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No Magic Bullet in Sight for U.S. Labor Shortage

With schools reopening and unemployment benefits scheduled to expire, employers have earmarked September as a hopeful turning point for the labor shortage. However, many economists and business owners warn that deeper issues will extend staffing challenges well into the fall.

Wage Compression Adds to Consumer Costs

As food companies increase hiring wages to attract frontline employees, existing staff and senior workers are watching as entry-level hourly rates approach their own. According to The Wall Street Journal, this so called “wage compression” is prompting employers to rethink pay for existing staffers along with new recruits at higher ends of the wage scale. (Aug 1)

To offset these issues, employers like Chipotle Mexican Grill — who recently increased their hourly minimum wage to $15 — are giving corresponding raises to experienced and salaried employees. To pay for the extra labor expenses, the company raised its menu prices by 3.5% to 4% in 2021.

Unemployment Ends, Hiring Lags

Data from the U.S. Labor Department suggests that cutting pandemic related unemployment benefits has not led to a big pickup in hiring. The 20 states that reduced benefits in June had the same pace of hiring as those that kept the extra unemployment payments in place.

The most notable change in these states has been who is getting hired. According to The Washington Post, small restaurants and hospitality businesses saw a jump in hiring of workers over age 25 (July 27). However, those numbers were roughly offset by a reduction in teenage hires.

Deeper Challenges Ahead

More fundamental shifts in the employment landscape are expected to play out further in the coming months, reported MarketWatch. (Aug 2)

  • The pandemic prompted many Baby Boomers to retire ahead of schedule. Another wave of older workers may choose to retire if they can no longer work remotely.
  • A record number of new businesses launched and thrived during the pandemic. Many entrepreneurs have no plans to return to the traditional workforce.

Furthermore, doubts are growing about millions of moms returning to work in September as the delta variant revives mask mandates.

“School opening in the fall isn’t going to be the savior for getting people back to work,” Misty Heggeness, economist at the U.S. Census Bureau told MarketWatch. “I think we’re underestimating the fear people have with the virus.”