Where Are All The Workers?
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My wife and I managed to get a few kid-free hours to ourselves last weekend while our three balls of energy spent the day at their grandparents. We went out to dinner at a local restaurant and were greeted by the hostess, who promptly told us it would be at least a thirty minute wait. We eyed the dining area behind her, noticing it was barely half full. “We’re understaffed,” she answered without us actually asking the question out loud.
Let me first say this: people should be especially nice right now to workers in restaurants and retail. There is no reason to be annoyed or frustrated with the person who is there serving you. At least they showed up. It’s not their fault that their business doesn’t have enough workers. Tip bigly, but more importantly than that, be patient and kind.
While our experience is just an anecdotal example, I suspect many people reading this have experienced something similar in recent months. And it’s not just leisure and hospitality businesses either. Bus drivers, plumbers, teachers, nurses: you name it and the industry is probably short-staffed.
So where are all the workers? Let’s dig in.
Labor Force Participation Rate
The chart above shows the Labor Force Participation Rate over the past five years. A clear drop is evident upon the outset of COVID-19 when employment plummeted around the country as businesses shut down either by choice or by mandate. What the chart also shows, however, is that even though employment rebounded in the months that followed the initial drop, the overall number of Americans in the workforce still lags somewhat significantly behind pre-COVID employment levels.
Labor Force Participation Rate is a technical term that represents a ratio of the total number of people in the workforce (which actually includes both people who are working and people who are actively looking for work) to the total non-institutionalized population, which includes all Americans age 16 and older who are not incarcerated or in a healthcare institution like a nursing home or long-term care facility.
According to the Bureau of Labor Statistics, in August 2021 there were 261.1 million non-institutionalized Americans and a workforce of 161.5 million, which yields a Labor Force Participation Rate of 61.7%, as illustrated in the chart above. It is not exactly fair to compare August 2021 with August 2020 because COVID was in high gear in August 2020 and the employment scene was not exactly typical for that time of year. A fairer comparison is August 2019, when the Labor Force Participation Rate was 63.2%. A decrease from 63.2% in 2019 to 61.7% in 2021 might not seem that significant, but the 1.5% decline actually represents nearly four million workers. That is four million fewer people in the workforce at the same point in 2021 as there were in 2019.
(My Maine readers might be interested to note that this national phenomenon has played out similarly in Maine. The Labor Force Participation Rate in Maine in July 2021 (the most recent month for which there is data) was 60.4%. In July 2019 it was 62.6%, a decline of 2.2%. Given Maine’s Labor Force of approximately 678,000 workers, the decrease in the Labor Force Participation Rate represents a loss of approximately 15,000 Mainers who are simply not active in the workforce anymore:)
Why?
From 2006 to 2010 I worked for the Boston Red Sox. Yes, it was a dream job. A group of coworkers and I would do pub trivia at Boston Billiards near Fenway Park nearly every Wednesday night. An older coworker who was a former school teacher gave us a piece of advice before we went one night, saying, “If they ask a question about which state in the United States is the home of something or produces the most of something or has the best of something, just say California. California is always the answer.”
Well, a recurring theme in my articles over the past few months is that if you’re looking to understand or explain anything these days, there is really just one primary variable that is driving our collective behavior: COVID-19. I have five hypotheses to explain why there are not enough workers right now, all of which are somehow related to the ongoing pandemic. No single hypothesis is the only answer, but I think they all are contributing to the current shortage of workers:
Hypothesis #1: Older Workers Aren’t Risking It
In 2020, there were 35.3 million American workers over the age of 55 according to the Bureau of Labor Statistics. Just one year prior (pre-COVID), there were 37.2 million. That is a decrease of 1.9 million workers age 55 and older from 2019 to 2020. Data is not yet available for 2021, but I have to think the decline in the number of older workers has continued or at least not bounced back as COVID-19 has stuck with us.
