The Great Worker Shortage: What Caused It and How to Solve It
The Worker Shortage has created a multiplicity of challenges for organizations, especially in IT and other support staff roles. In this white paper, we explore the causes of the shortage and ways executives can successfully lead their team through the challenges. Keep scrolling to read the paper in its entirety or fill out the form to download the PDF.
What this report covers:
The Covid Effect: The Existential Crisis of the American Worker and Why it matters.
- Nationwide, most industries have more job openings than people with prior experience in that sector, according to the US Department of Labor.
- According to The Wall Street Journal there are almost 4M more open positions than people seeking work.
- According to ZipRecruiter’s chief economist Julia Pollak, this “is the lowest ratio of unemployed people to job openings we’ve ever seen”
- The job quit rate hit an all-time high of 3% in September of 2021 compared to the 20-year average of 1.94%.
You Only Live Once (YOLO) – How a Meme Became Ingrained in the American Psyche
With the advent of Covid, American workers were forced to change their approach to work and school almost overnight, and these seismic shifts resulted in some deep introspection about life and what it should look like.
While every state approached the pandemic differently, across the board, the majority of non-essential workers stayed at home for some length of time, and many previously in-office workers are still remote. Millions of workers were laid off and some chose to stay out of the workforce when government benefits were more than their average weekly paycheck.
The giant pause button was pushed on people’s lives, and it gave them time to think. Many were able to ask: Is this what I want to be doing with my life? And they were asking this question in the context of some serious philosophical concepts that the pandemic brought to the forefront:
The Frailty of Life
In an August 2021 survey, 72% said they personally know someone who has been hospitalized or died from COVID-19. Adding to that, news coverage fills the 24-hour news cycle with tragic stories, images of overrun hospitals and Covid data. It’s hard to avoid the subject of death and dying. All of this is leading people to ask the big question: Life is short. Is this what I really want to be doing with my life?
The Importance of Family
The initial shutdowns brought families together in a way that they’d never experienced before. Plus, over the course of the pandemic, many Americans have been separated from extended family for significant periods of time. This has left the average worker re-evaluating how to better balance family and work. Remote work has given people more time with their family and reduced stress, with one study finding that remote work gives people an average of 51 more minutes in their day.
The Right to Bodily Autonomy
The debates about vaccine mandates, either government or employee mandated, have caused some people to question the role of government and employers. Their opposition to these mandates have prompted some workers to leave their jobs. While the numbers are small, in this tight job market it still makes an impact. Mary Kay O’Neill, senior health and benefits consultant at Mercer, explained, “The percentages are playing out to be very small. … In this environment of worker shortages, even 3% turnover can be concerning,”
An October 2021 Kaiser Family Foundation survey found:
- Half of workers do not want their employer to put in place a vaccine requirement.
- Seven in ten unvaccinated workers say they will leave their job if they are required to get vaccinated and weekly testing is not an option.
- Five percent of unvaccinated workers say they have left a job due to a vaccine requirement.
These three issues are leaving people to think about their lives and their freedoms as well as seeking more purpose and fulfillment in how they spend their time — and it’s impacting the job market. And now with a market that favors the job seeker, they have better choices and opportunities. Technology has given people who want to start their own businesses a variety of choices with a low entry cost. For instance, Etsy – an online marketplace for vintage and craft goods – has experienced a 53 percent increase in sellers with four in 10 of the new sellers having started their businesses for reasons related to the pandemic.
In the Wall Street Journal, Danny Nelms, president of the Work Institute summed it up well:
“This [pandemic] has been going on for so long, it’s affecting people mentally, physically. All those things are continuing to make people be reflective of their life and career and their jobs. Add to that over 10 million openings, and if I want to go do something different it’s not terribly hard to do.”
As workers are evaluating their lives in light of the YOLO (You Only Live Once) mentality, they are seeking more fulfilling and flexible work if they choose to work at all.
