Workers hard to find for some companies: Here's why

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It’s a topic that seemingly everyone is talking about – stores, restaurants, and shops that seem short-handed, have reduced hours, or are even closed because of a lack of employees. But why is there a lack of employees?

The unemployment rate is often used by media as one of the barometers of the nation’s economy. But Farmer School of Business management professor Scott Dust said unemployment numbers don’t tell the current story.

“It’s actually the quit rate, not the unemployment rate,” Dust said. “So people were holding onto their jobs because there was uncertainty. And because of the pandemic, no one was ready to make a jump. Nobody was interviewing, nobody was looking. And so as soon as that tailed off, all that pent-up demand just skyrocketed.”

That demand for new work left holes, sometime gaping holes, in industries that often have high turnover in any economy – food, retail, service, etc. Farmer School economics professor Riley Acton said that at this point, a lot of those holes that would normally be filled by new workers simply aren’t being filled. “There seems to be some amount of kind of mismatch in terms of what types of businesses are looking for workers and what types of workers are looking for jobs, and that is not quite lining up.”

Acton noted that during the pandemic, enhanced unemployment benefits were sufficient to keep some workers home rather than in public-facing jobs. But she said studies have shown that states that ended those enhanced benefits early didn’t see much of an increase in employment. “There was a little bump in people going out and getting jobs, but fairly small, something like a four percentage point difference between states that ended them early and states that did not,” Acton said. “What they find is that if you have one person who goes out and finds a job, you may have seven people who don't. Those people don't have benefits anymore and aren't finding a job. So what do they do? They ended up spending less.”

Dust said that the increasing amount of remote and hybrid work options has also steered some workers away from in-person jobs. “The impression is that nobody wants to work at a restaurant anymore and nobody wants to be in service in confined areas indoors, which is retail and restaurants. Those two areas in particular, there is a labor shortage. And I think that's real,” he said. “If I can make $20 an hour doing something on my computer at my house versus putting myself at risk by being indoors and dealing with customers who may or may not be vaccinated, I'm probably going to choose sitting in front of my computer.”

And when it comes to other fields, Dust said, the pandemic has caused some workers to reprioritize what is important in their lives. “Many people are actively looking for jobs, but there's a lot more people passively looking than there have been in the recent past. Part of it is because there's pent-up demand, but the other part of it is because people have a new set of priorities,” he said. “The amount of money I make will always be something I'm going to pay attention to from an equity perspective, but work-family balance, flexibility, and geographic location, those are all becoming more important, and they used to be farther down the prioritization list. Organizations are going to have to make adjustments.”

Dust said that businesses are having to balance demand and expenses with more variables than before. “I think many are getting to that point where they're squeezing their profits so much that they're playing this balancing act of ‘How much money do I need to come in through the doors to maintain my business, even if I'm not making a ton of money?’ versus ‘I need to make sure that I'm not missing out on potential revenue because I can't serve people and I have to turn people away,’ or ‘I can't keep the drive-thru open on a Thursday afternoon because there's just not enough customers.’”

Meanwhile, Acton said, potential workers are having to consider issues like childcare and health concerns when deciding to take on a role, and as a result, they’re looking for more money. “The answer to the classic economic question of, ‘How do you get rid of a labor shortage?’ is ‘You raise the wage,’” she said. “It's important to remember that the labor shortage we’re seeing is a labor shortage at a given wage. For many jobs, particularly in the service sector, people's reservation wage – the lowest wage they’re willing to take -- has gone up.”

“For the vast majority of companies, they're going to have to work a little bit harder to retain talent and get people to work with them,” Dust said. “Right now, recruiters and hiring managers are really, really struggling across most industries to find talent and retain talent. People are being pickier than they ever have before. And part of it is recruiters don't have as many tools to meet those needs -- salary only gets you so far. Workers are looking at other things, they're looking at flexibility, and they’re looking at growth potential.”

Dust said that historically, odds are good that the working world will return to some sort of equilibrium eventually. But he believes that the definition of a job, of employment, of work, may undergo some changes along the way. “I think our expectations about flexibility -- I think that's going to be a big one -- more remote work, more hybrid work than we've seen before. More willingness to allow employees to have more space, to have conversations about what's working and what's not, not about the job per se, but about the conditions in which they're working.”

Acton agreed.

“I think historically people have taken jobs for the wages offered, even if it’s not a preferred job, but I think there are questions about what changes in society have happened over the last 18 months that might make that answer be different now.”