Business leaders must face the fact that the current labor market could last years, not months. The forces keeping people away from available jobs are complex, long-term and out of business’ control.
Much of the conversation around current labor challenges has pointed to short-term factors like school closures and federal aid programs. Yet school reopenings and the reduction in unemployment insurance benefits failed to produce the hoped-for spike in workers’ availability.
Some businesses have been forced to cut services or hours of operation and even turn away customers to cope with staffing shortages. Filling these gaps is an important part of fueling economic recovery. Unless companies rethink who they hire and how, the country’s economy could be in jeopardy. Instead of waiting for hiring challenges to ease, businesses must act quickly to change what they can control. They must understand what’s keeping workers away and revamp traditional talent strategy.
Understand the ‘uncontrollables’ driving the labor shortage
The factors driving the labor shortage run deeper than unemployment benefits or The Great Resignation and will take years to resolve. The worst won’t be over until workers’ savings run low, but that doesn’t mean they’ll stay at a new job for long. Employers will likely be feeling this for the next one or two years, perhaps longer in some professions or industries.
For starters, the labor force is about 3 million workers smaller than on the eve of the pandemic. Retirement rates for Boomers more than doubled in 2020 compared to the previous year. Despite school reopenings, parents and women, in particular, are still struggling to find childcare amid rising costs and unpredictable closings, leaving them unable to rejoin the workforce. Some workers are simply biding their time, sitting on months of accumulated savings while looking for a job that provides them with a better fit for their skills, values, interests, and personal needs.
Many people are still hesitant to return to jobs that may expose them or their loved ones to COVID-19, or which place them repeatedly in high-stress situations. Frontline jobs within healthcare, education, and law enforcement are facing particularly urgent staffing shortages. Variants and slow vaccination progress mean that COVID-19 will be a significant health risk for a long time. Meanwhile, the pandemic has made people rethink where they want to work and in which industries. Indeed found that interest in loading and stocking jobs has dropped by 40% and food service jobs by 18%. Simply paying more isn’t working; compensation for workers in retail, leisure, and hospitality increased between 5.3% and 6.9% over the last 12 months, with no end in sight to the talent shortage in these fields.
Businesses cannot control these factors or offer incentives to counteract them, but understanding them will enable business leaders to empathize with candidates and refocus on what they can control, ease short-term pain, and position themselves for the long term. Here are a few places to start.
Deconstruct the workload and get creative about staffing
Jobs are bundles of tasks that people perform using their skills and the available technology. That means jobs can be unbundled to leverage the many different types of workers, from gig workers and full-time job candidates to contractors and current employees who want to learn new skills. Instead of thinking in terms of traditional roles with rigid boundaries, business leaders can break down the workload into smaller bundles and reassess how certain tasks get done. From there, consider which tasks can be digitized, which can be done by contractors, and which tasks should remain bundled in a job done by an employee. This will often strip away the tasks that people find less satisfying and free up employees’ time for what matters most.
What’s left are the core differentiators of your business, the most important elements that must be done by a current or new employee. This creates an important opportunity to offer both current and potential employees fulfilling work that fuels their own professional growth and supports the mission of the business. Employees want more than raises and promotions. They want stretch assignments and varied tasks. By breaking down work and redistributing tasks in new ways, companies can invest in employees and build an infrastructure of digitized and contract work to help future-proof the business.
Rethink required skills and expand your talent pool
Once business leaders have identified which tasks must be done by employees and where staffing gaps exist, it’s time to rethink assumptions around who is qualified to fulfill a role in this labor market. Workers’ skills can be translated to perform new bundles of tasks in different environments.
Companies and researchers have made big strides in mapping how close two jobs are in terms of the skills and tasks they require. Many jobs share core skills with dozens of other jobs. For example, according to LinkedIn, business analysts have a 70% skill overlap with product owners, the 15th most in-demand occupation in 2020. Employers can and should seek out candidates with untraditional backgrounds and from geographies beyond their front door by expanding possibilities for remote work and collaboration, and removing any job requirement that isn’t truly a must for the job. Once these folks are on staff, it’s important to build a strong training and mentorship system to fill in any gaps.
This extends to workers who are long-term unemployed. The pandemic has wreaked havoc on the labor market, and old standards to filter candidates need to be rethought. Even if some skills have atrophied over the course of a long unemployment spell, investing in training and onboarding to refresh skills is better than turning away customers or cutting services due to a staffing shortage. Someone who can do a job 60% well for three months before they do it 100% well is an improvement over not having a worker; in that scenario, 0% of the work gets done.
Automated hiring software or arbitrary job requirements can often end up ruling out high-potential candidates from untraditional backgrounds, various geographies, or those who have been unemployed. In this labor market, it’s important to be intentional about the hiring process and remove arbitrary qualifications that can cause organizations to miss out on great employees.
Treat employees like key stakeholders
Employees have become key stakeholders and will remain so. They are now in a position to demand higher pay, more stretch assignments, better recognition, and more fulfilling tasks. Employers must show up for current and prospective employees by re-bundling the most important tasks, digitizing or contracting out less satisfying ones, and rethinking who is qualified to perform the most important, most human work. Not only will this reduce a business’ reliance on a tight labor market, but it will also help create a work environment that develops existing employees, attracts new ones, and keeps people interested in the work.
COVID-19 concerns, workforce shortages, and economic uncertainty are not problems that can be resolved in a matter of months. This means business leaders must rethink traditional talent strategy and focus on what they can control that will enable them to better invest in employees and navigate whatever comes next in the labor market.
Liz Wilke is a principal economist at Gusto, researching the state of work and business in the modern economy.