Unprecedented labor shortages can present certain risks
Business owners are facing significant challenges related to finding and retaining talent in today’s job market.
According to the most recent data from the U.S. Chamber of Commerce, there are more than 10 million job openings in the United States, but only about 6 million unemployed workers.1 That means if businesses could hire every unemployed person in the country, there would still be 4 million open positions. This gap has narrowed some since its peak in March 2022, but remains elevated.2
Beyond not having the talent needed to execute on organizational initiatives, this massive gap in the availability of skilled labor can cause considerable business risks and employee safety concerns. For example, when a business is short-staffed, employees may have to work longer hours to compensate for lost productivity.
This can lead to fatigue that makes the workforce more prone to mistakes— such as service quality issues, damaged work product, on-the-job accidents or other liability concerns. To respond effectively to labor shortages, it’s critical for organizations to understand what’s causing them, the potential exposures they create and ways to help navigate them effectively.
COVID-19 undoubtedly had a significant impact on the number of available workers due to the economic uncertainty of the pandemic as well as state-issued lockdowns, and massive layoffs by some organizations. However, even as the economy slowly reopened and job availability returned, many individuals reassessed their employment arrangements and opted to stay out of the workforce altogether, while others opted to quit voluntarily. Notably, over 47 million Americans quit their job in 2021 in a trend termed “The Great Resignation.”3
Economists initially feared these employees would stay out of the workforce, but in what’s now being called “The Great Reshuffle” a great number of those who quit jobs in 2021 have rejoined the workforce. Many looking for new jobs in different industries that offer increased freedom and earning opportunities.2
While there is considerable concern about the current labor shortage, the pandemic and related resignation/reshuffle offer valued insight into reasons that employees quit their job. This can be used shed light on how to address these concerns to attract and retain employees.
As a result of the pandemic, many individuals had to take on more caregiving responsibilities. In many cases, these individuals—predominantly women—had to take time away from work to care for children or elderly grandparents.3 Given these new responsibilities, it became increasingly difficult for primary caregivers to return to work, and preliminary data indicates that approximately 3 million women exited the workforce between 2020 and 2021.4
During the height of the pandemic, many individuals nearing retirement either quit their jobs or decided not to re-enter the workplace after an otherwise temporary lapse in employment. Many favored living off retirement benefits over navigating the challenges of finding a new job in a tough market. Others felt ending their career earlier was more attractive than hazards related to in-person work given COVID-19’s potential to cause more severe disease in older people.
Working during the pandemic and receiving little to no help from employers led to significant burnout among some employees. This issue was compounded among employers that offered low salaries and benefits, poor management and lack of work/life balance or flexible scheduling options.5
While we are far removed from the lockdowns of 2020, COVID-19 cases aren’t going away, particularly as new variants emerge. As a result, many employees have remained out of work to avoid potential health concerns.
New opportunity and mobility
More individuals have left old jobs and shifted careers or started new business ventures since the start of the pandemic. Nearly 52% of Millennial and Generation Z workers were likely to consider changing companies in 2022, and 46% of the world’s workforce plans to relocate in 2022.6
By addressing and capitalizing on these issues (e.g., improved elder and child care options, prioritizing wellness and health safety, offering work from home and hybrid arrangements), employers can attract needed talent from the reshuffle into their organization. However, many economists still anticipate significant hiring and retention challenges ahead. This makes it all the more important for organizations to understand how talent shortages impact their business—especially from a liability standpoint.
Liability concerns stemming from labor shortages
For many organizations, labor shortages increase the focus on potential economic impacts an under-capacity workforce can have on a business (e.g., lost productivity). However, labor shortages can also have an effect on employee safety and other liability concerns. The following are some key exposures of note:
- Employee safety—With labor shortages, employees may be asked to take on additional responsibilities or work longer hours to keep up with demand. This can increase the risk of accidents and injuries on the job, particularly in industries already considered high-risk. Additionally, the pressure to fill positions quickly can lead to hiring inexperienced or untrained workers, further compromising workplace safety. For example, a reduced workforce may mean skilled employees don’t have the time to train new recruits on company equipment, leading to potential safety or property damage concerns.
- Burnout—Employee burnout refers to physical, emotional and mental exhaustion caused by overwork, as well as excessive or prolonged stress. Burnout can lead to various physical and mental health issues, including depression, anxiety and heart disease. It can also negatively impact an employee’s performance and productivity at work.7 This can put an organization at risk of liability if an employee in a state of duress accidentally (or intentionally) causes harm to the organization or its clients. For example, the organization may be held responsible for resulting damages if an employee makes a mistake or fails to complete a task due to burnout. Additionally, if an employee’s burnout leads to a workplace accident, the organization may be at risk of workers’ compensation claims.
