Why you can’t find people to hire: unpacking the complexity of the labor market

It’s mid-2021, and despite the challenges with the Covid-19 Delta variant, companies continue to add jobs. A good sign of economic stabilization. Unfortunately, we’re also facing the greatest disruption in the labor market in a century. Employers cannot find enough people to fill their open positions. One would think the math is easy when the number of open jobs is greater than the number of unemployed people. And yet, it’s not so simple. Nor is it as simple as stopping federal monies or increasing worker pay. However, there is hope for employers through skills-based hiring and unique partnerships.

While enjoying a coffee with my husband over the weekend, we met a local farmer and enjoyed a long conversation primarily about the current challenges presented in agriculture in the West during the driest, hottest year on record. He said he’s grateful that his federal crop insurance will cover 85% of his yield, given the significant losses he will have.

He then asked what we did for a living. I gave my quick spiel about WholeStory and how we help employers hire for soft skills. The farmer responded with a remark about how employers are struggling to hire because people are “sitting at home getting paycheck from the government.”

[Pause for irony]

Most people are unaware of the macro forces at play in the current labor market. This includes many perplexed employers, especially those who are raising wages and still not seeing enough applicants to fill their roles.

Like the farmer, I used to see things as black and white. I shared the perspective, concern, and assumption about people’s work ethic. Today, my understanding is much more nuanced. Through some hard life challenges, like my parent’s divorce when I was 30 and six years of struggle living with a chronic illness, I learned that few things in life are binary. Instead, most things are gray, “both and,” or hold a multitude of perspectives and variables.

Through my work with WholeStory, I’ve been steeped in labor market trends. My education has deepened over the last year as the issues employers face nationwide have been exacerbated, accelerating and growing in complexity due to the pandemic. I’ve had an even more intimate look into these issues through our work in the XPRIZE Rapid Reskilling completion as all ten teams—to varying degrees, regardless of industry—are facing significant hurdles in enrolling job seekers into FREE training programs that practically guarantee a well-paying, entry-level job at the end.

First, the elephant(s) in the room

#1. Supplemental federal unemployment insurance benefits and federal stimulus checks have certainly played a role in labor market dynamics. It’s estimated that 25% of those on unemployment were making more money than at their previous job when considering the additional federal monies (source). By and large, the jobs that these folks had were low-wage, and offered little-to-no health benefits. It doesn’t take a rocket scientist—or better yet, a social psychologist—to conclude that many folks would take this opportunity to hold back. However, the data suggests there are bigger factors at play (source), which I’ll dig into below.

#2. We’re still in the midst of a global pandemic. People are rightly concerned about getting sick and/or transmitting Covid to others (source). Until it’s over everywhere, it’s not over anywhere. For workers, especially those barely scraping by in industries that require frequent engagement with others, such as in retail, restaurants, and hospitality, it’s no wonder people are hesitant. They’re in a tough spot: work and risk their health/life and the health/lives of their loved ones, or wait and hope that they can figure out a new path before unemployment runs out.

Second, the workers have left the building

#3. The stress and clarity that this crisis has brought about in many is leading to what some are calling “The Great Resignation” (source). Millions of people are leaving their jobs every month. At a rate of 2.7% to be exact, the highest since 2000 (source). This is especially true in healthcare, restaurants, hospitality, and education but it reaches into nearly every sector. As mentioned above, people are concerned about their health and switching to jobs that do not require as much engagement with others. Many are using this moment to more deeply align their work with their values, priorities, and desires. In industries where workers were able to work remotely but are now being forced back to the office, many are opting for more flexible, remote-friendly jobs. People have realized that life is short—work is not worth sacrificing their health, family, or values if they are able to go elsewhere.

Image Credit: https://www.bls.gov/news.release/jolts.t04.htm#

#4. Roughly 1.5 million people over the age of 55 have taken severance packages and retired early (source). Similar to other groups, many older workers have simply decided it’s no longer worth it. The gap left behind by Baby Boomers in particular presents a huge risk to employers who do not have strong succession plans in place. There are not as many mid-level workers to fill the shoes of those retiring. This trend was accelerated over the last year.

