The United States is currently experiencing a mass labor shortage that many link to the COVID-19 pandemic. Remote work environments, pandemic anxiety, and stay-at-home orders caused many workers to leave their jobs, and that trend continues today. In May alone, over 4 million people willingly left their jobs.
The current labor shortage is affecting the economy in ways that the country has never before seen. For your business, that means it’s affecting your team, your suppliers, and even your customers.
What is a Shortage of Labor?
A labor shortage occurs when employers can’t find qualified applicants to fill open jobs. Though qualified applicants may be out there, they are few and far between, making them hard to find and recruit. If employees leave a company faster than they can be replaced, that company will also experience a shortage of labor.
Why is Labor Shortage a Problem?
A national labor shortage can cause companies to raise their wages to be more competitive and attract better employees. In turn, they also raise their prices, passing the cost of higher salaries onto their consumers.
A labor shortage can also cause delays in the supply chain. These disruptions lead to fewer available products in stores and raised prices for the products that are available.
How is the Labor Shortage Affecting Businesses?
Businesses have been hit hard by these labor shortages. A lack of qualified candidates has meant that companies need to raise their wages, which not everyone can afford. Many businesses have also been experiencing supply chain issues beyond their control. These problems can sour customer and employee experiences, hurting the company even more. Today, businesses are still trying to overcome the labor shortage.
How Does Labor Shortage Lead to Inflation?
Labor shortages can lead to inflation by driving up the cost of doing business. When companies have to pay their workers more, they raise the prices of their goods, meaning you pay more at the register.
The current inflation rates in the U.S. are experiencing a double whammy linked to labor shortage and supply chain issues, plus an increased demand. People have money to spend after pandemic handouts and a reignited economy. Unfortunately, labor shortages and supply chain delays mean there isn’t enough product to meet the public’s demand. From there, it’s basic economics: high demand and low supply lead to increased prices.
How Does the Labor Shortage Affect the Economy?
We’ve already seen how the labor shortage has affected the economy in the short term. Wages have increased, inflation is rising at rates never before seen, and there have been some serious issues with supply chains. A prolonged labor shortage could have even more detrimental effects on the economy, such as:
- A recession
- Slowed economic growth
- Greater inflation
- Rising interest rates
Overcoming the Labor Shortage
While a labor shortage sounds scary, there is still a chance for things to get better. Businesses can make an effort to place more importance on their employees in order to retain workers. This can be done by offering competitive wages, a flexible work environment, opportunities for advancement, and treating every employee with respect and compassion. Give us a call at 888-297-3321, for business advisory services.