9 Reasons for the Labor Shortage & Why it's so Hard to Find a Job

By Chika


Last Updated: September 15, 2023


The Covid-19 pandemic has had a profound effect on both global public health and the economy, resulting in significant disruptions.

The labor market has experienced notable transformations, characterized by a growing trend of individuals willingly resigning from their positions coinciding with an increase in demand for workers due to the reopening of economies.

The occurrence of job shortages and the challenges faced by firms in recruiting and retaining personnel are multifaceted issues that can be attributed to a range of economic, social, and behavioral variables. 

In this article, we will examine the several factors that contribute to the intricate economic dilemma at hand.



The Great Resignation

Also called the "Big Quit" or the "Great Reshuffle", the "Great Resignation" refers to an economic trend which started in response to the COVID-19 pandemic in early 2021 characterized by employees quitting their jobs en masse. 

Some of the most commonly mentioned reasons for the Great Resignation have been:

  • pay stagnation in the face of rising living expenses
  • little chance for career progression
  • unfavorable work environments
  • a lack of benefits
  • rigid remote work restrictions
  • and chronic job dissatisfaction 



Why is there a shortage of workers?

#1. Pandemic impact

The COVID-19 pandemic significantly disrupted the labor market.

Many employees were laid off or placed on unpaid leave, and some chose not to return to work due to health or family obligations. This contributed to labor shortages in numerous industries.


#2. Early retirements

More baby boomers are retiring early, which makes the already tight job market even worse and leaves a gap for companies to fill.

Some quit out of fear of COVID-19, while others did so because they couldn't find work that fit their skills. 

Rich boomers are also retiring earlier than planned because their stocks, homes, and other investments are worth more now than they did when they were younger.


#3. New business startups

Some workers quit or stayed out of work to start their own businesses.

In the past two years, almost 10 million applications for new businesses have been sent in. In 2022 alone, more than 5 million new businesses were started.


#4. Increase in household savings

People's financial stability was strengthened by higher incomes and savings, which allowed them to stay out of the labor market.

Increased unemployment benefits, stimulus checks, and the inability to spend money due to the COVID-19 pandemic all helped Americans accumulate $4 trillion in savings since the beginning of 2020. 

In a November 2022 study, 23% of women gave as their reason for not reentering the workforce that having family members bringing in sufficient income makes working a full-time job less important. 


#5. Skills mismatch

A mismatch in the skills of job seekers with available jobs has made the labor deficit worse. Even though there might be jobs available, they frequently demand particular skills or certifications that job searchers do not have. 

Also, less educated people are becoming less inclined to enter the labor market as a result of the growing pay disparity between those with and without four-year college degrees.


#6 Childcare costs

The problem of limited access to reasonably priced, high-quality daycare existed even prior to the pandemic. Childcare costs have remained high despite falling inflation

According to recent Labor Department data, the average cost of nursery and preschool services nationwide increased by 6% in July compared to the same month last year. That was almost double the 3.2% general inflation rate, which was lower than its most recent high of 9.1% in June of last year.

Because of repeated problems with childcare and school closures, many parents—mothers in particular—have been forced to cut back on their working hours or quit their jobs.


#7. Enhanced unemployment benefits

During the pandemic, enhanced unemployment benefits provided a financial safety net that discouraged some individuals from returning to work, particularly in lower-wage jobs.

Exhausted employees left and found ample opportunities elsewhere. Numerous people who remained unemployed were sustained by federal benefits.


#8. Changing job preferences

Some employees have reevaluated their job preferences and are now pursuing improved working conditions, higher pay, and more flexible remote work options.

This shift in preferences can result in labor shortages in traditional occupations. Exhausted employees quit their employment to pursue abundant opportunities elsewhere. Currently, job seekers favor positions that are less physically demanding or that enable them to work remotely. 


#9. Changing worker expectations

More workers are willing to walk away from their jobs or switch jobs if employers do not meet their expectations.

Workers are now placing more demands on employers, which was not the case pre-pandemic. Some of the demands that have become prominent include mental health, paternity leaves, diversity and inclusion, working from home and a 4-day work week. 



Why is it so hard to find a job?

However, while some in-person workplaces are struggling to fill vacancies, people hoping to get professional and white-collar jobs are finding it difficult. 

If you have been unsuccessful in getting a white-collar job, here are some reasons why it has been difficult to do so.


Recession and interest rate hikes

The hike in interest rates, coupled with growing anxiety about the recession, has put a lot of companies on their toes.

Companies are hiring more slowly and reducing job postings as higher interest rates weigh on economic demand. Business activity has slowed down, and the cost of borrowing has gone up. 


More experienced workers in labor market

As a result of layoffs at (tech) companies, there is a surplus of experienced employees willing to take on positions that were once reserved for college graduates.

This has resulted in companies requiring at least three years of experience for entry-level positions. This inevitably lowers the status of recent college graduates with no work experience, a circumstance that was unthinkable two years ago. 


Cooling labor market

In July, there were 8.8 million job opportunities as opposed to 5.8 million unemployed people, a significant difference that suggests a declining but still high labour demand.

Women, immigrants, and Americans with disabilities are among the growing numbers of workers joining the workforce, helping employers fill open positions. As a result, employers are posting job openings, which has chilled the labor market. 


Shortages are industry-specific

While demand for jobs is concentrated in leisure, hospitality, and, to a lesser extent, government, hiring in business and professional services, which includes many white-collar jobs, decreased by 10.8 percent between June 2022 and June 2023.

Financial services, manufacturing, and retail have the lowest rates of employee turnover. Other industries, such as technology are either striking off workers or freezing hiring. 



Final Thoughts

The labor market has been impacted by changes in demographics, including:

  • worker aging and retirement
  • border and immigration limitations
  • and demands for flexible work schedules and greater wages

But understanding the reasons behind employees' absences from available roles is only half the story. The first and most important step in resolving the labor deficit is putting strategies in place for hiring and retaining new workers.

Photo by Andrea Piacquadio


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