#5. For women, the pandemic created an impossible situation. 2.3 million women permanently left the workforce in 2020 to care for sick or at risk loved ones and/or their children who were out of school and daycare. Women, especially those with children, were much more likely to leave than men (source).

#6. That’s not to mention the overall shrinking workforce due to declining birth rates, a trend over the last decade (source). Between those retiring and women leaving, the overall labor market participation rate dropped 1.7%, which may not sound like much but represents 3.1 million workers (source).

Image credit: https://fred.stlouisfed.org/series/CLF16OV

#7. All of these factors thus far have created a cataclysmic shift in power dynamics between employers and employees. We’re in the midst of a labor market reckoning. Job seekers and employees are now in the driver’s seat. And they’re not stopping without good reason—higher wages, improved benefits, better hours, flexible schedules, transparent & effective health / safety policies, etc. (source). Like it or not, that’s how it is.

Third, we need more Mr. Miyagis

#8. Raising wages and boosting benefits only helps to a degree. It’s not panacea and certainly comes with constraints for some small businesses. Several industries simply do not have enough skilled workers. This is especially acute in healthcare, manufacturing, construction, and many of the trades (source). A decline in apprenticeships, lower interest in these jobs, and advances in technology (namely automation) are some of the major factors. The effects of the pandemic accelerated what was a 10 to 20 year projection, condensing it down to just a few months. In addition, some other industries are also less desirable like retail, restaurants, and hospitality. Higher wages don’t reduce health risks, improve shifts, or ensure predicable schedules.

#9. Along the lines of declining apprenticeships, the turn of the 21st century brought about the end of internal training and leadership development programs. Many companies stopped creating distinct career pathways to help people move up (source). Instead, they then expected people to show up “work ready.” In some instances this may be an effective model but in many, it’s created significant hurdles for recruitment to not just find people to do the job, but to do it well.

#10. In the throes of the sharp, deep recession in mid-2020, many people separated from employers in layoffs, furloughs, quitting, and business closures. There were 110,000 restaurants that permanently shut down in 2020 alone, resulting in 2.5 million jobs lost (source). What many employers are not fully aware of, is that when an employee relationship is severed, it is exponentially more difficult to reconnect it. Many people went out and found new jobs, went back to school, or dropped out of the workforce altogether (as discussed above). The rest were left looking for jobs in new industries, struggling to match or translate their skill set.

#11. The last factor I’ve observed is not as obvious but no less important: most employers are too narrowly focused on “qualifications” that have little to no bearing on performance. Things like brand name schools, previous industry experience, and in some industries, level of education and degrees themselves. This tight aperture excludes 70 million people (!) who’ve been skilled through alternative routes (STARS, source) and have the potential to transform teams.

Complex, indeed. While the number of jobs listed exceeds the number of people unemployed (and maybe even including those underemployed), it’s not a one-to-one match. We don’t have the right people with the right skills. Rather than a labor shortage, what we have is a labor mismatch.

What’s an employer to do?

Thankfully, there are two simple yet strategic actions employers can take to mitigate their risk. First, employers must shift toward skills-based hiring, allowing for life experience as a job qualification. Second, employers must connect with job training programs, which are growing in capacity yet historically underutilized.

Skills-based hiring offers transformative lens

In every crisis lies opportunity. For employers, this is a moment to truly differentiate—in values, candidate experience, and follow through. Superficial benefits like $100 just for showing up to the interview won’t cut it. This comes down to who can out-behave the competition.

We spend more time at work than we do in any other activity in life, except for hopefully sleeping. Work is not “just business.” Employers must signal to job seekers that they value them and their employees as people. And—here’s the real kicker—follow through with authentic actions. Any in-authenticity will be sniffed out and dismissed immediately. The impact this will have on employer branding cannot be overstated.

Skills-based hiring offers a win-win scenario. Employers can identify and hire the right people for the right jobs while expanding the aperture for who qualifies. This is especially powerful for job seekers who are underrepresented or come from non-traditional backgrounds. Skills-based hiring focuses on the skills an individual already possesses rather than focusing on how they acquired them. These can be both technical and soft skills.

