It is no secret that there is currently a staffing shortage. Currently, the demand for employees is at an all-time high. Estimates indicate that as of April 2021, there were 9 million job openings, and there have been no significant improvements. Another worrying statistic shows that 49% of small businesses have been unable to fill their job openings.
This has led to a range of problems for local business owners. Without enough employees, you are forced to ask current ones to work overtime—and pay them overtime rates. This can also lead to them burning out more quickly and could potentially risk current employees quitting.
Even with your limited team working overtime, there will still be delays in the services you deliver, and you have likely found yourself having to reduce your hours of operation.
What is the staffing shortage?
While the labor shortages span numerous industries, it has mainly affected entry-level positions, such as retail associates. Low-wage and entry-level customer-facing roles have been the hardest for employers to fill, including both retail and restaurants.
Owners and managers looking to attract and retain employees have had to get creative, offering more incentives and benefits. This is especially true in retail, where working from home is not an option.
Even for local businesses that can find enough employees, there are still challenges due to the labor shortages. Many of these come from the lack of workers in shipping spaces.
For example, consider the massive delays and build-up of cargo ships and shipping containers in the Los Angeles ports. It got so bad that in October 2021, the port had to shift to 24/7 operation to attempt to keep up. Even then, it only reduced the backlog instead of eliminating it. In just under a month with 24/7 work, the number of containers for imports at the port was only down by 25%, and 29% fewer containers sat for at least nine days.
This is a major issue for businesses of all sizes, as the backlog has led to increased delays and higher costs. This requires you to come up with ways to overcome those challenges as a business owner.
What is causing the staffing shortage?
Experts cite numerous reasons behind the labor shortage. In most cases, it is due to a combination of factors.
Lack of urgency to return to work
One survey highlighted that many workers simply don’t feel an urgent need to return to work. In fact, only 10% of surveyed unemployed people were urgently and actively searching for a job. That same survey found that 45% of those polled were looking for work passively. Another 30% weren’t currently looking but did have plans to get a job soon. While these figures are from June 2021, the overall sentiment still applies to labor force participation.
There are numerous reasons that people don’t feel an urgent need to get back into the workforce, including:
- Many families wouldn’t have a childcare solution or couldn’t afford to pay for childcare if they worked.
- Others have financial cushions and savings, so they are comfortable waiting.
- Some are only interested in working remotely, and there aren’t enough opportunities to do so. That desire for remote work is sometimes related to COVID and health risks, but it is also sometimes related to the convenience of remote work.
- Some people have chosen to become early retirees.
With fewer job seekers, it is even harder to find workers.
Job switches
Many people have used the pandemic as an opportunity to switch their field or career. That desire to change industries comes from many potential reasons. Some people simply wanted to be able to work from home or to have other flexible working arrangements. Others were looking for healthcare benefits or other incentives or compensation.
The desire to switch industries hasn’t only applied to unemployed people either. As of August 2021, about 64% of workers said they were looking for a new job.
Pandemic effects
The direct effects of the pandemic have also played a role in the labor shortage. Many business owners are finding it much harder to bring back their workers than it would be just to let go of them. That is because of the need to increase wages that most workers demand. Essentially, the pandemic has increased the cost of labor, posing a challenge to all companies. However, this is especially challenging for local businesses with more limited budgets.
Health concerns
For many people, the risk of catching COVID while working with the public is a very real concern. This is especially true for people who live with those who are immunocompromised or otherwise at-risk. Regardless of what businesses do, this may be the case, but it can also be the case if employees don’t feel their employer takes enough precautions. New variants have made this an even greater concern.
On the other end of the spectrum, some people do not want to work for an employer that requires the vaccine.
People are stressed and burned out
More and more workers are feeling stressed as well as burned out. Part of this comes from the already mentioned fact that with fewer employees, workers have to put in longer hours. With less time off, they are more likely to get burned out due to a lack of rest. That can be especially true in retail spaces, where working on the weekends is the norm.
Even without working more hours than usual, some workers are simply burned out from the increased stress of their roles. In addition to the social challenges of interacting with customers all day long, there are also now health risks. The stress of worrying about COVID can put too much pressure on workers, increasing their chance of burning out.
Some industries are impacted harder than others
It is also worth noting that some industries have seen the impact of the labor shortage more than others. All industries are facing challenges, such as the demand for higher pay and other forms of compensation like incentives and benefits.
However, retailers and restaurants at least have the advantage of hiring unskilled workers. By contrast, many other industries require unique skill sets that make it much harder to find talent. This is also true for industries with additional educational requirements. Some examples include support, courier, transportation, and manufacturing. That lack of a skilled labor force means that companies need to offer competitive compensation to rehire workers successfully instead of losing them to competitors.
Unemployment checks likely weren’t a major factor
There was also some debate about whether the enhanced unemployment benefits affected the labor market. However, research shows that they likely didn’t make a significant difference. This comes from comparing data between states where the unemployment boost ended early and states where it continued.
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How the staffing shortage is affecting local retailers
We already touched on several ways that the staffing shortages affect local retailers, but we’ll dive into that deeper below.
Struggling to retain and recruit employees
The most significant impact is the challenge of retaining employees and recruiting new ones to jobs. In both cases, companies need to stand out from the other hiring jobs and offer employees what they want. In many cases, these are an increase in wages and other benefits.
Staff quitting
Sometimes, a business owner will do everything right but still have staff quit because of factors outside their control. For example, maybe they are too concerned about COVID in their public-facing role.
This type of situation only increases the challenges. Depending on the size of your business, if just one or two employees quit, you may find yourself scrambling to complete all of the necessary tasks and find more talent.
When staff quit, and you can’t fill the positions quickly, you also run the risk of your remaining employees being overworked or too stressed and quitting.
Needing to reduce hours
For many companies, the combination of issues with recruiting and retaining employees means that you simply cannot operate during your regular business hours. Many businesses have to make the tough choice to limit business hours, especially for service-based businesses. After all, you don’t have enough people to provide the same services as before.
Supply chain disruptions
As mentioned, the labor shortage has also led to disruptions in the supply chain. Even as shipping companies are doing better, they are still dealing with significant backlogs. This means that retailers may not have enough of their products in stock, or they may have to pay more to get them. In the latter case, you are then forced to decide whether to reduce your profit margins or increase the price and risk losing customers to offset the high costs.
Conclusion
Business owners now have to worry about labor shortages in addition to the everyday struggles of running their businesses. Whether you are trying to recruit employees or retain them, you have to find a way to improve job satisfaction. Many employees are now demanding higher wages, but this can be hard for small businesses to fit into their budget. This poses a challenge for both recruitment and retention.
Businesses also have to deal with the wider impact of the labor shortage, such as delays in shipping and increased shipping costs. These may require owners to adjust their business model and potentially increase prices.
