Yahoo Finance

Important new clues about the labor shortage

Rick Newman · Senior Columnist
Mon, February 28, 2022, 10:19 AM

Where did the workers go?

Many businesses are grappling with this question as they try to fill 11 million job openings, nearly the most ever. Companies say they’re raising pay and offering new perks, yet the workers still aren’t there. The percentage of working-age people who have a job or are looking for one plummeted when COVID arrived in early 2020, and it’s only about halfway back to pre-COVID levels. ... There are some pat explanations for the missing workers: They’re living off government benefits in place of a paycheck, or sponging off family. Moms who want to work are stuck at home with kids whose schooling is a mess. Some people just retired early.

New research from economists at the Chicago Federal Reserve and the University of Texas offers a surprising insight: Much of the labor shortage comes from part-time workers and those accustomed to working on and off, who have checked out of the labor force more than any other group.

“These are transitory workers who don’t necessarily seek out work, but may take a job if an opportunity arises,” study author Jason Faberman, a senior economist at the Chicago Fed, tells Yahoo Finance. “They seem to reflect a variety of people who wouldn’t mind the additional income, but aren’t necessarily dependent on it. A lot of them left the labor force during the pandemic and it seems more permanent for them thus far.”

A lot of people don't actually need full-time work

The researchers mined data from an annual Fed survey of consumers to figure out who wants to work and who doesn’t. By comparing responses after the COVID outbreak with pre-COVID data, they were able to isolate which groups are most responsible for what they characterized as “a notably large contraction in labor supply.” While the notion of occasional workers may bring to mind deadbeats getting by on government aid or other people’s money, that’s probably a misconception. There are many people who don’t need to work full-time, including students, retirees, the disabled, spouses whose job would represent a second income and people in the midst of retraining or another type of career switch. Each group may be relatively small, but combined they may explain a large portion of the labor shortfall.

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