Here’s why you’re having trouble finding work – or workers – during the labor shortage, economists say

A help wanted sign in a New York City restaurant
A ‘Help Wanted’ sign hangs in the window of a restaurant in the Greenwich Village neighborhood of Manhattan in New York, Tuesday, May 4, 2021 AP Photo/Mary Altaffer
  • Anecdotes about labor shortages have been popping up for months amidst America’s slow recovery.
  • But enhanced unemployment has expired and it hasn’t helped end end the labor crunch.
  • Insider spoke to five economists and experts about why workers aren’t coming back, and the issues with hiring.
  • See more stories on Insider’s business page.

America is tired of labor shortages. September was supposed to be the silver bullet month when the end of enhanced unemployment benefits coincided with schools and other childcare services reopening and vaccination rates facilitating a return to office. But if you’re not back at work, you’re far from the only one.

That’s because the reality of September could perhaps be summarized in two words: Womp womp. There’s another two words, nearly as fearsome: The month told a “Delta story,” according to Jesse Wheeler, an economic analyst at Morning Consult.

“We’re still expecting this improvement in jobs and continued economic recovery in the future, but it’s basically just on hold,” Wheeler said.

So if you haven’t returned to work yet, or are mulling whether a return to work is the right move right now, you’re not alone. In a note released this week, JPMorgan found that just half of the people who lost jobs during COVID are going back to work.

As Bloomberg reports, unemployment benefits winding down didn’t compel people back into the workforce, echoing several studies showing no connection. Schools are contending with Delta waves and temporarily shuttering. Childcare is facing its own labor shortage, turning away families who need care. Vaccinations are up, but mass vaccine mandates for businesses only recently become a reality.

“I don’t see evidence that the slowing of growth had to do with labor shortages. It had to do with Delta,” Heidi Shierholz, the president of the left-leaning Economic Policy Institute, told Insider. She added: “Employers really were demanding a lot fewer people in August than they had in the prior month.”

Insider spoke to five economists and experts about the current messy state of the labor market, and why it makes sense some people haven’t returned yet.

At the heart of the current labor crunch are major disconnects – what economists call “mismatches” – between what employers want and the people who could fill those roles. Some have moved out of areas where there’s need; others have higher expectations for work.

But employers are responsible for another mismatch: They say they’re scrambling to find workers but they’re not willing to pay the price labor is demanding right now.

Hiring is a mess

As Vox’s Rani Molla and Emily Stewart report, the hiring system is a little bit broken too. The current labor market has an “incongruity” between what job seekers are hearing about the abundance of roles, and their actual experiences, according to Vox. It might be a fourth more subtle mismatch.

For one, The Wall Street Journal reports that some applicants may be filtered out by the hiring software many employers have adopted. If your resume doesn’t have the exact keyword, or, like many workers, you’re trying to switch into a related role, you may not even make it past the initial screening.

One criterion that employers are filtering by: Whether applicants have a college degree. That could leave out the 70 million workers who are “STARs” – Skilled Through Alternative Routes, according to Papia Debroy, the senior vice president of insights at [email protected] According to the Census Bureau, two-thirds of American workers don’t have a bachelor’s degree, with that percentage coming in higher for Black and Hispanic workers.

Debroy said that STARs have been increasingly locked out of middle wage jobs in the past decades – roles that are crucial for them to move up the ladder.

“In many respects, not recognizing that skills are being gained through alternative routes is not just failing these workers. It’s failing employers from finding the talent they’re looking for, but also it’s preventing further mobility for this population,” Debroy said.

Erica Groshen, senior economics advisor at the Cornell University School of Industrial and Labor Relations and the former commissioner of the Bureau of Labor Statistics, told Insider that employers may not be working rapidly to actually fill the record number of job openings.

“They may say, ‘Well, we have an opening and we have it listed,’ but they may not be rushing to fill it if they’re not sure how the pandemic is playing out in their area,” Groshen said. “So they may leave the posting up, but not be rushing.”

There’s still the pandemic to consider

In July, Morning Consult found that 3.5 million of the people who left the labor force were planning on returning to work in the next year; two-thirds wanted to start working again within three months.

“However, a few months later, a lot of those people have put it on hold,” Morning Consult’s Wheeler said. The intelligence firm’s September outlook found that consumer sentiment in August reached its lowest levels since February 2021.

That’s because taking a job right now still faces all of the calculations of the health risks and childcare considerations of the pandemic, which many assumed would have been resolved by now. It’s what Shierholz calls “baby echoes” of the early days of the pandemic.

There is, of course, something we have now that we didn’t at the start of the pandemic: Vaccines. But, as Insider’s Aylin Woodward reports, the US has fallen behind in vaccination rates, ranking 39th in the world.

“In places where the pandemic is still hitting a lot of people with low vaccination rates, that might still be keeping some people home,” Brian Riedl, a budget expert at the right-leaning Manhattan Institute, told Insider. “The states that are relatively unvaccinated and seeing more Delta variant cases still may see a lag.”

As President Joe Biden continues to ramp up vaccination efforts and the Delta wave subsides, people might return more. JPMorgan anticipates that 2 million Americans “will continue to drift back into employment,” especially as their pandemic savings dwindle.

In the meantime, businesses have turned toward one method to make the return pay off for workers: Raising wages.

“There’s always somebody talking about there being a labor shortage, and yet in a free market economy, the price is supposed to make the adjustments so that the quantity demanded will meet the quantity supplied,” Groshen said. “What they’re really saying is that I’m not offering enough to get the workers I need.”

Anecdotally, it seems to be working. The New York Times reported that Jason Hammel, a chef in Chicago, raised base pay to $US18 ($AU25) to $US24 ($AU33) per hour; he said he hasn’t had issues hiring. But some restaurants have raised wages and still haven’t seen applicants flooding in, Insider’s Grace Dean reported.

Groshen said that offering more doesn’t just encompass wages – it’s working conditions and benefits, too.

“If I decide that I don’t want to pay the price of an Audi, I don’t get to just announce that there’s an Audi shortage and this needs government intervention,” Groshen said.

Joseph Zeballos-Roig contributed reporting.