Global labor shortage and solving it with a multifaceted approach

Covid-19 pandemic brought chaos in the global labor market and increased the unemployment rates to record highs. As per the report by the International Labour Organization (ILO’s Modelled Estimates and Projections database), the global unemployment rate reached 6.9% in 2020 - the highest level since 1991. However, things have taken a massive turn with the world now struggling with a massive labor shortage. Countries are unable to find skilled workers to fill open vacancies across industries.

Labor Shortage Across the World
As per the U.S. Chamber of Commerce, the US had 11 million job openings in December 2022. The report adds there were almost 5.7 million unemployed people during the time. It means that even if every unemployed worker was hired, the country would still have more than 4.5 million open jobs left.

Just like the US, the United Kingdom also had a record-high number of job vacancies. For instance, there were 1.3 million job openings in the UK in May 2022. Similarly, the Australian Bureau of Statistics reported 444,200 job vacancies in the country in November 2022.

Many of these developed countries tried to address the labor shortage by offshoring services from lower-cost countries like China, India, the Philippines, and Thailand. However, the south-Asian region has now come under grasp. They are experiencing worker shortages and skills discrepancies that threaten various industries. For instance, as per a Reuters report, Thailand is short of 500,000 migrant workers. The manufacturing hub of the world – China, also indicated a massive labor shortage. The country’s Ministry of Education forecasted a shortage of almost 30 million manufacturing workers by 2025 – a number bigger than the total population of Australia.

"Regular training and upskilling opportunities, mentoring and coaching, and ensuring on-the-job learning is some of the most effective strategies that can help in closing the skill gap."

Moreover, several reports indicate a potential labor shortage in the world's most populous country India. According to a report, 70% of the workers in India feel increased pressure at work as their colleagues are quitting their jobs. The report adds that 74% of Indian and 68% of global respondents are confused about their responsibilities because things at work have changed since their coworkers quit.
These figures are just the tip of the iceberg about the world’s labor shortage turmoil. But what exactly are the reasons for this unprecedented shortage of workers? Here are some insights.

• The pandemic resulted in massive immigration disruptions and made people rethink their lives and prioritize their physical and mental health. It also shifted workers' expectations - who now long for improved work-life balance, enhanced flexibility, and increased compensation in their jobs. This led to mass resignations - an event referred to as The Great Resignation.

• Employees are leaving their current jobs for better opportunities, higher wages, and improved benefits. This has led to a conflict as companies are unable to meet the increased salary demands and prioritize covering the cost of high inflation.

• Many people left their jobs to start businesses in the spirit of entrepreneurship.

• Increased integration of technologies like artificial intelligence and automation has subsequently increased the demand for skilled people who understand the respective techs. Unfortunately, the world is facing skill gap issues which have played its part in spurring the labor shortage. Mckinsey reports that 87% of companies worldwide admit they have a skill gap in the present or will have one in the future.

• The aging workforce is a significant contributor to the global labor shortage. As per the World Health Organization, 1 in 6 people in the world will be aged 60 years or over, and the world’s population (of people aged 60 or above) will reach 1.4 billion in 2030.

The labor shortage is surely one of the biggest challenges for the business world in modern history. A reportby Korn Ferry claimsthat the global human talent shortage may reach 85 million people, and $8.5 trillion in unrealized annual revenues by 2030.

The situation is becoming alarming each day, and we need to make a move now!

How to remove barriers and create opportunities amidst talent shortage?
The ongoing labor shortage cannot be solved with a single solution – surely not at the global level. Each country has its own geographically and demographically governed challenges, and one solution cannot work for all. However, organizations can work on individual levels to make an impact and move toward a fully staffed workforce with a multifaceted approach.

1. Time for leadership to step up
The role of leadership becomes even more important to tackle challenges like labor shortages. A leader is someone who knows the way, goes the way, and shows the way. Thus, they need to step up and drive changes to retain their best people while recruiting more top talent.

2. Reimagine organization culture
Organizations need to reimagine and invest in their company cultures to foster a place where employees feel safe, valued, and motivated. Moreover, organizations should start acknowledging the fact that employees are an asset (and an investment), and not an expense. A great culture also gives a boost to employee referral programs.

3. Reengineering employee relationships
During the pandemic, the personal and professional lives of the employees collided which completely changed the game. And thus, arises the need for reengineering employee relationships. Employees now look to work with employers who prioritize the human approach, focus on employee growth and development, offer targeted training, and personalize their job search approach this.

4. Close the skill gap
The skill gap is one of the contributors to the labor shortage and needs to be dealt with urgently. Regular training and upskilling opportunities, mentoring and coaching, and ensuring on-the-job learning is some of the most effective strategies that can help in closing the skill gap. Integrating technology is crucial to enhance operational efficiency, but utilizing multiple tactics for closing the capability gap is equally important.

5. Innovate your recruitment
An innovative recruitment strategy is crucial to finding and hiring the right people in the tight job market. The recruitment process directly impacts hiring and people management. A good and effective onboarding experience increases the chances of your candidate joining the organization. For instance, consider making your recruiting process easy and quick. The best candidates are off the market in a matter of days, especially when the market is tight. Thus, you need to act fast!

The labor shortage has created a candidate-driven market. Workforce preferences have changed, and employees demand enhanced benefits as part of the overall compensation packages. Apart from competitive salaries, they ask for a healthy work-life balance, job security, and considerate work environments. Thus, companies need to overhaul their strategies and build an employee-friendly culture to attract talent while retaining their existing workforce.