Construction workers
Source: Unsplash

The Worker Shortage Could Worsen This Summer

Mohit Oberoi, CFA - Author
By

Jun. 2 2022, Published 8:38 a.m. ET

Since the U.S. economy has started to reopen, companies—big and small—have been complaining about a shortage of workers. Why is there a worker shortage in 2022, and will things get better?

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Things were expected to get better in the second quarter of 2022 as the omicron wave subsided and people were allowed to return to work. But that hasn't been the case.

Why is there a worker shortage in the U.S.?

Several factors are behind the worker shortage. Over a million deaths were reported in the country due to COVID-19, and many of these were working-age adults. There are also several suffering the effects of long COVID.

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The high cost and low availability of childcare have also forced a lot of people out of the labor force. Thousands of childcare centers closed their doors over the last two years. Additionally, whereas baby boomers once added to the U.S. economy's growth, they've started retiring in the last decade. Some of them also require home care, pulling more working-age adults from the work force.

Finally, the labor force participation rate still has yet to recover to pre-pandemic levels. Immigration has also fallen, further pressuring the strained U.S. labor market.

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The U.S. worker shortage could intensify this summer

The worker shortage may only get worse as travel and other summer activities rebound. Shortages of lifeguards, drivers, and restaurant workers could disrupt Americans' summer plans for a third year in a row.

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Wages need to increase

Although wages have risen across the board in the U.S., many think they need to be increased more amid the high inflation. The costs of food and fuel have all risen steeply.

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Overall, the worker shortages don't bode well for the U.S. economy as the country looks to take on China. A letter issued by dozens of former national security leaders, which was viewed by Axios, says that the “bottlenecks in the U.S. immigration system” could “squander” the advantage the U.S. has over China in accessing international talent. The Fed is also concerned about the “unhealthy” U.S. labor market.

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How to resolve the worker shortage in the U.S.

One way out of the shortage would be increasing the female labor force participation ratio. To do this, child and elderly care would need to be made more affordable.

Wages for entry-level workers also need to be adjusted to attract more people to the labor force. And whereas some politicians have been against immigration, relaxing restrictions there could help the U.S. maintain its lead over rivals when it comes to tech talent.

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