The Demographics of the Great Resignation
Even before the pandemic, the aging workforce was an ongoing topic of concern for economists. When the Baby Boomer generation evaluated concerns about health risks and the added stress of the workplace, they made the decision to retire early in large numbers. During the pandemic, there have been 2 million more retirements than expected. With the YOLO principle at work, they’ve reassessed finances and their quality of life and found that retiring early was the best option. Most other groups have returned to the workforce, but those 55 and up have not, as the number in this age group participating in the workforce is actually down from last fall.
With most schools transitioning to remote learning, the burden of education fell to parents, and disproportionately affected mothers. Many of those mothers reached a breaking point, and left the workforce, still not returning two years into the pandemic. Women with young children disproportionately left the job market and haven’t come back. For those who do continue to work, they are choosing freelance work that gives them greater work/family balance. According to a Pew Research analysis of the US Department of Labor data, self-employed female workers have grown 4.3 percent.
With older generations, greater barriers to entrepreneurship existed: gatekeepers controlled access, high entry cost, inability to connect with consumers, etc. Now due to technology and social media, many of those barriers are disappearing — and the pandemic has accelerated that.
Upwork Inc. Chief Executive Hayden Brown, citing a September 2020 survey, said: “A new type of career path has emerged, with half of the Gen Z [age 18 to 22] talent pool actually choosing to start their careers in freelance rather than full-time employment.”
Bargaining Power has Shifted to the Worker
As a result of these various groups leaving the traditional workforce, there’s no doubt that the power has shifted to the worker. Scarcity increases cost, and in this case, it increases salaries. It’s a simple, well-known formula:
Increased Demand + Decreased Supply = Higher Cost
For example, according to the Washington Post, pay is up 8.8 percent for nonmanagerial workers in the restaurant-and-hospitality sector and 6.1 percent for warehouse workers in the past five months.
Increased demand is driven by market forces in some sectors:
Increased demand is driven by market forces in some sectors:
Decreased supply is driven by:
All of these forces are making it more difficult for companies to find qualified workers and they are paying more for workers they hire.
The worker is now in the driver’s seat with more bargaining power. Their bargaining power gives them:
Let’s take a deeper look at two areas that have been significantly impacted by the Covid pandemic.
Two years into the pandemic, healthcare workers are burned out and struggling. With 92% percent of nurses surveyed saying they believe the pandemic has depleted nurses and will cut their careers short, there’s cause for alarm that this industry will face shortages for years to come.
Many nurses are choosing to take a break from their careers after years of safety concerns and high stress. Hospitals are paying significant increases in nurse salaries to fill out their staff, often relying on traveling nurses or overseas nurses. With traveling nurse contracts paying so much more than staff positions, often staff nurses choose to leave their jobs for more lucrative positions. It’s a vicious cycle that lowers morale and reduces quality of care.
Healthcare executives are seeking solutions to their nursing shortage, especially those nurses who are able to work in the ICU.
IT Worker Shortage
Before the pandemic, there was already a shortage to meet IT staffing needs. Now businesses are seeking to create an IT infrastructure to support remote workers. This increased need for digital transformation includes security, automation, or adopting other emerging technologies means an increased demand for IT staff.
Demand for IT services is high:
- 58% of respondents in a Gartner survey reported either an increase or a plan to increase emerging technology investment in 2021 compared with 29% in 2020.
- 75% of IT execs see the talent shortage as the greatest risk to adopting the majority of IT automation technologies (including automation). It’s the greatest risk above implementation cost and security risk.
- Due to the increase in remote workers, 64 percent of IT leaders have increased or are planning to increase investments in security technologies.
According to ZDNet, “The COVID-19 pandemic has forced business leaders to radically rethink old ways of working, and in most cases has led to organizations kick-starting digital transformation programs.”
IT Worker Shortage
Employers are Scrambling to Find Solutions
So where does this leave the employer? The short answer is that things must change. But the bigger question is how.
The employer has a variety of options to address the worker shorter:
Of these choices, automation can have the longest term positive impact on the company’s performance and resilience to labor market fluctuations.
