Early on in the pandemic, millions of people around the world lost their jobs. With lockdowns in place and many businesses forced to scale back or shut down, hard-hit sectors such as hospitality and travel were forced to lay off staff. Even with some governments enacting job retention schemes, in many cases this help didn’t come quickly enough. The result was record unemployment in many markets and fierce competition for the jobs that were available. Now, however, fortunes have changed.
In the US, where recovery in the labor market has been particularly robust, record numbers of job vacancies are being reported. According to government data, job openings in the world’s largest economy rose to 9.2 million in May (the latest available figures at publication time). This number is well above the number of hires in May, at about 6 million. The disparity indicates a huge mismatch in the American labor market right now.
In EMEA, signs of a strengthening economy and labor market are also growing. Eurozone business activity recently grew by its fastest rate in 15 years. In the UK, businesses face the worst labor shortage since 1997, and a combination of higher demand and border restrictions has led to the fastest drop in talent availability on record. The outlook is not so clear in APAC as countries such as India and Malaysia continue to struggle with the pandemic. In markets such as China and Australia, however, unemployment remains low compared with others in the region.
As the rollout of the coronavirus vaccine gathers momentum, more countries are lifting restrictions and bringing workers back into the labor market. We are seeing good progress in getting people protected and putting them back to work. In the critical months ahead, how well public health leaders manage new variants of the disease and episodic outbreaks — and how well business executives navigate the changing landscape — will determine recovery success for the rest of this and next year.
With economic activity rising, the focus has turned to talent scarcity. Businesses that have survived the initial outbreak now face a new set of challenges in their resourcing needs. The scarcity of service workers means growth opportunities are limited for many hard-hit businesses. In addition, the rapid digitalization of many organizations requires additional digital competencies in the face of a growing skills gap. And in what is being referred to as the Great Resignation, many workers are either changing employment or leaving the workforce entirely. A survey conducted in June by Monster showed that 95% of respondents were considering changing jobs.
If you were to ask me a year ago whether employers would have trouble finding workers in 2021, I would have thought that unlikely. But here we are, and we need solutions for the labor market mismatch. How can we do a better job of addressing this problem? There are no easy answers, and we must embrace a sustainable approach because these challenges will likely persist into the future.
Before we explore solutions, I also want to point out the paradox of today’s market. Demand for labor is rising, but millions remain unemployed around the world. In OECD countries, there is still a deficit of eight million jobs, and 14 million more people are voluntarily staying out of the labor market compared with the end of 2019. Unemployment figures also fail to reflect underemployment problems in places like Australia, where a growing number of people can’t get enough work to meet their income needs. Additionally, we know that the pandemic forced more women out of the workforce than men due to factors such as family obligations. So how can we reach an equilibrium in the labor market?
addressing worker needs
As we enter the next phase of the recovery, it’s important to remain in tune to what workers want through regular employee surveying. Whether it’s a hybrid schedule or job flexibility or more competitive compensation, companies can retain talent and ensure productivity by understanding and accommodating their people. Last year, our Workmonitor research found that a large majority of the workforce felt supported by their employers through regular surveying and offering remote working and employee assistance programs. Organizations will need to maintain such efforts in the days ahead.
training and development
As I have said for some time, increased reskilling must be part of the solution. Many organizations have transformed the way they do business as a result of the pandemic, leaving them with an even greater skills gap than before. Ordinarily, companies are afforded a longer transitional period to adapt to transformation, but these are extraordinary times — which means a more pressing need for reskilling.
Job retention schemes were applauded by many for protecting workers in many countries, but some believe this is also exacerbating the talent scarcity problem. In some cases, workers collecting relief aid received more income than they would in certain jobs and have decided to stay out of the labor market. Others have chosen to stay out of the workforce due to safety concerns or to care for family members. How much these factors have exacerbated the labor shortage is up for debate, but governments will need to take a closer look at how current and future policies affect the supply and demand in the market.
Finally, this will take an integrated effort from all stakeholders — employers, governments and industry bodies — sharing data about demand and supply so we can better anticipate and address the labor market’s needs. Through such cooperation we can enhance the connection between people and jobs more effectively, thus raising participation in the workforce and minimizing unemployment.
I believe we will experience further talent scarcity in some markets as a result of the pandemic. There are also systemic inadequacies at play, such as insufficient educational opportunities, aging demographics and the proliferation of poorly regulated work. Without more intervention from all stakeholders, we risk having labor markets become even less efficient.
The good news is there is greater awareness of the challenges, and collectively we are taking action to address them. For instance, Randstad continues to provide reskilling opportunities to the talent we work with, helping them to remain marketable in a rapidly evolving economy. Policymakers are also using data to develop appropriate responses to labor market needs while safeguarding the health and safety of their population. Employers at the same time are strategizing to come up with effective policies around issues such as remote work, flexibility and employee assistance.
There have been a lot of unexpected developments as a result of the pandemic. The acceleration of talent scarcity is just one. These issues require urgent attention, but we should be aware that for each immediate challenge brought on by COVID-19, there is an underlying systemic concern that requires long-term, sustainable solutions.