The Labor Shortage Hiring Crisis: Why It’s Happening & How To Overcome It

With the labor shortage, companies are having a hard time finding people to fill positions, successfully onboarding new hires, and retaining current employees. About 62 percent of business leaders and HR leaders rated finding and keeping qualified employees as their top business challenge, according to the 2024 Priorities for Business Leaders report.¹

While the hiring crisis may stem from multiple factors, the fact remains that businesses need to ensure they have the staff to keep their doors open. What has precipitated the U.S. hiring shortage, and how can employers effectively address these challenges to keep their businesses moving forward?

Keep reading for some tips on how to manage your hiring struggles and find the right employees.

What Is a Labor Shortage?

A labor shortage, also known as a worker shortage, happens when there aren’t enough workers in the job market to fill the available roles. To identify a labor shortage, you can compare the number of available jobs with the unemployment rate. If there are considerably more jobs than job seekers, it indicates a worker shortage.

Why Is There a Labor Shortage?

The current staff shortage in the U.S. poses a unique challenge for employers. The U.S. Bureau of Labor Statistics reported approximately 8.8 million job openings in November 2023, but there aren’t enough workers to fill them.² There are 2.2 million fewer workers in the workforce than in February 2020.³

The labor shortage can be attributed to early retirements, the shrinking population, career changes, lack of childcare, and many other factors. Here’s a breakdown of the trends impacting hiring and recruiting:

Aging Workforce

The retirement of Baby Boomers has left a significant gap in the workforce. As experienced workers leave the job market, many industries struggle to find replacements with similar skill sets and knowledge to fill their roles.

Lack of Childcare Support

Another factor contributing to the U.S. labor shortage and trouble hiring is finding adequate childcare. Many parents still face soaring costs for these services leading some people to make the decision to stay home rather than pay for childcare.

Mismatched Skillsets

New technology developments in various industries have created a need for fresh skills that were not necessary before. For example, the increasing use of AI, machine learning, and digital technology requires technological expertise that some in the current workforce may not have.

Changing Expectations

If you’re finding it hard to hire employees, you might want to take a look at offering competitive pay and benefits. For example, companies in the private sector can typically offer more competitive pay — ultimately drawing away talent from other industries. Many employees are also expecting better pay and more flexible working arrangements, demands that some employers may not be prepared to meet.

Industries With Labor Shortages

The U.S. labor shortage has affected some industries more than others, either because they are no longer as desirable to workers or because of a lack of skilled talent for that sector.

The professional services industry has experienced the highest quit rates of all industries, according to the U.S. Bureau of Labor Statistics report. This industry lost 1,055,000 workers in December 2023, but hired 1,036,000 in that same month.

When looking at the labor shortage, the industries with the highest and most consistent number of job openings on the U.S. Bureau of Labor Statistics list are healthcare, professional services, and leisure and hospitality.⁴ This staff shortage may be caused by the decreasing number of skilled workers in these industries.

*U.S. Bureau of Labor Statistics data from December 2023

How To Attract Employees During a Labor Shortage

While you may be experiencing hiring challenges right now, there are strategies to overcome labor shortages and address these obstacles. With today's labor shortages and competitive landscape for great talent, the keys to successful hiring center around catering to employee values, providing benefits and incentives, getting smart with your recruiting, and providing positive experiences for new hires and employees alike. Consider the following approaches to learn how to deal with the employee shortage and improve your hiring and retention efforts.

Offer Incentives

Offering perks or incentives to potential new hires may help with your hiring struggles. This could be a sign-on bonus, a monthly stipend, or even a commitment to an efficient hiring process to demonstrate to candidates that you value their time, are taking the process seriously, and are ready to commit and get them on board as quickly as possible. Individuals motivated to get back into the job market could see this as particularly attractive, especially if they are interviewing with multiple companies.

Ensure Wages Are Competitive

Now may be the time to take a hard look at the compensation you're offering. Is there room to increase wages to help you gain a competitive edge for great workers? It may also be worthwhile to include pay ranges in your job descriptions and postings. This may be just the information job seekers are looking for — and if they don't find it, they could very well move on to the next job listing. You should be evaluating whether you have competitive pay practices for your current workforce as well.

