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Employers Face Difficulties Filling Open Positions While Unemployment Remains High

August 18, 2021 by Alexa Hornbeck
(Photo by Dan McCue)

A recent report from the National Council on Compensation Insurance finds that there are now 3 million fewer Americans in the labor force than there were before the pandemic. 

“At the pandemics onset, there were 18 million people on temporary layoff and now that’s 1.8 million, so, a lot of the job recovery early on was people being recalled to existing jobs, and now there’s a lot more that is going through more traditional hiring processes, and it’s just more difficult and takes more time,” said an author of the report, Patrick Coate, an economist from the National Council on Compensation Insurance.

​According to the report, during the pandemic, labor force participation declined most sharply for women with family responsibilities and for workers over 55. 

Women’s labor force participation is expected to increase in late 2021 due to factors like children returning to school, but the decline for older workers reflects a wave of early retirements that will reduce the labor force beyond 2021.

The report indicates that matching unemployed workers to job openings is more difficult now than in the early phase of the recovery due to the exhaustion of worker recalls, increasing skill gaps in particular occupations, and a closing employment gap.

Bringing back employees or hiring new employees is proving to be harder for employers, as research shows employees are dealing with soaring rates of depression, anxiety and lack of focus.

Data from Total Brain Mental Health Index shows a 56% increase in the risk of PTSD and social anxiety disorders for employees, and for workers aged 40-59 the risk of social anxiety disorder is 108% higher than before the pandemic.

Employers are starting to offer increased wages, mental health programs, and other benefits like college tuition coverage to encourage new hires or keep employees on the books.

“By definition if there is a labor shortage then it means that labor supply is less than labor demanded at currently offered compensation levels and raising compensation wages is one way to bring these back to equilibrium,” said Coate.

According to the NCCI report, wage increases in 2021 thus far are concentrated in low-wage service jobs which experienced the highest COVID-related losses, especially in leisure and hospitality industries. 

Coate said the leisure and hospitality industry experienced some of the largest job losses during the pandemic but had the highest wage growth during the second quarter of 2021.

In fact, the report shows that big wage gains are driving big gains in employment in leisure and hospitality, as the data shows that at the end of 2020 to June 2021, the wages for leisure and hospitality grew 10.6%, which is around five times faster than the average of all other job sectors. 

Now, more than half of the total increase in private employment in the second quarter of 2021 were in leisure and hospitality alone.

Employers are also offering incentives outside of wage increases to get employees back to work, as Target Corporation and Walmart recently announced they would pay the full cost of tuition and books for hundreds of undergraduate degree and certification programs for eligible full-time or part-time employees. 

When it comes to higher-wage employers, LinkedIn recently gave its 15,900 full-time employees a paid week off in April to help them combat burnout, and companies like SAP, Google and Thomson Reuters also instituted company-wide mental health days.

Providing more mental health resources for employees or new hires might help overturn the financial impact employers are experiencing, as current data shows that 31% of U.S. employers say workforce mental health is having a severe or significant financial impact on the company. 

However, the ability of employees to get mental health treatment may also be a challenge, as even before the pandemic the Bureau of Labor Statistics estimated that by 2025 there would be shortages of psychiatrists, clinical, counseling, school psychologists, and mental health and substance abuse social workers, school counselors, and marriage and family therapists.

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