- Supply chain issues—As a result of the COVID-19 pandemic, many countries implemented lockdowns and other measures to curb the virus’s spread, disrupting the flow of goods and services. This caused widespread shortages of certain products, which, had a ripple effect on many industries, including manufacturing, transportation and retail. The current labor shortage has exacerbated the issue. When there are not enough workers to complete tasks at each stage of the supply chain, it can cause significant disruptions. This can lead to shortages of certain products or services, which can hurt an organization’s ability to meet the needs of its customers, opening up the business to potential liability concerns. For example, if a disruption causes an organization to miss a delivery deadline and a client suffers financial losses as a result, the organization may be held responsible. Additionally, the organization may be at risk of possible liability for any injuries or damages if a supply chain disruption leads to a product defect or safety issue.
Beyond the above concerns, there are industry-specific exposures related to labor shortages that organizations should be aware of.
With an average worker age of 42, the construction industry has significant employment challenges ahead.8 This is particularly true when you consider that, between 2021 and 2023, the industry needs to hire more than 1 million workers to keep pace with future infrastructure and industry demands.9 Among other concerns, labor shortages in construction can cause increased job site accidents, project delays and decreased workmanship. This can result in additional costs for contractors who may have to pay overtime or hire temporary workers to complete projects on time. Furthermore, the lack of qualified workers can make it difficult for contractors to bid on new projects, ultimately impacting their ability to grow.
Recent federal programs support funding the new generation of manufacturing workers, but staffing shortages continue to be a concern. Some manufacturers are turning to artificial intelligence to complete tasks, while others have relaxed job requirements to broaden their candidate pool. However, this can result in an underqualified workforce, leading to increased job site accidents and liability issues. Notably, research shows that employees with less than a year of job experience are responsible for over one-third of worksite accidents.10
The American Trucking Associations (ATA) reports that there is currently a shortage of over 80,000 drivers—a 30% increase over pre-pandemic numbers.11 What’s more, the ATA estimates that this shortage could increase to 160,000 unfilled positions by 2030.12 The shortage is driven by an aging workforce and declining interest in the profession. The recent federal infrastructure plan includes a provision to encourage young talent to join the trucking industry and help fill the gap. Still, many motor carriers struggle to fill open positions and have had to extend existing employees’ driving schedules and lower driver applicant standards. This can increase the likelihood of accidents on the road and create liability issues, including driver injuries and fatalities, damaged or lost inventory, and delivery delays.
Finding and retaining quality talent
With fewer workers available, it can be difficult for businesses to find qualified employees, and retaining workers they already have becomes more important than ever. While recruiting tactics may vary by industry, the following are some strategies to consider:
- Offering competitive salaries and benefits—During a labor shortage, it’s important for businesses to offer competitive wages and benefits in order to attract and retain top talent. This can include benefits like health insurance, retirement plans, remote working options, paid time off and flexible work schedules.
- Survey your employees—The best way to stay in touch with your employee’s concerns and needs is to ask. Anonymous surveys can help identify issues that can be corrected before staff leave. Conduct exit interviews to identify problems that can be addressed to prevent others from leaving for similar reasons.
- Providing opportunities for professional development and training—Workers are more likely to stay with a company that provides opportunities for professional development and training. Specific policies will vary, but this can include in-house training programs, workshops and conferences.
- Investing in technology and automation—By investing in technology and automation, businesses can improve efficiency and reduce the need for additional workers. This can save time and resources while making the workplace more attractive to potential employees.
- Recruiting from a wider pool of candidates—Businesses may need to expand their candidate pool to find qualified workers. This can include recruiting from a broader range of backgrounds and experience levels as well as interviewing candidates who may not have previously been considered. This is a balancing act, however, as underqualified workers can potentially increase liability risks, particularly in high-risk industries.
- Recruit past employees—Sometimes employees leave and realize they made a mistake but are too proud to admit it, or believe you will not rehire them. A best practice is to contact past employees, who left in good standing, and let them know they would be welcome back. Past employees require less orientation and training.
- Developing a strong company culture—A positive workplace environment and strong company culture can help retain existing employees and make the company more attractive to potential hires. While the definition of a strong company culture may differ from person to person, employers that encourage transparency, open communication, collaboration and work-life balance are likely to see positive outcomes regarding employee satisfaction. Further, to retain workers, it’s critical for businesses to provide support and resources that help employees manage stress. This could include access to mental health resources and fitness facilities.
- Partnering with educational institutions and job training programs—Businesses can develop a pipeline of qualified workers ready to enter the workforce by partnering with local educational institutions and job training programs. This can help to ensure a steady supply of talent.
Robust recruitment strategies are crucial in the face of a labor shortage. By attracting and retaining top talent, organizations can ensure that they have the skilled workers needed to meet the demands of their businesses. Effective recruitment strategies can also help organizations build a diverse and inclusive workforce, improving collaboration and driving innovation.
You can find resources related to worker safety and hiring practices for various industries on mylosscontrolservices.com.