Focus on Staff Retention

As you look to fill vacant positions, don't forget about the workforce you still have. It's clear that maintaining employee engagement amidst an ever-evolving labor shortage needs to be a priority, but many businesses have struggled figuring out how to do it. This is alarming for many HR leaders, since engagement tends to correlate to an employee's willingness to stay with a company. To meet this challenge, some employers are implementing tactics such as training and development, administering job satisfaction surveys, offering remote work when possible, and providing financial incentives. These types of approaches could go a long way in helping you keep the great talent you already have.

Additionally, employers' actions and approaches during the COVID-19 pandemic (whether you enacted health and safety standards at work, if you offered remote work options for positions that allowed for it, etc.) send a strong message to new hires about the type of employer they might be working for. It's imperative to take care of your staff and demonstrate how you will continue to look out for both current and future employees.

Highlight Your Benefits

If you're experiencing hiring struggles, now is a great time to evaluate your current benefits and highlight particularly attractive offerings that can help you stand out. For instance, if you offer a 401(k) plan with a company match, this is something that could pique job seekers' interests.

Beyond tangible benefits, consider what makes your business unique and stand out from others in your field, whether your mission focuses on contributing to the local business community or if the organization has been recognized nationally for exceptional customer service. Job seekers are increasingly looking to align their work with their values and highlighting this information can help candidates envision how their work contributes to a larger goal.

No matter what makes your company unique or attractive, make these value propositions apparent. Include them in job descriptions, career pages, your company social media, and anywhere else a job candidate may find you.

Provide Flexibility

Long-term remote work and flexible schedules are becoming more sought-after by the U.S. workforce than ever. Whether employees simply prefer getting their work done from the comfort of home or are looking to improve their work/life balance, offering this flexibility has become coveted in such a way that many of the companies that offer this perk have seen it as a key differentiator.

Of course, remote work isn't always possible for certain positions or in certain industries. In these cases, consider ways that you can offer more flexibility to your workers, whether it’s the ability to attend a conference virtually instead of in person, or another option that works for your staff and the business.

Consider Offering Apprenticeships and Training

Managers and HR teams looking for ways to provide value to their employees, improve worker engagement, and build professional skill sets may want to consider the advantages of new-hire training for specific skills and competencies. Training and apprenticeships are great ways to foster growth and development, and ultimately employ an engaged workforce. Depending on your industry or the position, training can take many forms. You can offer an onsite, hands-on approach, or provide online training programs to new employees who can upskill from any location.

A systematic approach to training may also help the business bring employees on board who may not immediately have every skill needed but are open and willing to train for a position. While this approach can help ensure your employees obtain the exact skills you're looking for, training and education can demonstrate your willingness to invest in the workforce.

Consider Hiring Recruiting Help

Part of your difficulty hiring may involve additional time and resources posting jobs, waiting for quality candidates to find your listings and apply, and arduous interviewing, hiring, and onboarding processes. That's because it takes time, money, and resources to recruit and hire great employees — things that you may not have the luxury of in today's battle for talent. It's possible to cut down on paperwork, shorten the hiring cycle, and provide improved recruiting and onboarding processes with recruiting and hiring help.

The use of AI-assisted software can also help in your journey for recruiting new talent. These tools can help create talent pools, keep prospects engaged, and simplify your recruiting efforts. Automating certain processes can help your hiring teams stay on track, and HR experts can offer recommendations and support for effective ways to overcome the labor shortage and recruit, interview, and onboard new employees.

Stay Flexible To Help Your Business Overcome Hiring Challenges

Many businesses are struggling to not only find great candidates in today's ultra-competitive labor market, but also think strategically about their overall talent strategy to address a worker shortage. However, this presents an opportunity to recognize job candidates' and employees' shifting needs and respond accordingly as you look to recruit, hire, and retain great workers.

¹ 2024 Priorities for Business Leaders, Paychex

² America Works Data Center, U.S. Chamber, 2024

³ Job Openings and Labor Turnover Summary, U.S. Bureau of Labor Statistics, 2024

⁴ Job Openings, Hires, and Total Separations by Industry, U.S. Bureau of Labor Statistics, 2023