Understanding the Labor Shortage: Challenges and Strategies for Employers | WalletHub
Ask The Experts
Allen Huffcutt
Hendrickson Professor of Business, Austin E. Cofrin School of Business – University of Wisconsin-Green Bay
Why do employers have difficulties filling employment positions?
In movies, the concept of a “great conjunction” (when three or four planets align) is periodically used to reflect a rare and significant period. Several significant economic and social factors are currently intertwining in ways that are distinct, unique, and powerful.
First, there are declining birth rates. The so-called “replacement rate” (which keeps a population size stable) is 2.1 children per woman, but the U.S. had a rate of 1.6 in 2023. The U.S. rate has been declining for some time and may continue dropping. Decreasing birth rates translate into fewer high school and college graduates and smaller available pools of workers down the road. The fertility rate is even lower in other industrialized countries (e.g., Japan, China).
Second, attitudes toward work appear to be changing. Unlike previous generations, where work was generally assumed to be a given and issues like satisfaction and meaning were not at the forefront, younger generations want work that is meaningful and are not afraid to bypass opportunities that do not provide it (even if it means remaining unemployed). Younger generations also seek a better work-life balance.
Third, and more specific to professional positions, attitudes toward college among younger generations are also changing. Previous generations tended to operate under the premise that “getting ahead” somewhat automatically involved obtaining a college degree. Younger generations are questioning that premise and are less willing to commit extended years and accumulate debt unless there is a clear and tangible benefit. Conversely, interest in education that typically leads directly to employment and is not as lengthy (e.g., trades) appears to be growing among younger generations.
Fourth, the influence of ever-evolving technology cannot be understated. In some employment sectors, technological advances are changing the relative mix of the types of workers needed, increasing demand in some areas and decreasing it in others. For instance, computer programming (IT) has long been considered a golden area for employment, but thanks to AI, major corporations are now laying off these workers (e.g., it appears that AI has the capability to write code). Professional positions for which there is greater demand (e.g., engineers) face the challenges noted above.
What are the best ways for employers to attract and retain employees?
Attract
A classic line from the 1989 movie *Field of Dreams* (starring Kevin Costner) is “If you build it, they will come.” Too many companies still adopt a similar “If we post it, they will apply” mentality. In today’s tight labor market, businesses need to proactively pursue good candidates. Simply putting up a “Now Hiring” sign is no longer enough. Job advertisements should be engaging and highlight the positive attributes of working for the company. Walmart provides a good example of this, using full-size cutouts in their stores to promote benefits like assistance with college tuition for employees.
Additionally, many companies remain overly focused on recruiting from the traditional young adult population (e.g., high school or college students). Given declining birth rates, there are simply not enough young candidates to meet the demand. Companies that explore and tap into non-traditional applicant pools are more likely to achieve and maintain full staffing. These pools include individuals with neurodiversity (e.g., Autism, ADHD, Dyslexia), whose unemployment rate is more than eight times the national average, retirees looking for new activities, parents with young children who cannot work full-time, individuals with physical disabilities, and those with criminal convictions. Some of these groups may require flexible hours and scheduling, but the extra effort involved in “piecemeal scheduling,” so to speak, is far outweighed by the benefits of maintaining a fully staffed operation.
Dylan Polkinghorne
Assistant Teaching Professor, Cofrin School of Business, University of Wisconsin – Green Bay
Why do employers have difficulties in filling employment positions?
There has been a new shift in the labor market, where the number of individuals who want to work is in deficit compared to the positions available. This shift has created the ability for individuals to determine their career fate. Employees can negotiate and maneuver through positions creatively. They can apply for positions with the hope of obtaining higher salaries or better benefits. The connection to their current employer is not strong enough to keep them in their positions, leading them to utilize opportunities to control what matters most to them. This, in turn, is affecting employers, as they are becoming steppingstones in employees’ careers. Employers are struggling to keep up with the trend and the shift and to make the cultural changes that employees are seeking.
What are the best ways for employers to attract and retain employees?
The best way to ensure that employers can attract and retain their employees is to establish clear communication and transparency within the organization and the team hierarchy. By ensuring that employees and employers have transparency regarding development, future prospects, and decisions, it helps employees feel as though they are a part of the organization. Employees are more likely to have a higher sense of affective organizational commitment if there is this alignment. Employees are interested in having a connection to their organization, as they understand that workers spend much of their lives working. If employees are not motivated or interested in the goals of the organization, there will be an increase in turnover and absenteeism, which employers will have to face.
This article is featured in WalletHub – States Where Employers Are Struggling the Most in Hiring written by Adam McCann.
