Politics

Contentment Wanted: A Closer Look at America’s Labor Shortage

Ever since April’s disappointing jobs report—which showed an increase of only 260,000 jobs against projections of over 1 million—economists, labor market specialists, and employers have all been trying to locate the source of workers’ unwillingness to return to work. By now, the concert of variables are familiar to most—the generous unemployment supplement, lack of access to childcare, fear of the virus, and inadequate pay. What has gone largely unobserved in this raging debate, however, is another factor that is greatly influencing the labor market: widespread worker discontentment. 

Thus far, none of the commonly proposed theories have gained enough traction to stick.  

For one, employers looking to fill low-wage, hourly positions have been offering generous wage increases and signing bonuses, with economist Michael Strain noting nearly 8% wage growth in the retail, leisure, and hospitality industries from pre-pandemic to May 2021. Even still, anecdotal reports suggest that many employers are unable to lure applicants and retain employees in these industries. On the macro level, the labor force participation rate (LFPR) has remained flat since last summer, suggesting that these wage increases are not enough to draw prospective employees back into the labor force. 

Other external factors have also been mitigated, but the preliminary data suggest that such efforts were similarly unsuccessful. For example, in the wake of mass vaccination efforts and plummeting infection rates, fear of contracting the virus has been steadily dropping. As for the concern about childcare, a recent study from the Peterson Institute for International Economics found “childcare issues that have pushed mothers out of the workforce account for a negligible share of the overall reduction in employment since the beginning of the pandemic.” Put simply, lack of access to childcare does not explain economy-wide unwillingness to work. Moreover, the unemployment supplement has been rolled back in more than half of states, and while it is too early to determine the effect on the labor force, there is a widespread consensus that unemployment insurance is not the only culprit. Certainly, each of these variables likely play some role in the current labor market situation, but it is clear that they do not tell the whole story.  

Economists and labor market analysts have largely overlooked a key piece of the puzzle: worker discontentment. Workers throughout the labor force have long been displeased with their work environments and disengaged from their jobs, and this discontent has severe implications for individual businesses and the economy more broadly. Discontent is both a significant barrier for those considering rejoining the labor force, and a phenomenon that hinders productivity for those who continue to work. By addressing the sources of discontent, then, employers and policymakers would reap the economic benefits of increased productivity and fewer vacancies. 

The evidence for widespread worker discontentment is overwhelming.

Even before the onset of the pandemic, record numbers of workers expressed disengagement with their work. According to Gallup’s State of the American Workplace survey in 2017—amidst strong economic growth and a generally favorable labor marketonly 33 percent of the workforce felt engaged with their work. At the same time, a staggering 51 percent of the workforce said that were actively searching for a new job.  

The pandemic has only exacerbated these issues. In February 2021, two thirds of workers expressed not just a willingness to change their jobs, but change their careers. More recently, in April, quit rates across the entire labor market reached an unprecedented level of 2.7 percent, with particularly high rates in the food and accommodation (5.6), retail trade (4.3) and leisure/hospitality (5.3) industries. For comparison, average quit rates from January 2001 to January 2020 were 1.9 percent, with a standard deviation of only 0.3. 

According to Gallup, some of the top reasons fueling this nationwide desire to change careers or drop out of the workforce include slim opportunities for advancement, toxic company culture, and poor management practices.  

Individual businesses stand to benefit by addressing this crisis of discontent—not only by attracting and retaining workers, but by increasing the productivity of their current workforce. Christine Porath, a professor at Georgetown’s McDonough School of Business, has spent years studying the effects of discontentment and workplace incivility on business outcomes—finding that negative working environments produce suboptimal results for businesses. When workers experience a lack of respect, Porath found that 48% intentionally decreased their effort, and 47% intentionally decreased the time that they spent working. Unsurprisingly, these developments disincentivize productivity and growth throughout the entire economy, with Gallup finding that “actively disengaged employees cost the U.S. $483 billion to $605 billion each year in lost productivity.”  

The conditions that prompt such lackluster performance, according to Porath, are strikingly similar to the reasons Gallup found for workers wanting to leave their jobs—insufficient advancement opportunities, lack of workplace civility, and suspect managerial practices. In other words, mismanagement of human capital has resulted in discontentment and disengagement, negatively influencing the current labor conditions and economic productivity. 

In sum, many workers, especially those working for hourly wages, are discontented, and such widespread dissatisfaction is playing a significant role in America’s current labor shortage. A lack of advancement opportunities, poor company culture, and substandard management are all fueling this discontent, and employers would greatly benefit by better engaging with their employees, as vacancies would be filled and workers would be more productive. 

Admittedly, even the most vitriolic discontentment has a shelf life, and eventually those holding out from low-wage employment will no longer be able to afford to do so. But by simply removing the pandemic-era safety net and forcing hold-outs to return to work, employers and policymakers would be overlooking an opportunity for tremendous growth. By addressing the sources of the worker disengagement—offering opportunities for advancement, fostering more respectful business environments, and strengthening management practices—not only would the labor shortage be solved, but productivity would skyrocket and business outcomes would be boosted.  

The most overlooked, and perhaps most important, problem with the current labor market is worker disengagement and discontent. And while addressing this phenomenon in its entirety transcends the capacities of individual employers, businesses undoubtedly have a significant role to play—as the primary sources of discontentment relate to company culture and mismanagement of human capital. Policymakers also ought to take note, in that the effects of worker disengagement pervade the entire economy, leaving much untapped potential in the American working-age population. By treating discontentment as the fundamental source of the labor shortage, employers and policymakers would be achieving two aims at once: incentivizing workers to fill much needed positions while also boosting productivity and long-term growth. 

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