Nearly two years after the start of the pandemic, American businesses find themselves in a predicament: There are more job openings than people looking for work—but filling the jobs remains a challenge.
This is a complete shift from the millions out of work in the spring and summer of 2020. And although there are multiple explanations, one thing is clear: It’s a worker’s market, and companies that can offer flexible schedules, career advancement, higher pay and benefits such as paid leave are winning over job seekers.
The Jobs Mismatch
The U.S. labor market faces a paradox, with both a record worker shortage and a high number of job seekers. Recent data from the U.S. Bureau of Labor Statistic shows that employers posted 10.4 million job openings in September, the most the bureau has ever reported. At the same time, 7.4 million Americans were unemployed, topping the 5.7 million who were unemployed in February 2020, right before the pandemic hit. In other words, there are 83 unemployed job seekers for every 100 job openings.
So why the disconnect? There are a few possible explanations out there, such as the increased unemployment benefits, which expired in September, or reduced child care options for parents. Research has shown, however, that ending the supplemental unemployment benefits restored only a small fraction of jobs, and that parents of young children are not impacting the employment deficit more than other workers.
A recent survey of job seekers by Indeed Hiring Lab found that continued concerns about the pandemic and new COVID-19 variants are muting the urgency to find work. For some, financial cushions, such as savings and spousal income, or schools being on summer break, have also played a role in reducing the desire to seek employment. That will change as kids return to school and savings start to dwindle, the survey said.
“What we’re seeing in the labor market right now is an urgency mismatch,” says Nick Bunker, head of research for Indeed Hiring Lab, which tracks labor trends. “Many employers desperately want to ramp up production and need to hire workers to do so. Workers, for a number of reasons, don’t feel that same sense of urgency.”
Child care, increased unemployment benefits and fears of COVID-19 variants may all be playing some role in the number of unfilled jobs, but they aren’t the only drivers. In September, the Maine Department of Labor surveyed workers on state unemployment insurance, asking what was preventing them from returning to work. While the most common barriers were indeed COVID concerns and lack of child care and transportation, near the top were a “lack of opportunities that match my skill set” and “job quality concerns,” including low wages, lack of benefits and unpredictable schedules.
(Related: “Using ARPA to Modernize Unemployment Insurance,” by NCSL’s Jon Jukuri.)
A deeper dive into the U.S. jobs data reveals that many of the current job openings are in low-paying sectors especially impacted by the pandemic. According to August data from the U.S. Bureau of Labor Statistics, job openings were well over 1.5 million in multiple sectors, including wholesale and retail trade, professional and business services, education and health services, and leisure and hospitality industries. These industries include restaurant, hotel and retail workers, as well as health care professionals and child care workers. Many workers in these fields were laid off, had their hours reduced or were put in high-stress environments over the last 20 months and do not want to return to their previous jobs.
At the same time, at least 2 million Americans have retired sooner than expected during the pandemic, according to the Schwartz Center for Economic Policy Analysis. This has brought about a perfect storm of workers who have left the workforce for good or are looking for better opportunities. Some experts have dubbed it the “Great Reassessment.”
Reassessment of Work
The pandemic has given workers the opportunity to reassess what they want from work and life. Multiple surveys have shown that nearly 1 in 3 workers under age 40 considered changing careers during the pandemic. Although higher pay is a factor for many, a better work-life balance and career advancement opportunities are high priorities as well.
Many large companies are listening to workers’ desires for career advancement and job training opportunities and are now offering them as perks. Walmart recently committed $1 billion over five years toward college tuition and career training and development for about 1.5 million part-time and full-time workers. Google, Amazon, Microsoft and other tech companies are offering employees a chance to break into technical careers through free online courses or scholarships for certification programs. Similarly, established organizations such as Year Up and Per Scholas that train underrepresented populations for the workforce are currently expanding to meet the influx of new applicants.
Workers are also looking for work-life balance and flexibility in new jobs. In 2020, the pandemic became the largest-ever experiment in remote work, as billions of workers around the world pivoted to working from outside the office. And the experiment was largely a success, as productivity increased and employees found remote work offered more options to work when and where they wanted. As job seekers hunt for new employment opportunities, the option to work remotely is high on the wish list for many.
Many workers who have not found what they want in a job have turned to entrepreneurship. In 2020, Americans started 4.4 million businesses, a nearly 25% increase from 2019. Some were started as a necessity to bring home income in the wake of business closings and layoffs due to the coronavirus, but others were a way to pivot to a new, more fulfilling career. More than 10% of those new businesses were started by Black entrepreneurs. Although business applications were not as elevated in 2021, the numbers remain higher than pre-pandemic levels.
The State Role
Although a lot is being done at the business level to help recruit and retain job seekers, states are also playing a key role. Higher pay is one avenue to incentivize workers to return to jobs, and some businesses have found it to work. Increasing the minimum wage has been hotly debated for many years. Whereas the federal minimum wage has remained stagnant at $7.25 per hour since 2009, 29 states and the District of Columbia have state minimum wages that are higher. In 2021, 19 states started the year with increased minimum wages due to cost of living increases and recent minimum wage legislation or ballot initiatives taking effect. In July 2021, Delaware became the latest to enact legislation that would gradually increase the state’s minimum wage from its current hourly rate of $9.25 to $15 by 2025.
“The economic health of this nation turns on a core proposition: if you put in a hard day’s work, you will earn a fair day’s wage,” Delaware Sen. John Walsh (D) says. “I pledged our support for Delaware’s lowest-paid workers, who have stepped up for us in a heroic fashion during the greatest public health crises of our lifetimes. By passing Senate Bill 15, we recognize that we owe them more than our gratitude, we owe them a better life.”
Higher pay is not the only incentive states are considering. Early in the pandemic, Congress passed the Families First Coronavirus Response Act, which among other things, helped alleviate concerns over taking time off to care for oneself or a family member who contracted COVID-19. The legislation funded paid sick leave for workers to care for themselves, family members or even children at home due to school or day care closures. This was the first time the federal government required paid sick leave to most private sector workers. Before the pandemic, about 75% of the U.S. workforce had access to paid sick leave, but there were stark disparities: More than 90% of workers earning the most had the paid benefit, compared with only 51% of those making the least.
Fifteen states and Puerto Rico have enacted their own paid family leave programs. In 2021, at least 12 states introduced such legislation, with New Mexico enacting its bill. Colorado, New York and Puerto Rico all enacted legislation in 2020, and portions of the bills apply specifically to the pandemic or future states of emergency. Most state policies allow full-time workers to accrue one hour of sick leave for every 30 to 40 hours worked.
Finally, recognizing that there may be a skills mismatch between current job openings and those looking for work, many states are creating opportunities for job training and skills improvement. Arizona, Florida, Hawaii and Maine are just a few of the states that have already allocated federal money from the American Rescue Plan Act to workforce development. These enactments range from modernizing the state Reemployment Assistance System (Florida) to creating green job youth corps programs (Hawaii).
Time will tell if state and business efforts are enough to lure workers back into jobs, or if the pandemic will continue to shape the course of employment in the coming months and years.
Suzanne Hultin is the associate director of NCSL’s Employment, Labor and Retirement Program.