Companies from all over the world are challenged with another difficulty as markets start to recover and production levels slowly start to return to pre-pandemic levels: the continued labour shortage. In fact, statistics indicate that by 2030, there will be a global labour shortfall of 85 million people.
What is Labour Shortage?
A labour shortage typically arises when there are not enough workers available to enter the labour market and satisfy the demand required to fill vacant jobs.
The Global Perspective
All of Australia, New Zealand, the United States, and the United Kingdom now have much more job openings than they did before to COVID-19. This indicates that the labour market is becoming more congested across all four economies. (“International Perspectives on Labour Market Tightness | National Skills Commission,” 2021)
The labour force participation rate is at 62.1%, down from 63.3% in February 2020. It is obvious that competent workers are being ignored or ignored. But there is more than one reason workers are skipping work to create the persistent shortage. A survey revealed that some people are still worried about COVID-19 at work, feel that their salary is too low, or are more concerned with improving their education and skill set before re-entering the workforce. (“Understanding America’s Labor Shortage,” 2022)
Figure 2 – Number of Job Openings vs. Unemployed Workers in the United States in July 2022
The labour picture is very mixed throughout Europe, and Italy and the UK offer two good examples. Both countries—Italy in particular—suffer from high unemployment.
Long term workforce challenges vary throughout European nations. In the 10- and 20-year growth scenarios, Italy’s demographic problems—the nation has Europe’s fastest aging society—translate into a labour shortfall by 2030. However, the UK struggles with persistent unemployment because of a growing labour pool and insufficient economic expansion. (“The Global Workforce Crisis” BCG, 2022)
In addition, the European Commission has identified structural underpinnings for the tight labour market, such as population aging, salaries and working conditions, mobility, and immigration policy. However, the pandemic has also had an impact since workers are less prepared to return to dangerous and stressful situations because they are more aware of their working environment, safety, and work-life balance. (Claes-Mikael Ståhl & Claes-Mikael Ståhl, 2022)
Figure 3 – Labour Supply vs Demand in Europe
As it recovers from the effects of the COVID-19 pandemic, New Zealand is currently experiencing a talent and labour crisis.
Professor Paul Spoonley, a demographic and economic expert from Massey University in New Zealand, claimed that the country’s over reliance on “workers trained elsewhere” is the main reason for its low productivity and low retention rates.
An economist predicts that the country’s three-decade low population growth will result in the current labour shortage in New Zealand.
Figure 4 – Labour Shortage in New Zealand, June 2022
The labour shortage in Australia coincides with a global increase in competition for qualified workers, particularly in fields where the COVID-19 pandemic caused firms to lay off workers or encourage remote work.
With strict border controls, lengthy visa processing delays, and a million job applicants stuck in limbo, businesses are struggling because of the acute staff shortages in both corporate Australia and New Zealand. In August, employers advertised 301,000 job openings, a 37% increase over the same month last year. (Praveen Menon,Sam Holmes, 2022)
Figure 5 – Labour demand – job ads increased; larger proportion of employers looking for recruit (Recent Labour Market Outcomes, June 2022)
Numerous issues that the Australian labour market is dealing with are also present in other countries. Understanding where similar measures may (or may not) help to generate better labour market results in Australia would require careful observation of the effects of the tightening labour markets elsewhere, including the efficacy of various remedies.
Figure 6 – Recruitment difficulty in Australia
What is the impact?
The prolonged labour scarcity may have effects on society in addition to impeding company growth. For instance, product shortages have already been brought about by supply chain disruptions. There may have been store and restaurant closings or shortened hours in some locations because of the labour shortage.
Rising inflation is a different issue that many analysts are keeping a close eye on. Many feel that the current labour scarcity will lead to higher wages, higher prices, and a slower post-pandemic recovery, even if it is still debatable whether it causes inflation. Inflation, if unchecked, may trigger a catastrophic crisis that would take years or decades to manage.
Game Changer: Remote Work
Some industries have been less impacted by labour shortages but are grappling with how to deal with the rise of remote work.
Gallop found that 91% of U.S. workers hoped they could continue working some of their hours from home, and three in 10 workers signalled they would seek new employment if they were recalled to the office. (“Understanding America’s Labor Shortage: The Most Impacted Industries,” 2022)