the lifting of unemployment benefits in half of the states of the Union has not had a significant impact on the number of job openings.
Millions of workers retire with boomers leading the trend
Some economists argue that Covid-19 and the recent emergence of the delta variant have convinced older workers to retire early, who also have more savings than the younger population to support themselves without having to work.
Erick Sullivan, who worked for more than 30 years as a consultant, says he and his wife retired as soon as Covid began because, “The best part of retirement is the first part. We’re healthy and have no mobility issues. That may not be true in the future, but today it is.”
“Sure, we could work more years and have more paper (money). But what good is money if you can’t live the life you want?” explains Mr. Sullivan.
Early retirement has primarily affected women over 55, who have exited the workforce at a faster rate than men, as Michigan executive Heather Patterson explains, “I retired at 54 this spring, simply because financially I could.”
“Three weeks ago I took a motorcycle trip to the Smokies, two weeks ago I got a cabin in the Ozarks where I alternated days between kayaking and hiking, and I just got back from a side-by-side trip in Michigan’s Upper Peninsula,” Ms. Patterson says of enjoying her retirement, and she is convinced she will not go back to work “unless there is an absolutely devastating financial crash.”
While the early retirement of boomers partially explains the lack of workers, it falls short in explaining the massive retirement of low-skilled labor, usually headed by younger and immigrant populations.
“Most of the labor force does not have the proper documentation to work in the United States, which imposes a major constraint on companies,” explains Paula Calderon, general manager of a construction firm in Houston. The construction sector employs a large number of Latino immigrants.
The prospect of a smaller labor force could hit large employers especially hard. For the holiday season, between Amazon and Walmart, there are more than 300,000 open positions, while transportation companies such as FedEX and UPS have more than 200,000 open jobs.
The lack of staffing in daycare and eldercare settings has resulted in many Americans —who must care for their children and/or their parents— also having to spend more time at home and remain without a job that limits their time to care for their loved ones.
According to the Department of Labor, the number of childcare workers remains 10.4 percent below pre-pandemic levels, while the healthcare sector is down 524,000, with nurses and eldercare professionals accounting for four-fifths of the absent workforce.
The closing of the borders also affected the availability of immigrant labor, which often takes jobs that Americans do not want to have. Many industries that hire low-skilled, immigrant labor, such as restaurants and hospitality, are suffering the consequences of worker shortages.