The labor shortage is actually 3 mismatches between workers and employers

Hiring fair Florida coronavirus
A man hands his resume to an employer at the 25th annual Central Florida Employment Council Job Fair at the Central Florida Fairgrounds. Paul Hennessy/SOPA Images/LightRocket/Getty Images
  • Reports of a labor shortage persist, even as unemployment benefits ended and the US continues to reopen.
  • Some of the driving factors behind the labor shortage remain mismatches across the economy.
  • Available workers might not fit open jobs, or want more from work. They also may have just moved.
  • See more stories on Insider’s business page.

A Family Dollar briefly closed in Nebraska after its whole staff quit over high turnover and low wages. A coffee shop owner in Iowa raised wages to $US15 ($AU21) to lure in workers. A burger chain owner says restaurants are in a bidding war for workers.

It seems like every day there’s yet another story about the effects the persistent labor shortage is having on businesses.

Ending federal unemployment benefits hasn’t seemed to plug it up yet, Bloomberg reports. In fact, letting those benefits lapse may actually deal a large blow to consumer spending and incomes, according to a report from the left-leaning Economic Policy Institute.

There are three major disconnects that define this mystery around open jobs, and why people aren’t filling them. Economists call these “mismatches,” and they’ve been driving labor crunches for months, as Insider reported in July. None seems to have faded yet.

(1) There’s still a skills mismatch – and higher-skilled workers might be filtered out

In June, the right-leaning Chamber of Commerce sounded the alarm on a skills gap, arguing for the need to invest in job-training programs and to equip applicants with the skills needed to fill open roles.

In an August note, economists at Morgan Stanley led by Ellen Zentner wrote: “Differences in skills and qualifications limit the extent to which workers can easily transition to high-demand industries, leading to a mismatch of labor supply and demand.”

However, there’s another wrinkle: The Wall Street Journal reported that employers are increasingly leaning on hiring software that filters out applicants based on words that may or may not appear on their resumes. But those keywords might filter out someone with tangentially related skills, and keep out someone looking to job switch.

Erica Groshen, senior economics advisor at the Cornell University School of Industrial and Labor Relations, told Insider that many employers may also be filtering out applicants who don’t have four-year degrees.

“This is a real problem for the labor market, because less than half of US workers have a college degree, it’s not changing rapidly,” Groshen said. “And yet we have many, many workers who were very productive at previous jobs, who have learned a lot of skills on those jobs.”

(2) People are moving and leaving open jobs

While big cities like New York and San Francisco may be on the rebound, people did move around within metro areas – and many don’t want to start commuting again. In fact, they’re making big investments in homes without factoring in commute time as much as pre-pandemic.

And “exurbs,” rural areas and small towns outside of big-city suburbs, have risen in popularity during the pandemic; the cities people have moved to have more professional roles that need filling, according to Morgan Stanley. Meanwhile, the big cities – which are now seeing red-hot housing prices – need service workers. Those economists say migration might need to settle down before the geographic mismatch ends. They also warned that, after the 2008 financial crisis, “regional misallocation of labor was one of the reasons that employment was slow to recover.”

(3) Workers have higher expectations and want more than what’s available

For four months now, workers have been quitting at record rates. Even leisure and hospitality, the sector largely leading the recovery, is seeing workers leave en masse and push up wages as employers get more eager to lure them back.

In a survey of 1,800 unemployed job seekers by FlexJobs, 48% of respondents said they were frustrated with the search because they weren’t finding the right positions – and many were only finding openings for low-wage roles. With the Delta variant still pummeling the US, taking a job now isn’t just about pay or benefits (although both are compelling workers). It’s also a health and a childcare consideration – will the job offset childcare costs, or be flexible enough when school closes due to an outbreak?

As Rep. Alexandria Ocasio-Cortez wrote on Twitter: “Would you sign up for a job to get attacked by unvaccinated tourists for $US15 ($AU21)/hr? For no healthcare but max risk? Most wouldn’t.”

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