The Compelling Case for Automation: Don’t Get Left Behind
Automation is a growing trend that is redefining the workforce forever. The LA Times reported that 50% of firms plan to use more automation (robots) in their companies. In the first nine months of 2021, US companies ordered a record of 29,000 robots according to Business Insider. (5/4/21)
It’s becoming clear that those businesses who do not automate will struggle to compete against companies who are able to be more efficient at less cost.
Hyperautomation is also a growing trend. According to Gartner, hyperautomation is a type of comprehensive, connected automation that coordinates the use of various technologies including:
Cathy Tornbohm, distinguished research vice president at Gartner, explained, “Organizations are transitioning from a loosely coupled set of automation technologies to a more-connected automation strategy.”
Gartner forecasts the hyperautomation software market to reach nearly $600B this year alone. Hyperautomation is becoming a necessity for businesses to compete successfully, with Gartner projecting that hyperautomation will lower operational costs by 30 percent by 2024.
“Hyperautomation has shifted from an option to a condition of survival,” said Fabrizio Biscotti, research vice president at Gartner. “Organizations will require more IT and business process automation as they are forced to accelerate digital transformation plans in a post-COVID-19, digital-first world.”
Applying Automation to AP, IT, and Telecom
While there are a number of ways automation can be leveraged within enterprises, we will use a manual IT, AP, and telecom invoices’ payment process to demonstrate how a digital transformation combined with automation can help enterprises avoid unpredictable labor increases, increase productivity without an increase in cost, and grow in efficiency and competitiveness.
Manual Invoice Processing v. Automated Invoice Processing
A digital transformation and automation of processes can save significant time and provide greater visibility into business operations and data. Below are some differences between a manual approach and an automated approach to telecom related invoices (same for other high quantity complex invoices such as utilities, waste, IT license subscriptions, etc.).
Multiple manual touch points including:
|Eliminates manual touch points.|
Multitude of staff hours involved in process:
|Eliminates 95% of Staff Time’s Involvement|
Errors & Issues
|Eliminates or Reduces Errors and Issues|
Access to information is:
Access to robust data and information:
|Contract Management is manual and time consuming for staff.||Contracts management is automated with configurable notifications and tied to associated accounts, services, and inventory|
Steps to Success in Transitioning to Automation
If you think you’re ready to explore automation for your business, consider a few things before you begin the process. According to McKinsey’s report, Driving Impact at Scale from Automation and AI several factors are important to successful implementation:
As you consider these strategies, it’s important to evaluate if you have the IT and other staff to successfully implement automation.
Could Outsourcing Be the Answer?
When you consider the shortage of IT workers along with the overall worker shortage, automating manual processes is a no-brainer.
But the paradox is that due to the IT worker shortage, implementing automated solutions may not be possible or could experience delays. In some cases, that can lead to serious problems, especially if invoices are unpaid or other important business tasks are overlooked.
However, outsourcing provides a solution. With a provider for automation in place, you can enjoy these benefits:
For example, at Tellennium, we offer business automation solutions utilizing robotic process automation (RPA), which is a software robot that can be programmed to perform business functions just as a person would.
An RPA can help your business reduce staff needs, and therefore costs, by performing a variety of tasks, including:
Automated Invoice Retrieval
Automated Inventory Pulls
Real Time Usage
Automatic Information Retrieval
Setting Your Business Up for Success in a Volatile Labor Market and Economy
The labor market’s dramatic shift since the pandemic is forcing businesses to re-evaluate how they do business. With high labor costs, disruptive turnover, lost institutional knowledge, and worker shortages, businesses are seeking solutions that will provide cost stability and business sustainability.
Automation is becoming a necessity in this job market, and those businesses who do not adopt automation will find it increasingly difficult to compete. However, those businesses that are adopting automation are finding that many processes can be automated for greater efficiency and less cost.
Due to IT labor shortages and complexity of automation, many businesses are seeking an outsourcing option.
At Tellennium, we’re able to provide expertise and continuity in a difficult labor market, with flexibility to scale up or down services as needed.
When you work with Tellennium, you’ll get: