Labor shortage

There are millions of jobs, but a shortage of

workers: Economists explain why that’s
worrying
Holly Ellyatt W W W . C N B C . C O M ( O C T 2 0 2 1 )

A contractor holds a sign reading “Slow” on Van Ness Boulevard in San Francisco, California, U.S., on
Monday, March 22, 2021.

LONDON — The Covid-19 pandemic is not only having a seismic impact on global public
health but also causing chaos for the economy, with supply chain disruptions and labor
shortages a big problem for businesses around the world.

Shifts that have taken place in the labor market are becoming more pronounced, with many
people voluntarily quitting roles just as demand for workers rises as economies reopen.

Economists say changing demographics like ageing and retiring workers are a factor behind
the shortages, as well as border controls and immigration limits, and demands for better pay
and flexible working arrangements.

The latest labor data from the U.S., for example, shows that more workers are willing to walk
away from their jobs or to switch employment. The most recent U.S. Labor Department’s
monthly Job Openings and Labor Turnover Survey, released last week, showed there were
10.4 million job openings in August whereas the number of people leaving their jobs (the so-
called “quits rate”) rose to 4.3 million, the highest level seen on records dating back to Dec.
2000.

Sectors particularly affected by workers quitting their jobs were accommodation and food
services, wholesale trade and state and local government education.

The problem is not just a U.S. one, with many countries around the world experiencing a
shortage of workers. It matters because it’s exacerbating supply chain disruptions around the
Labor shortage
globe, with key industries struggling to regain momentum due to a lack of workers or raw
materials.

This disrupts both local and global production and supply networks, hampering economic
growth and causing product and service shortages for consumers.

Experts are assessing the potential impact that the worker shortages could have on economies
in the U.S., U.K. and euro zone. They also stress that while the pandemic has accentuated
and underscored labor shortages, the roots to these problems are pre-pandemic.

“The lack of skilled workers is not only just another symptom of post-lockdown economics but
also the result of more fundamental developments in the U.S., the euro zone and the U.K.,”
ING economists Carsten Brzeski, James Knightley, Bert Colijn and James Smith wrote
Tuesday in a note.

What’s going on with U.S. workers?

Looking at the cyclical and more fundamental drivers of those shortages, ING’s economists
examined similarities and differences in labor markets across the globe.

In the U.S., they noted that the economy has fully regained all of the lost economic output
brought about by the pandemic although “employment remains 5 million [jobs] below February
2020′s level.” This isn’t due to a lack of worker demand, however.

“There are more than ten million job vacancies right now spread across all sectors with a record
proportion of companies raising pay to try to attract staff. Instead, it is a problem with the supply
of workers, which is both holding back output and increasing inflation pressures in the
economy.”

One possible explanation for this is that households have built up savings buffers and don’t
have any urgency to return to work, the economists note, but the problem could be more
structural than that.

“We believe there is a more permanent loss of workers driven by a large number of older
workers taking early retirement. The thought of returning to the office and the daily commute
may seem unpalatable for many people and with surging equity markets having boosted 401k
pension plans, early retirement may seem a very attractive option,” they noted, adding that
border closures will have curbed immigration and slower birth rates mean fewer young workers
are now entering the workforce.

Principal Nathan Hay checks the temperatures of students as they return to school on the first
day of in-person classes in Orange County at Baldwin Park Elementary School on August 21,
2020 in Orlando, Florida, US. Face masks and temperature checks are required for all students
as Florida’s death toll from COVID-19 now exceeds 10,000, with some teachers refusing to
return to their classrooms due to health concerns.

“If correct, labour market shortages could persist for a good deal longer than the Federal
Reserve expects, which will mean companies increasingly bidding up pay to attract staff,” ING
said.

“Not only that, but elevated quit rates suggest that companies may also have to raise pay to
retain the staff they currently have given the high costs of worker turnover on moral, training
Labor shortage
and customer satisfaction. This points to more inflation pressures for the Fed to respond to
with interest rates rising sooner and faster than currently priced by financial markets.”