Given that the negative outcomes of COVID including both serious illness and death disproportionately impact older people versus younger ones, it is not surprising at all that many older workers have simply decided that they are not going to risk it by exposing themselves to interactions with customers and coworkers in the era of COVID. There are many people who have retired from their careers and may still want to work as a source of some extra dollars, as a hobby job in retirement, or simply because they love to work and don’t want to be bored, but for those who are able to financially sustain themselves without working, why expose yourself to the virus if you don’t have to? I know several school teachers, for example, who were eligible to retire but were continuing to work because they loved to teach. Once COVID became as serious as it did, they basically said to heck with it, I’m done.
Hypothesis #2: Home Construction is Pulling Workers from Other Industries
The housing market is hot. I’ve written about how the rapid increase in home prices around the country is actually not a housing bubble similar to 2017, the lack of smaller and more affordable homes, and how the market has been particularly strong here in Maine, so I won’t dwell on further analysis of the housing market today. But one thing I have been noticing in my bank work this summer is that many workers are swarming into the construction field to take advantage of such a hot market. This is just based on observation and I don’t have data to back it up, but I especially see a lot of younger men age 18-35 working as a part of home construction crews or apprenticing for plumbers and electricians. And why not? These guys are tripping over work with no real end in sight. Every homebuilder I know is busy beyond belief. Many are booking projects into 2023 at this point. Waitlists for everything from roofers to plumbing to paving to countertop installation to full-home construction are incredibly long just because there is so much demand among consumers right now, and that has attracted workers into the industry who might otherwise be working other jobs.
By the way, construction and trades are not the only housing-related fields drawing workers; real estate agents, too, have swelled in numbers over the past year and a half, to the point where there are now more real estate agents in the United States than homes for sale! For each person who has become a full-time real estate agent, that is one fewer person who is going to be a teacher, a firefighter, a waitress, or a hotel desk clerk, etc.
Hypothesis #3 - Limited Immigration
The United States government issues nonimmigrant visas each year for people who want to visit the United States on a temporary basis for tourism, medical procedures, or to work. States like Maine that have a large tourism industry rely on foreign workers on a seasonal basis to work in restaurants, hotels, and all manner of other industries including fishing and agriculture. Bar Harbor, Maine, for example, brings in hundreds if not thousands of workers each summer from the Caribbean, Latin America, Europe, and Asia.
There have been two problems of late, however. The first and most notable is that global movement has been severely restricted by COVID-19. People just aren’t traveling due to travel bans and the general feelings of uneasiness and uncertainty that have been globally prevalent for the life of the pandemic. The second challenge is that the caps on work visas have not been increased even as demand for these workers among businesses has continued to grow. Businesses are clamoring for more foreign workers, but the politics of it all have been limiting. (By the way, another limiting variable is the lack of affordable housing in some of the hottest tourism markets, including places like Bar Harbor, which is perhaps a topic for a future article).
Hypothesis #4: Lack of Childcare is Keeping Parents at Home, Especially Mothers and Grandmothers
All through 2020, childcare facilities and schools around the country were shut down. As much as it became possible for many white-collar workers to work from home, this luxury was not afforded to all. Hourly workers, shift workers, and other blue collar trades, in particular, had, generally speaking, no such option. With kids not able to go to daycare or school itself and private childcare often costing an exorbitant amount, many parents had to give up work altogether or decrease their hours in order to be home. This burden fell disproportionately on female workers, who more commonly fulfill the role of childcare despite all the advancements in equality and more progressive attitudes about gender roles today than in previous generations. The Labor Force Participation Rate for women age 16 and older decreased from 57.5% in August 2019 to 56.2% in August 2021 and had previously bottomed out 54.6% in the early days of the pandemic when school and daycare shutdowns were most common.
A Gallup study from several months ago estimated that in February 2021 there were 2.3 million fewer women in the workforce in this country than one year prior, which would have been just prior to COVID hitting the United States. In addition to childcare responsibilities, the study also posited that women are more likely to be in front-line positions that have been more impacted by COVID-19 shutdowns and that women are more likely than men to be mindful of the risks of COVID-19, which has led many to withdraw from the workforce altogether.
