The economic theory of supply and demand is axiomatic to American businesses: the less a commodity is available, the more desirable and valuable it becomes. Around the world, workers have become a commodity unto themselves.
According to the Bureau of Labor Statistics, there are 11.4 million job openings and 6 million unemployed workers in the U.S. Even if every available worker were to fill an open position, there would still be millions of vacancies leftover. How did the demand for labor become so misaligned with the supply of willing and able laborers?
The exodus colloquially referred to as the “Great Resignation” cannot explain the ongoing labor shortage because many of those same workers accepted employment at a new job. For this reason, the Chamber of Commerce suggests that the movement is better described as the “Great Reshuffle.” Workers cited higher pay, better benefits, and improved lifestyle as their motivation for leaving one job in favor of another. To attract and retain employees, American employers started to offer sign-on bonuses, lower educational requirements, and supplement initial job training. This call-and-response has increased the cost of labor itself—a predictable outcome under the law of supply and demand.
The industries hardest hit by resignations during the COVID-19 pandemic are, ironically, the same industries that rebounded the quickest in terms of consumer interest. Demand for labor increased as the supply of willing and able laborers decreased, especially in manufacturing, transportation, retail, and hospitality. While the workforce in these industries steadily declined, the world’s largest consumer markets in the U.S. (and the E.U.) rebounded and exceeded pre-pandemic levels.
Reliance on Asian exports has also increased, but workers across Asia have been reshuffling, too. In China, nearly 70% of businesses report labor shortages. In fact, China’s Ministry of Education has estimated that by 2025 there will be a shortage of nearly 30 million workers in the country’s manufacturing sector. By contrast, the number of people looking for office work in government and the public sector doubled from 2020 to 2021. In Southeast Asia, countries such as Laos, Vietnam, Thailand, and Malaysia have been combatting labor shortages in the industries whose exports accounting for critical segments of their own economy—clothing, electronics, automobiles, and agriculture. Labor shortages in these countries has strained the global supply chain, which in turn inflates costs overseas. One might presume that this inflation would curb consumer spending, but so far there is no clear indication that consumer spending is in decline.
Meanwhile, employers in the U.S. lack the labor to manage and process what imports do come through. Even Amazon, a behemoth in both retail and delivery, reportedly struggles to balance its seemingly infinite supply of products and enormous demand against the unavailability of warehouse workers and drivers. Amazon contracts with smaller businesses to staff delivery drivers, but these smaller businesses cannot staff enough drivers to meet Amazon’s delivery routes—even after increasing its hourly wage to $23 and offering a $3,000 signing bonus. These smaller contractors have cited their inability to offer higher wages as one reason for their trouble retaining employees. Additionally, they have compared their employees’ wages to unionized employees at UPS, who make $40 an hour. Recently, in a well-publicized election, one of Amazon’s warehouses voted to unionize.
The American work ethic has fundamentally changed in the wake of the COVID-19 pandemic. Union membership had been declining for decades, but unionization efforts at major employers like Amazon, Apple and Starbucks are on the rise. Employers who are struggling to fully staff positions should assess their capacity to meet the new expectations of employees.
At the same time, American businesses can anticipate continued delays and stoppages in the global supply chain owing to labor shortages abroad. The U.S. economy may have taken for granted that a presumably healthy increase in its consumer demand could always be met by a supply of laborers.
Glenn Duhl is a management-side employment and litigation lawyer at Zangari Cohn Cuthbertson Duhl & Grello P.C. Please visit www.zcclawfirm.com.
The information contained in this article is general in nature and offered for informational purposes only. It is not offered and should not be construed as legal advice.
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