What about the U.K.?

The U.K.’s situation has also been exacerbated by Brexit, with many foreign workers that the
country relied on going back home during the pandemic.

The absence of workers in critical industries such as meat production, agriculture and
transportation has led to consumer panic in the U.K. in recent weeks, with shortages of fuel at
gas stations and warnings that thousands of livestock could be culled.

That has led the government to introduce temporary visas for truck drivers and poultry
workers and reports of wage increases to attract workers to key industries like hospitality. In
the meantime, there are widespread concerns over the rising costs of goods, services and
food ahead of Christmas.

Post-Brexit visa rules make it trickier for EU nationals to work in the U.K. in lower-paid roles
and ING said this means it will be permanently harder for U.K. companies to source staff from
overseas. “Recent temporary visa changes for specific roles, including lorry [truck] drivers, are
unlikely to make a huge difference to that story,” they noted.

Like Europe, there are structural challenges facing the U.K. too, namely that working-age
population growth is set to slow over the next decade. ING noted that “like the U.S. that may
amplify some of the current shortages, but it’s also a structural drag on U.K. potential growth.”

And the euro zone?

Similarly to the U.K., the neighboring euro zone sought to limit massive job losses in the
pandemic by introducing furlough schemes (where the government subsidized workers’
earnings in order to stop redundancies).

“At 7.5%, the unemployment rate is now just 0.4 percentage points away from its all-time low,
reached in March last year,” ING noted.

Still, while concerns about labor shortages have started later than in the U.S. and are less
pressing than in the U.K., “they are increasingly mentioned as a concern for businesses,” ING
added.

“More than ever, businesses in industry report labour as a factor limiting production, in services
this number is still below historical highs.”

1. General comprehension
Read the document and take note of ONLY three key points that summarize it.
When finished, review in groups and agree on only three for the group.
Labor shortage
2. Specific comprehension
Answer the questions below:

1. According to the article, what is the most recent record high for the number of
people quitting their jobs in the U.S.?
2. What are the three sectors that are particularly affected by workers quitting
their jobs in the U.S.?
3. Why are labor shortages a problem for businesses around the world?
4. What are some of the reasons why labor shortages are expected to persist for
a longer period of time than the Federal Reserve expects?
5. How has Brexit exacerbated the labor shortage situation in the U.K.?
6. What are some of the measures that the U.K. government has taken to
address the labor shortage?
7. What are the structural challenges that the U.K. and Europe face in terms of
labor shortages?
8. What is the unemployment rate in the euro zone?
9. Why are businesses in industry more concerned about labor shortages than
businesses in services?

3. Focus on meaning.

Look at the definitions below. Go back to the text and look for the words that match
the definitions.

1. To prevent someone doing something easily

2. To control or limit something that is unwanted.
3. To think or believe something will happen.
4. To make something that is already bad, even worse.
5. To emphasize the importance of something.
6. To make or become less severe, difficult, unpleasant, painful, etc.
7. To show that something is very important or worth giving attention to.
Labor shortage
4. Focus on using the vocabulary.

Recreate correct sentences using the words available:

➔ key / (to hamper) / lack / the / qualified / growth / industries / the / of / workers /
of
➔ pandemic / global / across / the / the / (to curb ) / movement / borders / the /
workers / of / (to hamper) / market
➔ (to expect ) / persist / Federal Reserve / labor / for / economists / anticipates /
than / shortages / the / to / longer / the
➔ shifts / as / shortages / populations / labor / demographic / (to exacerbate) /
such / aging / the
➔ the / the / shortages / automating / role / and / labor / technology / enhancing /
(to underscore) / of / in / tasks / productivity
➔ labor / growth / the / economic / of / article / (to emphasize) / importance /
addressing / the / support / to
➔ measures / immigration / labor / (to ease) / governments / market / restrictions
/ (to ease) / shortages

5. Written expression and peer-correction

Now, write your summary of the document (on paper. You will be giving it to
someone in the class for feedback)