Hypothesis #5: People Just Don’t Want to Do Certain Jobs in the Era of COVID
COVID-19 has fundamentally changed the ways we work and how we think about work. The impacts will be far reaching from vast new opportunities for people to work remotely to meetings and conferences being done via Zoom and Skype rather than in-person. There are some companies including large tech firms like Twitter who have told their workers they may never need to com back to the office.
The other side of this coin is that there are certain jobs that may not be as popular in the future as they have been in the past. Or at the very least, there are certain jobs that are just not as sought after right now. Working a restaurant comes to mind immediately, for example. Not only do waitresses and waiters have to potentially expose themselves to COVID-19 from customers, they are also exposed to some of the worst behavior of customers imaginable that can be both rude and abusive. This behavior ranges from the general grumpiness of customers who are impatient and uncaring to actual physical abuse. Just this week, three tourists from Texas were arrested in New York City after assaulting a hostess who asked them for proof of vaccination per a local ordinance requiring her to do so.
Will an interest in restaurant work surge back eventually? Probably, but not until people can collectively chill out and the virus passes us by to the extent possible (it my be here forever in some form or another…). In the meantime, and perhaps permanently, businesses will have to pay workers more and offer more creative benefits. The decision to work is an economic one, too, and higher wages for these types of jobs may be necessary to tip the balance towards people working them.
What Comes Next?
There are other variable at play too besides the ones I have listed above. I think multiple rounds of federal stimulus and enhanced long-term unemployment benefits have played a role, although there have also been studies that have found that states that reduced these unemployment benefits did not have any notable uptick in job seekers versus states that didn’t. In my opinion, these programs at the very least did let potential job seekers be more selective in what jobs they sought out, however, and everyone seems to have an anecdote about a friend, family member, Facebook acquaintance, or neighbor who has been sitting at home collecting unemployment when they could be working. I can hear my more progressive friends calling foul on this stereotype as they read this, but I have to be honest: I work with and know a lot of people through my bank work, and there have absolutely been people who have taken advantage of these programs who have not actually needed them.
But a more overarching variable, and the point on which I will conclude today, is that the economy has just been bouncing back (with the caveat that the Delta Variant threatens to undermine all the economic recovery, a topic I wrote about three weeks ago). It seems like most every industry is busy right now. Construction, trades, tourism, restaurants, medical: everyone is busy. When everything is going strong at the same time, everyone needs workers and everyone is stretched thin. Businesses will have to pay more to attract talent and offer more benefits, including the flexibility to work from home or work remotely when possible. A case could be made already that even though the federal minimum wage has not risen in many years, the de facto minimum wage is $15, which is itself a product of the tight labor market and a positive thing for lower and moderate-income workers trying to make ends meet as costs for things like rent continue to rise.
Sadly, there is one other variable at play here, too: over 650,000 Americans have died from COVID. True, many of these people were older and retired, but not all have been. While the other hypotheses I offered above are much more statistically significant drivers of the current worker shortage, we can’t forget that 1 in 500 Americans have died of COVID-19.
I’ll end where I started: this is a strange time for our nation and world and a strange time for the economy and the people who are a part of it. Be patient and kind and gracious to those who are serving in any capacity right now. We will get through it, but this is a weird time and some extra grace and compassion towards one another would go a long way right now.
Ben Sprague lives and works in Bangor, Maine as a V.P./Commercial Lending Officer for Damariscotta-based First National Bank. He previously worked as an investment advisor and graduated from Harvard University in 2006. Ben can be reached at ben.sprague@thefirst.com or bsprague1@gmail.com. Follow Ben on Twitter, Facebook, or Instagram and subscribe to this weekly newsletter by clicking below.
Author’s Note: I would like to thank Shawn Brace for reaching out to suggest this week’s topic. Shawn is a friend, a pastor, and the author of several books. He recently started his own Substack newsletter, which I highly recommend for its refreshing, apolitical perspective on modern Christianity:
Got news tips or story ideas? Email me at bsprague1@gmail.com. Have a great week, everybody.
That was a well-balanced picture. I like that you built it around hypotheses as opposed to factors. Too many certainties all over the internet these days.
Another very insightful read. I wait for these every week and enjoy them
Thoroughly with my Sunday morning coffee! Thank you!