By Ringside Talent Partners
February 14, 2024
But it’s also important to understand the dynamics of the labor market and the reasons for the shortage, so you can respond effectively and ensure a runway for success with your business or organization.
Mixed Messages Abound
Press about layoffs has been seemingly everywhere lately. From the 12,000 UPS employees laid off globally, to the 500 employees let go at Snap—businesses say they’re right-sizing.
In addition, press about AI strikes fear in the hearts of workers who report anxiety about losing their jobs to robots, software and systems which could replace both highly-skilled and less-skilled responsibilities.
On the other hand, 55% of CEOs expect to increase hiring during the next year and only 7% of CEOs of small and medium-sized businesses expect to reduce their workforces, according to Vistage. In addition, 81% of recruitment professionals say it’s challenging to fill roles, according to a poll from Employ Inc.
And while job growth is slowing somewhat, economists predict that about 100,000 jobs will be added per month, resulting in a stable unemployment rate of 3.7%, which is just modestly above a 50-year low.
The Talent Shortage Is Real
But despite the mixed messages, the talent shortage is real, and many businesses are struggling. A whopping 75% of employers globally are reporting they are having challenges in filling roles, according to ManpowerGroup.
The problem is evident across industries. Fully 77% of health care and life sciences organizations are struggling, but consumer goods and services; information technology; transport, logistics and automotive; industrials and materials; communication services; financials and real estate; and energy and utilities all report difficulty—with 76% to 71% saying they struggle to hire, according to ManpowerGroup data.
And company size doesn’t seem to insulate any business. According to the ManpowerGroup report, 71% of companies with less than 10 employees are struggling and 74% of those with greater than 5,000 employees are as well. The greatest challenge is with those employing 1,000 to 4,999 employees where 77% report difficulties.
Overall, the U.S. Chamber of Commerce reports there are only 71 workers for every 100 jobs in the U.S.
The bottom line: Employers in multiple countries and industries—and those of all sizes—are experiencing a shortage in attracting and retaining workers.
Solid Skills Are Tough to Find
It’s also relevant to note the skills that employers are having the most difficulty finding. On the side of soft skills (which we know aren’t really soft at all, because they are so fundamental to success), communication and teamwork are hardest to find, followed by accountability and reliability; reasoning and problem solving; active learning and curiosity; and resilience and adaptability.
The technical skills which cause the most challenges to secure are information technology and data; engineering; sales and marketing; operations and logistics; and manufacturing and production. All this is according to ManpowerGroup.
On top of this, college enrollment has been declining since 2010, and continues to decline, according to Best Colleges—so people may be less likely to obtain the skills employers are seeking.
Perhaps all these challenges help explain two broad trends in hiring. First, employers are doing more skills-based hiring in which they select less for degrees or formal training, and more for capabilities. And second, employers are offering greater amounts of training throughout an employee’s life cycle—investing significant amounts of time, effort and budget in building employee skills on an ongoing basis.
Reasons for the Talent Shortage
Labor market participation (a measure of those 16 or older who are employed or actively looking for work) has increased, but it is unfortunately still low. In 2001, it was 67% of workers, but today it is only 62.5%. And there are 8.8 million open jobs in the U.S. while there are 6.3 million unemployed workers, according to the U.S. Chamber of Commerce.
So why is the talent shortage so acute?
One of the first reasons is demographics. People are aging and they are retiring—exiting the workforce. In addition, birth rates are declining globally—so there just aren’t as many people available to do the work that is required in societies across the world.
Another key reason is a skills mismatch. People don’t have the skills employers need, and despite their promise, AI and tech haven’t yet replaced key tasks in a way that relieves the talent challenges.
In addition, child care is less available today, and the implication is that parents—especially mothers—are staying home to take care of children. As a result, they are not in the workforce.
In addition, people have some of the highest levels of wealth ever reported. Savings have increased, and this translates into more people choosing to work less, because they don’t need their paycheck as much.
How to Respond
The best response to the talent shortage is multi-faceted—and addresses both the demand for talent and its supply. Employers are wise to do the following.
- Invest in equipment, technology and AI. Invest in equipment and technology that can do the work of humans who will be in short supply. Test and experiment with AI, so you can establish expertise and understand the ways it can replace tasks. In addition, begin the process of reorganizing work. AI is less likely to take over complete jobs, and it is most likely to replace tasks. As a result, there will be a significant need to assess the content of jobs, reassign tasks and redesign responsibilities to best leverage tech and create both meaningful and productive work for people.
- Offer flexibility. To attract more parents, offer part-time work or flexible work—in terms of where, when and how work gets done. And to reduce the brain drain of aging workers leaving the workforce, offer plenty of options for them to stay with reduced hours, flexible models or contractor status.
- Offer childcare. Since lack of childcare is a significant issue keeping parents from the workforce, consider offering options for support—with onsite, stipends or emergency child care programs.
- Offer great work experiences. For those who may not need to work as a result of increased wealth, offer conditions which are rewarding beyond a paycheck. Provide for a compelling sense of purpose and meaning, the opportunity to create connections with others, the chance to contribute to the community and a positive work experience and workplace.
Big Changes, Big Opportunities
Significant, innovative improvements are less likely when things are moving forward as usual. Today’s volatility, uncertainty, complexity and ambiguity—including the significant talent shortage—create circumstances which will require new thinking to reimagine and reinvent the future. There is peril, but also promise in terms of how we respond, reset and adapt.