why is there a global labor shortage?

As markets begin to stabilise and production levels are slowly rebounding to pre-pandemic levels, companies from around the world have yet another challenge to navigate: the ongoing labour shortage. In fact, studies show that there will be an estimated shortage of 85 million workers around the globe by 2030. 

There are many common factors across economies spurring the talent shortage, as well as unique challenges to specific regions, industries and job roles. Continue reading to learn more about the labour shortage and the drivers behind it.

what is the labour shortage?

Typically, a labour shortage occurs when there are not enough available workers participating in the labour market to meet the demand for employees. For example, in the United States, there are nearly 11 million job vacancies, but only 6.5 million workers are listed as unemployed in 2022.

This high level of job openings is not only affecting employers in the United States. For example, as of early 2022, employers in Europe  were struggling to fill over 1.2 million open job roles, while employers in Australia are working to fill nearly 400,000 vacant positions.

Also, in 2021, Singapore saw 163 job vacancies for every 100 available candidates.

what are the driving forces behind the labour shortage?

While the impact of the current labour shortage varies by location and sector, it’s undoubtedly one of the biggest challenges in modern history. An ongoing labour shortage could significantly impede the world’s ability to fully recover in a post-pandemic market.

To overcome this immense challenge, it’s important to identify the causes behind this massive labour shortage.

Here’s a look at some of the factors driving the labour shortage.

1. COVID-19

It would be impossible to discuss the current labour shortage without acknowledging the global pandemic's role in it. As of March 2022, WHO has reported more than 6 million people deceased due to pandemic-related issues, while millions of others are dealing with the long-term effects of the virus.

This factor alone has caused major disruptions to workplaces around the world. But that’s not all. The lingering global pandemic has spurred a number of challenges for employers and employees, including:

• mental health issues

Early into the pandemic, mental health professionals started to express concerns regarding the global pandemic's impact on workers’ mental health. Today, it looks like these warnings are proving true.

The U.K.’s  Office of National Statistics reports that one-half of the over 400,000 employees who left the workforce between February 2020 and November 2021 did so due to long-term mental health issues. In the U.S.,  a recent survey revealed that two-thirds of millennials who quit in 2021 cite mental health as the primary reason.

• immigration disruptions

Migrant workers make up 5% of the global workforce. Countries such as the United States, Saudi Arabia, United Arab Emirates, Canada, Germany and the United Kingdom depend heavily on these workers to meet production demands. The pandemic significantly hindered this dependency as countries set stricter immigration policies to control the spread of the virus within their borders.

In the UK, the combination of COVID and Brexit caused immigration rates to fall by 90% in 2020. Many countries are now taking steps to loosen immigrant restrictions, but it could still take years for migrant rates to return to pre-pandemic levels.

• shift in workers’ expectations

Throughout the pandemic, many employees faced additional pressures at work, such as sudden layoffs and lockdowns and extraordinary personal challenges, including homeschooling their children and caring for ageing parents.These stressors have spurred a shift in workers’ expectations. At the forefront of these expectations is the desire to maintain a healthy work-life balance.

Today’s workers are looking for greater flexibility by means of remote work options, flexible schedules, additional paid time off, and greater autonomy to set their own schedules. 

Furthermore, some workers are willing to change jobs to get the flexibility they need or leave the workforce altogether if they can’t find it.  In fact, a recent study by Monster shows that 95% of workers are open to changing jobs, and 92% are willing to change industries if necessary. 

2. low wages

While some workers are leaving the workforce altogether, the majority are simply changing jobs due to better job opportunities. Some are leaving for higher salaries. In fact, according to our Randstad Employer Brand Research, 62% of workers around the world rank salaries as the strongest motivator for changing jobs. 

The ongoing labour shortage has created a candidate-driven market in most areas of the world. Many employees and jobseekers are requesting higher wages and improved benefits. However, these wage increases vary across the globe.

For example, 100% of countries in North America expect to see wages rise in 2022, while only 92% of countries in Latin America, 78% in Asia Pacific and 50% in the Middle East and Africa expect to see salaries increase..

In some areas of the world, worker’s pay increases may not be enough to cover the cost of rising inflation. For example, in the United States, hourly wages rose by 4.7% in December 2021, but inflation rose by 7% during the same period. For workers in these areas, increased salaries are even more important.