In order to understand what those skills are, employers must look at the broad experiences candidates gain through life. Learning about an individual’s life experiences is a powerful mechanism for both human connection and assessing soft skills. Before this is dismissed as some soft and fluffy kumbayah thing, know that life experience is the most effective and powerful way to understanding people and their soft skills. Recently, the top global management consulting firm McKinsey recommended employers “elicit work-life experiences” in the interview.

For more detail on how to put that into practice, here’s one small change that will transform your hiring success rates.

Job training programs supply amazing, untapped talent

For some companies, developing in-house training, internships, or apprenticeship programs may be a viable path to getting new hires up to speed. However for most, it will likely be a long and costly road that cannot address acute needs. Workforce development programs are strategically positioned to meet this moment, and to meet employers where they are.

There are roughly 10,000 private and non-profit job training programs nation-wide. In addition, we have an extensive, established public workforce development system at our fingertips here in the U.S. The American Job Centers are in every state and add up to nearly 2,400 “one stops.” These programs and organizations provide training in every industry and represent millions of job seekers.

This space is also poised for growth with massive investment awaiting approval on the desk of Congress, along with the notable stage of the XPRIZE Rapid Reskilling competition.

As part of our work, we partner with workforce development programs across the country to help prepare their job seekers for the interview. Here in Washington State, our partners at the Association for Washington Business Workforce Portal have an internship program. They provide internships in a wide variety of industries, partnering with their 7,000 business members.

Year Up, one of our national partners, serves the tech, business, and finance industries. Their program not only trains students in a specific technical skills but also helps them become polished professionals. What really sets them apart, according to Kamal de Campos an Employment Placement Manager, is that their students have “a drive and tenacity like no other.”

“Our students are resilient, focused and hungry for knowledge. They are always seeking feedback and specifics and have their professional development top of mind and never stop growing.”

When it comes to IT roles and technical certifications, TLG Learning and Vets2PM ensure veterans who are transitioning out of the military are prepared for a second career in the civilian world. Not only do their students represent the fullness of diversity in the U.S., they offer cultural contributors who have the capacity to transform a team and organization. “Military service builds many skills including strong communication, flexibility, leadership, troubleshooting, and work ethic.” said Karise Swainsen, Placement Manager at TLG Learning. “We add the hands-on and current technical training and have the candidates ready to be productive employees in three to six months.”

Cathy Walters Miclat is the Director of Career & Talent Services at Vets2PM. She adds that veterans bring experiential diversity, “someone who comes from a different work culture and brings a new and fresh perspective to your organization or business. These candidates often struggle to present in this way, so are often overlooked during the recruitment process, but once they do, they bring great value to the organizations they join.”

Career Path Services is another Washington State organization that helps people rise out of poverty through “the dignity of work.” Nate Mazzuca, the Regional Director here in the Puget Sound shared that their job seekers “have done the work to know who they are at the core. They’re able to draw on their past experience to shape their future success and have the confidence to make it happen.”

And here’s a growing, searchable database of job training programs

These organizations have the capacity to come alongside employers and ensure a clear, consistent, diverse and outstanding talent pipeline. Given the difficulty in finding the private and non-profit outfits, we’re building The National Database of Workforce Development and Job Training Programs. So far, we have over 340 organizations identified and we’re adding to it every week.

Here is a snippet from Washington State:

Like most macro-level problems, the challenges in the labor market today are not simple. They’re perhaps as complex as they’ve ever been. The media tends to be singular in the narratives they present, making it difficult to wrap our heads around the broader context. We are then left to rely on our own perspective, which is subject to blind spots and bias.

While there is no “quick fix” to a multifaceted problem like this, there are simple yet impactful steps employers can take to ease the acute pain felt: 1.) shift the hiring practice to be inclusive of life experience; and 2.) partner with the many workforce development organizations out there who are ready and eager to connect.

May the force be with you.

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