Before the COVID-19 pandemic, Dean Fearing had more people wanting to work at his popular Dallas restaurant than he could handle.
Now the chef and owner of Fearing’s Restaurant at the Ritz-Carlton hotel has about half his typical kitchen staff of 35 and has been forced to close for dinner on Sundays and Mondays and lunch on Mondays and Tuesdays. Customers have told him how disappointed they are when they’ve arrived—sometimes with clients in town on business—only to realize they can’t get his well-known Southwestern cuisine that day.
“We don’t have enough people. Once we get people, they leave,” Fearing said. “It’s been two years now and nothing has changed. It’s a little scary.”
- A labor shortage has become the new normal for many U.S. employers, who frustrate customers with shorter hours, empty shelves, and months-long waits for services.
- The severe mismatch between the number of open jobs and the number of people who want them creates problems all along the supply chain and fuels painful consumer inflation.
- With pay increases and financial incentives so common, workers have the upper hand—at least for now.
The struggle to find and keep workers is the new normal for many employers these days, as are the frustrations of customers and others impacted by the vast ripple effects of a U.S. labor shortage.
The severe mismatch between the number of open jobs and the number of workers who are willing and able to fill them contributes to disruptions throughout the supply chain and painful consumer inflation, now running at the highest annual rate in 40 years. In other words: dark dining rooms, empty shelves, frustratingly long waits for even the most basic goods and services, and higher prices for just about everything.
How does it work? When employers hike pay or add benefits to lure workers, they often raise their prices to compensate. When they can’t afford to pay more (like Fearing), they may instead cut back operating hours, making the service or product they provide less available. In some cases, the standards may even suffer because employers can’t find anyone to replace people with certain skills.
“The accelerated tightening of the labor market has been broad and deep,” economists at the Conference Board wrote in an April analysis about how to handle the shortage. “This is a serious problem.”
Take Jason Morgan, the principal of The Academy for Technology and the Classics, a public charter school in Santa Fe, New Mexico.
Since the pandemic began, four out of 27 teachers have resigned their full-time positions at the 400-student school, two others have asked to go part-time, and many substitute teachers—some of whom were older and feared for their health—are no longer available. Because he’s been forced to stretch and shuffle his staff around to cover all the classes, students in two high school math classes have even left the school, he said.
“I can think of two examples of families who, disappointed with the quality of instruction in those two math courses, disenrolled their kiddo in order to try to find a more challenging academic environment,” Morgan said. “That’s notable because ATC is one of the most rigorous academic programs in the state. So it is rather extraordinary for us to have students leave for that reason.”
Although Morgan nearly doubled the pay rate for some substitutes and began giving out $2,000 retention bonuses he calls “pandemic preparedness stipends” to returning teachers, nothing has drummed up much interest. He’s even started offering up to $2,000 for relocation expenses and a $500 referral bonus to existing employees, but there are virtually no applications for new teachers coming in, he said.
Record Job Openings
Indeed, the number of job openings in the U.S. has risen sharply in the pandemic era, marching to new record highs for months in a row.
In April, the latest month for which data is available, there were 11.4 million job openings, down a little from March’s record high 11.9 million, but still far higher than the 7 million range seen before COVID-19, according to the Bureau of Labor Statistics, which has data going back to 2000. The number of people quitting their jobs each month has also been unprecedented. In April, 4.4 million workers quit, just shy of the 4.5 million record.
The latest figures mean there are about two job openings for every unemployed worker in the U.S., the most in the 22 years the government has been keeping track. In May, 51% of small businesses reported having job openings they couldn’t fill, according to the National Federation of Independent Business, the most (except when it was 51% in September) in the 48 years it has been conducting a survey.
Experts point to a number of factors causing the worker shortage, which may seem strange coming so soon after 22 million U.S. jobs were lost at the height of the pandemic-triggered lockdowns.
In what many call the Great Resignation, a swarm of people have left their jobs or taken time away from work because the pandemic changed everything—from priorities and feelings about work-life balance to health considerations, access to childcare, and their sense of self-respect. As the economy reopened, the sudden demand for workers was a mismatch for the newly depleted workforce.
Not only are fewer people seeking work—including those who lack childcare (particularly women) and older populations who are more vulnerable to COVID-19 complications—but immigration levels to the U.S. have dropped.On top of that, there are more workers retiring than younger people replacing them, a problem that’s existed since long before the pandemic.
Better pay is one of the most significant natural consequences of the labor shortage. The average hourly pay for U.S. private sector employees is rising about twice as fast as it did for much of the decade before the pandemic, according to government statistics (though it’s still not keeping pace with inflation). It’s also given workers leverage in a host of other ways.
“People are becoming more and more demanding about what they want their job to look like and the hours they’re going to work,” said Mark Prude, who worked for more than two years as human resources director for the Atlanta-based infrastructure division of construction company Balfour Beatty US before leaving in March. They’re less willing to relocate and increasingly want to negotiate their pay, he said.
Because of the shortage of people, the company has increased the hourly wages and overtime it pays tradespeople and even makes bigger offers for salaried positions in management, Prude said. But where he used to receive 30 or 40 applications for every salaried opening, now it’s not unusual to get just three.
To be sure, the dynamics of the economy have changed, particularly this year, which could start to restore some balance between workers and openings, recent evidence suggests.
Wages rose a little more slowly in May, a sign of decreasing pressure on employers, and interest rates are ramping up fast as part of a deliberate move to slow down the economy and stifle inflation. Some economists fear the higher borrowing costs could even tip us into a recession, which could quickly erase the labor shortage and create the opposite problem: higher unemployment.
“Difficulty finding workers would ease up under such a scenario,” said Michael Wolf, a global economist with Deloitte in Philadelphia. “Even without a recession, the slowdown in the economy as rates rise should also ease some of the pressures that labor markets are facing."
Months of Waiting
For now, though, a lack of workers—whether dishwashers, electricians, or teachers—continues to fuel longer wait times, fewer options, and compromises around the country. And stories of places turning people away, leaving phone calls unreturned, and delaying repairs are all too common.
Wolf, the economist, was forced to wait months for a leak in his kitchen ceiling to be patched up after the company he called last July didn’t have enough workers to get to him until mid-December.
Danielle Abril, a journalist in San Francisco, was told her rescue dog would have to wait six months to see a local veterinarian for medication because the place was so swamped. She turned to friends on social media to tide the dog over, but ended up getting what she needed for Wicket, a Cairn Terrier mix, on a visit to her hometown of El Paso, Texas.
“They told me that unless the dog was sick and needed emergency care, they wouldn’t be able to see her until September,” Abril said of the San Francisco vet. “I told them she wasn’t sick, but she did need wellness meds.”
And then there are Fearing’s customers, who come to a dark dining room disappointed. Fearing has resisted boosting hourly wages so far, though unlike many restaurants, he does offer employees health insurance and a 401(k) plan, among other benefits.
“We’re bound by a budget,” Fearing said. “All these people paying $23 an hour, $25 an hour for line cooks and dishwashers—how do they make any money? At the end of the year, it can’t be a financial success when you’re spending that much money on labor.
“I just gotta say, ‘I wish I could be open, I’d love to be open—if we could find the help.’”