It’s equally important to focus on enhanced benefits as part of the overall employee compensation package. Competitive salaries aren’t the only thing workers want. According to our research, they also want a healthy work-life balance (58%), job security (56%) and pleasant work environments (55%).

3. ageing population

Another factor impacting today’s labour shortage is the world’s ageing population. For years, employers in many countries have had concerns about replacing record numbers of retiring workers. For instance, in the United States alone, 10,000 people per day reach the 65-year-old threshold for retirement and this rate is expected to continue until at least 2029.

The ageing population is expected to increase in the upcoming decades. Studies estimate that by 2030, one in six people in the world will be aged 65 or over and by 2050, this number will double. On top of this crisis, birth rates in many countries are falling. The combination of an ageing population and a falling birth rate means that there will be fewer people available to work.

In fact, studies show that by 2050, China’s working population will drop by 20%, and in Japan, the working population is expected to fall by 40%. This issue is not isolated to just China and Japan. According to UN and World Bank statistics, 75 countries already have fertility rates that fall well below the desired replacement rate of 2.1%. This issue will continue to plague employers for at least the next few decades.

4. technology skills gap

According to a recent study, 87% of global employers admit that they are currently struggling with skills gap issues or expect to within just a few years. While the loss of skills and experience through retirement is certainly a contributing factor, the main cause of the skills shortage is the integration of advanced technology, AI and automation in the workplace. While this emerging technology definitely helps to streamline business processes and improve workplace efficiencies, it also requires workers with the skills to operate it.

This is not a new challenge facing employers, but it is one that has intensified since the pandemic. 

With so many companies struggling with production and supply chain challenges during the pandemic, there’s an increased push for automation in the workplace. This increased use of technology in the workplace also creates an increased need for companies to acquire the right tech-related skills.

which industries are most impacted by the labour shortage?

While nearly every industry is affected in some way by the growing labour shortage, there are a few sectors where the impact is larger:

healthcare

The healthcare industry was hit hard during the pandemic. Not only did these essential workers risk their lives, as well as those of their families, by going to work every day, but many also had to work long hours due to staffing shortages. Now, as the effects of COVID-19 start to subside, many of these workers are considering leaving the profession.

For example, 57% of nurses in the U.K. are considering leaving their jobs, while 32% of U.S. registered nurses want to leave their direct-patient roles. Globally, the International Council of Nurses warns that as much as half of the current nursing workforce could leave the profession within the next few years. This issue could lead to a global crisis in under a decade.

manufacturing

Even before the pandemic hit, experts were predicting a global labour shortage of over 8 million workers in the manufacturing industry. Today, the labour shortage is even more problematic.

In the United States, there could be over 2 million unfilled jobs in manufacturing by 2030 and manufacturers in the UK are facing the largest labour shortage in over 30 years.

supply chain

Logistics is another sector that is struggling to attract workers before and after the pandemic. This labour shortage is not isolated to just one region of the world.

For instance, employers in the U.S. are struggling to fill 80,000 open trucking vacancies, while the U.K. is seeing a shortage of over 100,000 truck drivers. This ongoing labour shortage is expected to bring an 18% shortage of truck drivers in Mexico and a 24% shortage of drivers in Turkey.

what impact does the labour shortage have?

The ongoing labour shortage can not only hinder company growth; it may also impact society as a whole. For example, supply chain disruptions have already resulted in product shortages. In some areas, the labour shortage may also have resulted in store and restaurant closures or reduced hours.

Another problem that many experts are closely watching is rising inflation. While there’s still some debate whether the labour shortage contributes to inflation, many believe that today’s labour shortage will result in increased wages, higher prices and slower post-pandemic recovery. If left unchecked, inflation could bring about a serious crisis that could take years, or decades, to resolve.

The labour shortage, more specifically the skills gap, can prevent businesses from implementing emerging technology. A new study reveals that 64% of organisations list the labour shortage as the number one roadblock to implementing new technology, compared to just 4% back in 2020. The problem is that these companies cannot implement new technologies without first acquiring the necessary tech-related skills.

The labour shortage is a great challenge, but understanding the causes behind it can help your company overcome it. Gain more insights into the causes behind today’s labour shortage by downloading our summary today.