Where are all the workers? Its Complicated.
Musings on the Labor Market Shortage
Many of the restaurants and stores we visit all seem to be short staffed and it has been this way for months.
This is because there are nearly 3 million fewer people in the labor force today (October 2021) than there were in January 2020, before the start of the COVID-19 pandemic. Had the labor force continued to grow at the same rate from 2011-2019 (and the pandemic had never occurred) there would be around 5 million more people in the work force than there currently are.
There are many anecdotes used by politicians to explain the shortage of workers to benefit their political agenda. There is no evidence to suggest the pandemic-related enhanced unemployment benefits were a cause of the labor shortage. The United States is currently several months removed from the end of those benefits, and the labor force has not recovered. The current labor shortage is more complicated and nuanced. We won’t truly understand what is going on until some time in the future where there is more data we can look back on, but it is likely a combination of several contributing factors.
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The United States relies heavily on immigrant workers for many low-wage jobs in hospitality, construction, agricultural, and other industries. The number of immigrant workers declined by 38.4% from 2019 to 2020 and the growth rate of net immigration to the United States (number of people who enter the minus the number of people who leave) has declined since 2016.
While net immigration to the United States is still increasing, had net immigration continued the same growth rate from 2016-2020 as from 2011-2015, there would be around 3.5 million more immigrants in the United States than there were in 2020. While not all immigrants will enter work force, the declining growth rate is likely contributing to the current labor shortage.
Since 2019, there has been around a one percentage point increase in the number of people ages 55-64 that consider themselves retired, approximately 400,000 people, and around a two percentage point increase in the number of people ages 65-74 who consider themselves retired, approximately 600,000 people1. Over the last two years, there are nearly one million more people between the ages of 55-74 that are retired. This is another possible factor that could be contributing to the current labor shortage.
A recent analysis by Heather Long at the Washington Post shows that the number of workers in the child care industry is struggling to return to pre-pandemic levels. With a shortage of child care workers, some parents may not be able to return to work, which may also contribute to the current labor shortage.
It is likely some combination of immigration, retirement, child care, and other factors that are contributing to the current labor shortage. The declining growth rate of immigration was likely due to a combination of policy during the Trump administration and the pandemic. It is difficult to determine what the growth rate of net immigration will be as it is influenced by a number of factors, but immigration policy reform is decades over due. Some retirees will likely return to work as the pandemic conditions decline, particularly those aged 55-64. It is also difficult to determine how long it will take the child care industry to recover as immigration and retirement likely have some influence on the number of workers in this industry and wages will also likely increase which may attract more workers.
The labor market will eventually recover, but it is difficult to determine exactly how long that will take because there are a number of determinants causing the current labor shortage. Keep this in mind when you hear politicians and others discussing this issue in absolute terms that are tied to their political ideology.
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