Businesses have 3 options to tackle the labor shortage and they all have problems

A McDonald's logo with a billboard below that says 'work here $US15 ($AU21) and free meals'
The hiring boom showed up in lower-wage hospitality jobs at first – but now, recruiters see a red-hot job market everywhere. MediaNews Group/Reading Eagle/Getty Images
  • Labor shortages seem to keep dragging on, even after measures like enhanced unemployment ended.
  • While it’s unclear what’s driving all of the current shortages, employers are adapting.
  • Some are leaving demand unsatisfied, raising wages, or working current workers harder.
  • See more stories on Insider’s business page.

Summer may be officially over, but the labor shortage is not.

As the Delta variant throws a wrench in getting people back to work, businesses are still struggling to hire enough staff to meet demand. Employers are complaining that no one wants to work anymore and job openings continue to reach new record-setting highs, even though enhanced unemployment benefits lapsed in early September. The end of those benefits just hasn’t yielded mass movement into the labor market. At the same time, workers are quitting in record droves – leaving behind vacancies as businesses struggle to staff up during reopening.

While there’s no one exact reason that workers aren’t flocking back, employers are still contending with crunches. In a note, Bank of America researchers Aditya Bhave and Ethan Harris break down three ways that employers are dealing with labor shortages – and why those approaches might be fueling a temporary boon in productivity.

(1) Some businesses have decided they just can’t serve all their customers right now

Some employers are throwing in the towel on hiring right now, which means they’re just not satisfying all of their demand, BofA says.

As Insider’s Hannah Towey reports, more businesses are shuttering early this fall as seasonal workers head back to school and leave them short-staffed. And two Chick-fil-A restaurants in Alabama were open for eight hours less each week in August due to the struggle to staff up, Insider’s Grace Dean reported.

Perhaps some businesses are hitting pause and waiting to ramp up business again when vaccination rates rise, which has anecdotally proven to get more people back to work. Or maybe they figure when working parents to have a more stable childcare situation, they’ll return to the workforce.

(2) Some are raising wages and offering perks

One tangible thing seen throughout the labor market: Employers upping salaries. A slew of restaurant chains – from McDonald’s to Chipotle – have raised pay, along with other major chains like Walgreens and CVS. In some cases, it seems to be working.

McDonald’s CEO Chris Kempczinski said that rising wages helped the company staff up. Nick Stone, the CEO of Bluestone Lane, told Insider’s Zahra Tayeb that the cafe chain has evaded labor shortage woes – and hired 400 new workers – because the company treats workers well and pays them $US15 ($AU21) an hour. Rich Osborne, the owner of Greene Bean Coffee in Iowa, said that the coffee shop got nearly 50 applications in two weeks after raising hourly pay to $US15 ($AU21).

Other companies have thrown in perks like new education benefits to help subsidize workers’ degrees, free phones, or the ever-popular sign-on bonus. The number of jobs offering signing bonuses skyrocketed over the summer.

(3) And some are making current workers work harder and longer

Employers are also addressing the labor shortage by leaning on the labor they already have, which is likely partially responsible for increases in productivity.

But, as the BofA researchers note, “this is not sustainable: you can only speed up the treadmill for so long.” Ironically, that treadmill may actually be driving current workers away. For instance, Insider’s Sarah Jackson reported that a Family Dollar in Nebraska had to temporarily close after all of its workers quit over short-staffing and long shifts. Something similar happened in May at a Dollar General in Maine, Insider’s Áine Cain reported, with workers walking off over low wages and understaffing.

So, while employers have had a variety of responses to difficulty finding workers, and workers may be struggling to find jobs that are the right position or haven’t chosen to return yet, there’s one thing that’s clear, according to a BofA United States team: “Bottom line, concerns over Covid are likely holding back the return of workers.”

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