Where Have All the Workers Gone?                             The Labor Shortage & Its Effects on the Supply Chain

The driver shortage has been a well-publicized problem in the logistics industry for a long time now. However, it is not the only issue affecting the supply chain. Warehouses, manufacturing plants, factories, retailers and more companies throughout the entire supply chain are seeing a labor shortage. Combined with the record-setting freight increases and capacity issues, the supply chain is suffering widespread negative effects.

The Impact

While the supply chain and logistics industries are seeing their need increase from the ecommerce boom spurred by the global pandemic, they are struggling to meet that need due to the worker shortage. Recent research from Korn Ferry estimates that businesses worldwide could see a labor shortage of 85.2 million skilled workers by 2030, meaning the situation is not expected to get better anytime soon. This worker shortage is expected to cause a reduction in revenue up to $8.45 trillion globally. 

In addition to costing companies profit and growth, the labor shortage will ultimately end up costing the end consumer more money too. With manufacturers, distributors and carriers all understaffed, there are not enough goods or ways to deliver the goods to meet consumer demand, resulting in higher prices for those items. This is a simple Economics 101 lesson on supply and demand. 

Causes of the Labor Shortage

Now that we know the impact that the labor shortage has caused, let’s examine what is creating the problem to begin with. As with most things, there is not a one-size-fits-all answer. There are a variety of reasons that the supply chain is suffering from a labor shortage. 

Demographic changes. The baby boomer generation is reaching retirement age and leaving the workforce in record numbers. There are simply not enough experienced younger workers to make up the difference. Millennials are filling the entry-level roles but are not ready for the managerial roles vacated by retirees. Recent studies estimate that more than 60 million boomers will retire by 2025, leaving behind a large hole of technical and institutional knowledge that can’t be replaced. The same reports found four out of five manufacturers are concerned about the labor shortage caused in part because of the retiring workforce.

Higher unemployment benefits coupled with increased childcare obligations. Because of the pandemic, the US government instituted new unemployment benefit programs to help the nonessential workers who were pushed out of a job. However, now that the supply chain is picking back up, these workers are remaining off the job because they are making more in unemployment benefits. Couple the increase in unemployment pay with the closure of schools and workers are finding it more advantageous to be at home with their children rather than find new childcare programs. As states opt out of the additional $300 per month unemployment from the federal government and reinstate job-searching requirements to stay on unemployment, workers will hopefully return. Many manufacturers, carriers and other companies in the supply chain are offering higher wages and sign-on bonuses to entice workers back as well. However, this “fix” may just be luring workers away from one business to another, meaning it is not actually the intended solution to the widespread labor shortage.

Change of skill set and lack of training programs. As the supply chain becomes more technically savvy, it means jobs need to be more skilled than before. This is impacting companies’ ability to hire. There are simply not enough technically and analytically skilled workers. Additionally, with budget cuts and in-person training being cut due to the pandemic, companies are behind schedule in training new employees. 

Labor Shortage and the Future of the Supply Chain

All of the data and statistics indicate the labor shortage will continue to be a problem into the future. Therefore, companies will need to adapt and figure out a way to do what they need to get done in order to survive. Stay tuned for part two of this blog series, “The Labor Shortage: How to Mitigate Its Effects on the LTL Industry.”