10 million jobs open: why workers left

A record-breaking 10 million jobs in the United States are vacant. That’s a simple fact. More complicated are all the reasons for the labor shortage and its effects, such as higher prices, product shortages and possible closings of our favorite businesses.

What’s causing people to leave jobs or not apply for jobs, and how is the labor shortage affecting our daily lives?

Christian Lundblad

For answers, The Well talked with Christian Lundblad, the Richard Levin Distinguished Professor of Finance in UNC’s Kenan-Flagler Business School and director of research at the Kenan Institute of Private Enterprise. Lundblad, who talks frequently with CEOs of companies, researches and teaches about asset pricing, investment management, international finance and emerging market development. Here’s what Lundblad had to say:

The U.S. Bureau of Labor’s August numbers showed 10.1 million job openings. Why is there a shortage of people to fill them?

The reality is that the labor shortage is extremely complex with a lot of varying components that came together in different and unexpected ways.

The No. 1 factor is the concern about the virus. We’re in a health emergency that’s created a crisis of confidence in a way. We won’t really have an economic recovery until we have a health recovery. So a number of folks are relatively disinclined to return in person to places of employment because they’re worried about the virus or about the implications for their children, particularly if they’re under 12 and, hence, unvaccinated. The disincentives to go to work supersede the benefits.

We’re also dealing with the challenges of folks being at home instead of working because they chose to take care of children or family. We’ve learned a lot about the intermingling between education and workforce participation. Kids are thankfully inching back into school. That’s been a big impediment to people going back into the workforce and is being alleviated bit by bit.

Another component that’s a little more political is the role of government benefits. It’s just a piece and not the major story, to be clear, but they do play a role.

For example, the guess work is that somewhere between 25% to 40% of Americans were making more on employment benefits than they were when working. As those benefits roll off, people may be interested in getting back to work, which will offer some modest help to alleviate this problem. But this is not the first order effect; this comes back to the virus and the willingness and ability of laborers to return to in-person activities.

When we put all these things together, there are simply fewer workers who want to engage in in-person labor. Collectively, there are 10 million-plus jobs open. We’ve never seen anything like that before.

What do you think about what some call the “Big Quit” and the trend among workers to think about work-life balance as they make decisions, even to the point of moving?

Again, a lot of things are happening at the same time. We are just now gaining some understanding about the implications of remote work. We’ve run this experiment to see if we can work effectively from home. At some level, at least for the subset of us who can work in this way, it’s been reasonably successful. Further, remote engagement has given people the thought that perhaps they can move to a place that’s maybe a little more spread out, a little cheaper, a little less crowded. So that’s generated a bit of exodus from some areas where work was more concentrated. That realization is intermingled with many of the components we’ve discussed. The changing nature of where folks want to work is also affecting regional variation in labor shortages.

The pandemic has forced a lot of people to think more about what matters to them — what’s really important — like spending more time with family. As an example, there is a growing quit rate among some who are at the edge of retirement. They may be asking, “You know what? I’m going to fire the bullet on that.” Many of us know people we work with who have taken that plunge and are headed to their next chapter. We are also talking about people who want to work fewer hours so that they can spend time with their families. Aggregate all that up, and we are talking about millions of people. This is all part of the putting-Humpty-Dumpty-back-together problem. As a result, firms are struggling mightily to find people to replace them.

What are business owners and CEOs saying?

The shortage is happening on all levels, from large corporations all the way down to local labor in restaurants. Across the landscape, finding laborers is hard and getting more expensive.

They’re saying two really interesting things. All of them are struggling to find the labor that they need, and they’re all considering or have already engaged in creative ways to induce people to come. That could be in the form of salaries or by being more lenient on in-person days or other sorts of benefits. Even beyond CEOs at major corporations, you see these pressures in restaurants and small businesses. As a result, a lot are operating at significantly reduced capacity because they simply don’t have the labor to return to normal.

A second factor that is important has actually been around for more than a decade. There’s a skills mismatch problem in our economy. Some larger corporations are using the pandemic to pivot, but to do so they need rare workers with specific skill sets. Even before the pandemic, welders or specialized truck drivers were already expensive. Some of the jobs we lost aren’t coming back, while other openings are growing for skills that have long been in increasingly short supply.

What’s the labor shortage doing to the economy?

Categorically, we’re seeing wage pressures increase. Whether it is firms offering higher pay to bring in staff or because they face competitive pressure from the Amazons of the world that are offering above minimum-wage salaries, they have to respond. Smaller businesses all the way up to the larger organizations are feeling growing wage pressures. That means corporate America’s wage bill is increasing. To be clear, that’s not bad for laborers, but it does impact business’ profit margins, among other things.

Hence, businesses, if they can, will pass some of those wage burdens off to their customers. Now you’re talking about all of us. Wage pressures can lead to inflation, and we’re already seeing some of that.

Policymakers are trying to determine how much of those price pressures is a reflection of one-off COVID weirdness that will calm down when the pandemic calms down (think about the supply chain disruptions in certain industries) versus something more sustained affecting prices. Rising prices due to growing wage pressure represent a trickier form of inflation, and the Federal Reserve Board is watching this closely.

What in our daily lives can we do to head off those effects?

Ultimately, for us to get on the other side of all this, we’ve got to get a handle on the virus. If anything, the delta mutation is making it harder and setting us back, slowing us down by affecting the willingness of people to engage in economic activity like we used to.

At the end of the day, we need vaccine penetration to reduce transmission. To the extent that we can care for one another by getting vaccinated, by being part of the social compact that is our country, that’s a really important thing we can do to help limit virus transmission and get us through this. Only an end to the pandemic will foster a truly sustainable economic recovery.

In the meantime, we also have an opportunity to think carefully about what matters to us. It may mean returning to work in a way that you feel good about what you’re doing but also balances other considerations. It’s going to be an interesting next couple of years as we work through the consequences of this change in mindset. Collectively, Americans can manage. It will be tricky, but it’s OK. It’s a good process.

An additional, but important, challenge is an understanding of what our business community is facing. This is about the places that we love, restaurants or our favorite coffee shop or wherever we like to go. They’re navigating a tough environment in which they’ve operated at below capacity. If we love them, we should show them a bit of grace and understand what they’re working through because that’s ultimately how we’re going to get through this together.