Recent global crises have caused significant labor shortages – and the impact is leading businesses to reevaluate how to attract the right talent and protect their customer experiences from the fallout. Read our analysis and tips on balancing labor shortage with great CX.
As we move towards the 2021 holidays and the new year, ongoing labor shortages are becoming an ever-more glaring issue.
With a tighter labor market, companies emerging from the fallout of the pandemic are having to balance their economic growth with efforts to retain workers. More workers are considering whether their current or previous workplaces are right for them – and whether they want to return to such an environment.
Not only that, but consumer demands are higher than ever before. As our 2022 Global Consumer Trends report found, consumers want better treatment and their money’s worth – a hard goal to achieve when worker shortages are prevalent.
How can you minimize the impact of unforeseen global crises on your business while also providing customers with the experiences they desire?
Read our analysis of why labor shortages have come about, and our tips for encouraging the labor force while protecting your customer experience.
Free Download: Stay ahead of the curve with our 2022 Global Consumer Trends Report
Key labor statistics
It’s different from other US labor shortages
While labor shortages and an impact on economic growth aren’t a new problem, right now these issues coincide with a higher unemployment rate. In the US, from Q4 2019 the number of job openings rose 33%, but over 9 million people are unemployed. There’s a significant disconnect happening between employers and workers that’s driving lower labor force participation rates.
Workers are actively seeking new roles
Employees are radically reevaluating their current roles and the part they play in their daily lives. 20% of workers changed their job role during the COVID-19 pandemic. The labor market’s focus is changing, and businesses are struggling to keep up with staffing shortages.
Leisure and hospitality businesses were the most affected
Understandably given the in-person nature of the roles and the high risk of infection, the leisure and hospitality industry has been greatly affected by the pandemic. Around 1.7 million workers in this sector who lost their job since the end of 2019 have moved to a different sector or stopped work entirely, leaving a large skills gap in the labor market for manual services jobs.
Why is there a labor shortage?
The current global problem isn’t a new one. With working-age population growth stagnating and wage acceleration continuing to be slow, labor shortage was a problem long overdue.
However, right now there are several compounding issues exacerbating labor shortages, meaning a slow decline in the labor market has become a glaring issue.
The COVID-19 pandemic
The pandemic caused the loss of thousands of jobs and the closure of many companies, leading to 9.5 million people being classed as unemployed.
However, even though job openings grew over 2021 (with around 9.2 million open in August), trying to fill positions is tougher than ever.
But are these labor shortages due to health concerns? Or are they caused by the COVID-19 unemployment benefits offered on a federal level, as some states believe?
The Society for Human Resource Management (SHRM) polled 1,000 unemployed Americans for the reasons why they aren’t tempted by labor markets. They found that:
42% hadn’t received a response from jobs they’d applied to
32% were worried about being exposed to COVID-19
29% were being offered less pay than their previous role
17% were looking for a career shift
11% thought that expanded unemployment benefits gave them the ability to be choosier about jobs
9% were earning more through benefits than a new job would offer
Key Takeaway: The labor force is applying for jobs, but the roles available aren’t meeting their expectations – making this more of an engagement problem than a labor shortage problem. Engaged workers mean a better customer experience: 79% of companies with engaged employees have a significantly better customer experience than companies without.
Use experience management to ensure customers don’t feel the fallout of global crises.
The Great Resignation
Driven by the world-changing events of the past two years, employees have begun to reevaluate their priorities. What role does work play in their lives, and are they happy with the status quo? Can they find higher wages while also getting a better work-life balance?
Many, it seems, have found labor markets wanting. According to the US Bureau of Labor Statistics, in July 2021 alone 4 million Americans quit their jobs. The Great Resignation, as it’s being referred to, has spread across the globe as workers consider how they want to spend their time – and whether their jobs are really right for them.
Key Takeaway: Companies need to offer more than just a job to fill open positions – employees are taking a stand on what matters to them. Businesses that see their employees as just another number might find that they suffer more from labor shortages as the labor force goes elsewhere for better benefits.
Not only that, but customers care more about employee experience than ever. According to McKinsey, one-fourth of consumers think that a company’s treatment of its employees is a consideration factor when making a purchase.
The ongoing skills gap
Before the pandemic hit, employers were struggling to find candidates that had the skills they needed for their vacant roles – and that issue is still ongoing in this new labor market.
SHRM’s research found that 60% of businesses say they can’t find applicants with the right skillset – and on the other side, 30% of applicants say their skills aren’t matching the jobs on offer.
The global trend towards technological advancement was hastened by the abrupt need for remote work and safer working environments, making the skills gap wider. COVID-19 sped up the adoption of digital technologies by three to four years, changing everything from customer experience to supply chain to internal operations.
Businesses all across the board are looking to hire workers that can keep up – and are finding it hard to source them.
