Making a Choice to Understand and Adapt to Labor Market Trends
Job growth in July was significant, adding 528K+ jobs. More than double analyst expectations, this growth also signaled a return to pre-pandemic levels of employment. This is great news, right?
Then why am I still hearing complaints that people just don’t want to work anymore? With the unemployment rate at 3.5%, its lowest since 1969, why are people defaulting to an opinion about workers and their motivations instead of considering the math I’ve laid out in these insights? Could it be because the general population is feeling the labor shortage where it hurts most and where workers are exercising their choice as mentioned in insight #2?
Data Point 1: A Major Shift
Whether dining out, planning a home remodeling project, waiting for a package delivery, seeing more classrooms without a teacher, or feeling the nursing shortage, Americans are feeling the macro and micro labor market trends in real time. And many of us just can’t comprehend what’s going on.
Holding the size of the labor market constant (at pre-pandemic levels), a major shift has been happening away from lower wage, increasingly unsafe, and oftentimes under appreciated occupations — ones that the general population engages with often.
Data Point 2: Immigration
Automation and immigration have historically been potential solutions where workers are hard to find and/or carry too much cost. Increasing the size of the working age population with immigration or decreasing the need for workers via automation makes sense. Unfortunately, compounding the current labor market deficit is the current state of immigration as reflected in the following chart.
This comes from Gad Levanon, one of my favorite economists, and Chief Economist at the Burning Glass Institute, who says this explains about 1 million of the missing workers in our workforce today.
Data Point 3: Automation
I walked into McDonald’s the other day and saw the cutest older couple standing at a kiosk trying to place their order. The sign as I walked in said “taking kiosk or mobile app orders only.” Is this an example of the dreaded robots taking over for workers, or is it simply automation enabling today’s shifting workforce dynamics? Maybe this is an example of a company not being as flat footed as I mentioned in insight #1.
Comparing the major shift of workers away from key industries (as mentioned above) to the chart below, I wonder whether these industries simply didn’t prepare for the talent supply chain realities they now face. Years ago, I advised my engineering clients that one way to increase their talent supply is to redesign the jobs. For instance, don’t make engineers do administrative work – they hate it. Increasing talent supply isn’t always about adding workers; it can also be about increasing the capacity of those workers who are available.
So, the good news is that we’re at pre-pandemic levels of employment. The bad news is that we’re at pre-pandemic levels of employment. Without something to attract workers to the industries losing the most labor, increasing immigration, or automating tasks that make workers more productive, we’ll continue to experience the labor shortage impact in our everyday lives, and it may get worse.
Employers have a choice. Stay at a standstill, complaining that people don’t want to work. Or, be a change agent. Get your business to thrive by embracing the macro and micro changes underway and adapting to solve problems.
-Teresa