Key Takeaway: Brands should seek technology-skilled talent from the labor market – but also accept that investing in potential workers with training and development might be the best solution for finding the perfect candidate.
Training your staff doesn’t help you to just retain workers – it also helps you to provide a better customer experience. With more workers able to consistently learn and adapt to new company directions, your customers will also benefit.
An aging workforce
The pandemic accelerated issues that were already soon to happen – namely, the rising proportion of older workers.
The close nature of retirement for many workers affected by the pandemic may have been partially responsible for many workers leaving labor markets.
Rather than waiting for a few short years to retire, many took the opportunity early. In 2020, 20% of the population of the US was retired, a 5% increase from 2015. Unfortunately, it will only continue.
Key Takeaway: There are always external factors that will affect the labor market – and in many cases, attempting to streamline recruitment or better target candidates might not make a difference. Learning how to separate internal business issues from the customer experience is key for making sure your business thrives, even when there are difficulties.
How brands and nations are resolving their labor market problem
Reducing financial support
As mentioned previously, there are concerns that financial unemployment support is a factor in workers not returning to jobs. Half of US states are planning to end additional federal-funded benefits to try and inspire higher labor force participation and reduce the unemployment rate.
However, only three states’ unemployment benefits, when combined with federal unemployment benefits, were worth more than average wages. Reducing the unemployment rate might not correlate with reducing financial support.
Wage growth and offering new benefits
To tempt workers to fill urgent job openings, business leaders are offering wage increases. The average hourly wage for non-farm workers working for private companies rose $0.20 in April, $0.13 in May, and $0.10 in June 2021. Particularly in the restaurant industry, companies are having to offer more money and better benefits – such as an emergency child care program.
For some businesses, reducing capacity has been the only way to cope with worker retention difficulties and ongoing safety restrictions. For example, the restaurant industry has had to greatly reduce the services it offers, even though overall consumer spending at restaurants rose to $440 billion in the 12 months ending in August 2021.
Tips for supporting your labor force and protecting customer experience
Having considered the nature of these labor shortages, the actions businesses and states have taken and candidates’ reasoning for refusing roles, there appears to be a mismatch between brand and employee experience. The labor supply and the labor market are balanced – but the incentive to work isn’t enough to convince potential employees.
Problems that affect you – supply chain issues, corporate profits – aren’t the focus for potential workers. Their lives outside of work and their experiences in work are the deciding factor in what roles they choose to take. Encouraging the labor force and retaining employees will mean looking critically at your business from an outside perspective and changing your offering to match.
Here are our tips for avoiding the labor shortage – and for protecting customer experiences.
Offer competitive wages
Wage growth has been stagnant for decades, and with the current federal minimum wage lagging $5.13/hour behind inflation from 1968, wage acceleration is long overdue. Workers reevaluating their working lives have been given a stark view of this problem – and they’re looking to rectify it with any new role they may take.
Enable flexible working
Workers have now experienced flexible working arrangements – and they’re not keen to go back. Before the pandemic, people had to accept working conditions as they were as the alternative was unattainable – but after nearly two years of flexible arrangements, they’re not keen on going back to the old ways.
88% of workers whose main capital is knowledge are looking for flexibility in hours and location – and brands are going to have to be flexible themselves to find workers to suit their needs.
Evaluate work differently
Before the pandemic, work completed at home was perceived as less valuable. In the new world of working, evaluating employees needs to be different.
According to Citrix, 86% of workers are looking to find roles with companies that prioritize outcomes over output. Rather than seeing 40 hours of work as the goal, companies need to see work quality as the measure of a job well done.
Finding workers for hard-to-fill positions might be easier with a better approach to the value of work – and making this view clear during the recruitment process.
Take the pulse on employee experience
Listening to your employees doesn’t have to be intrusive. Taking the pulse on workers’ experience can be mutually beneficial – and give you insights into your employee engagement that can stave off labor shortage issues down the line.
You can see not only how your current workers feel about your business, but understand how future employees will see you. How do your workers feel about employee referral programs? What do they want from their jobs? What are the needs of new hires and what actions have you taken that ensure your current workers are likely to stay?
An employee experience program is vital for making sure disruption stays at a minimum during times of crisis. The past two years have offered you the unique opportunity to improve employee experience – so don’t miss out on attracting workers over your competitors.
Focus on the quality of customer experience, not the quantity of interactions
Cultivating connections that are meaningful between your brand and your customers is the best way to mitigate fallout from issues in finding workers. Rather than raise prices and reduce services when workers are scarce and labor costs are high, focus on providing competitive experiences that will have your customers coming back and bringing others to your brand.
Using best practices for customer experience is just the starting point. Having a sophisticated approach to customer interactions that can adapt as your business capacity and capability change is key for ensuring your CX doesn’t suffer when staffing shortages become a problem.