It’s no secret: there’s a mismatch between what employers need from the workforce and what the current workforce can provide. Job openings across the country have remained unfilled for weeks at a time. Rest assured that labor shortages are a normal part of changing market conditions. And though they introduce new obstacles for your business to contend with, with every obstacle, there’s opportunity.
How to find and capture the opportunities afforded to your business by the current labor shortage is what this article is all about. We’ll start by covering labor shortage basics—specifically, what they are and why they happen. Then we’ll review techniques to approach hiring in a labor shortage so your business comes out on top. We’ll also show you why a labor shortage can be a huge opportunity, no matter your industry.
What is a worker shortage?
A worker shortage happens when there are not enough workers to fill vacant positions. You may also hear “worker shortage” described as a talent shortage, talent crunch, talent gap, or occupational shortage.
Worker shortages directly affect some parts of the market and indirectly affect nearly all parts of the market. They influence changes in the hiring process as well as business operations. For example, some companies turn to artificial intelligence (AI) and automated solutions when they can’t find people to fill certain roles.
During a labor shortage, filling positions is difficult because the group of qualified candidates is smaller. Your competitors will target the same pool of candidates, which can increase hiring and labor costs. When a candidate has multiple offers, they’re likely to choose the offer with the best compensation package.
Several sectors are highly affected by the current labor shortage, including healthcare, hospitality, manufacturing, cybersecurity, and food service. But, labor shortages shift over time and can affect any industry, given the right conditions.
What is the difference between a skills shortage and a worker shortage?
A skills shortage is one type of labor shortage where there may be enough candidates to fill vacant positions, but the candidates are not qualified. Sometimes this is labeled as a problem with the “quality of job candidates.” In other words, there is a mismatch between the skills obtained by job seekers and the skills desired by employers.
Labor shortages are complicated and not easily defined as “just a skill shortage” or “just a worker shortage.” Instead, both skill and worker shortages contribute to most labor shortages.
What’s causing the worker shortage?
The worker shortage, both globally and locally, is caused by a web of complex factors. There is no way to point to one moment or single cause to explain the shortage—or anything in the economy. Instead, a group of interrelated events and problems have pushed labor markets over the precipice into shortage territory.
The latest research links eight key elements to the current labor shortage:
- An aging population means more people are retiring, partially retiring, leaving the workforce due to disability, or otherwise removing themselves from the general workforce.
- Supply chain chaos has disrupted business paths and forced industries to shift hiring needs to overcome new obstacles.
- Normal, cyclical events, such as the economic cycle.
- Shifts in desired labor, such as the decline of blue-collar work in favor of white-collar work or the shift to self-employment.
- Workers have been quitting their jobs at higher rates than ever before, aka The Great Resignation.
- Higher demand for technology-related jobs.
- Changes in immigration practices in the U.S. have slowed the influx of workers typically gained through the citizenship processes.
- The COVID-19 pandemic shook up the market, hitting small businesses the hardest.
But it’s important to remember that this labor shortage has been developing at least since the 1990s, according to research from Harvard Business School. COVID-19 and other recent changes in our economy have exacerbated what was already a growing problem. And, these problems extend beyond the United States. Great Britain and Germany, for example, have similar labor issues to the U.S.
What are the potential consequences of a talent shortage?
The main problem with unfilled positions is loss of money. First, the hiring process costs more money because filling vacancies takes longer. Candidates can be more selective during a labor shortage, which means they can take their time choosing between competing job offers.
Second, companies suffer indirectly as reduced productivity and competitiveness due to vacancies drag profits down. When large amounts of work are spread across too-few workers, those workers more easily suffer burnout and other stress-related issues that affect individual productivity. This can result in higher turnover and exacerbate shortage issues.
Third, companies need to invest more time, money, and energy into the hiring process in order to source candidates who have the potential to become ideal workers. But, sourcing and training your workforce can have significant benefits, including high employee satisfaction rates and retention.
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Finances and TaxesWhat are potential solutions to the talent shortage?
There are several strategies businesses can use to reduce the adverse effects of a talent shortage. The first is to look for talent within the organization. Hiring from within, mainly by providing training programs to help your people acquire new skills, is a great way to ensure you have a constant pipeline of qualified candidates to fill hard-to-fill positions. As a bonus, employees who receive training are more likely to stay with a company long term.
You can also adjust your hiring process to invite candidates with related work experiences instead of direct work experience. And you can revise your current hiring process to ensure new candidates move quickly through the hiring, orientation, and training processes.
Looking for workers outside of traditional avenues is what Harvard researchers call sourcing “hidden workers.” The people in the hidden workforce are those who could fill these roles if given the right opportunities to do so. Let’s take a closer look.
“Hidden workers” is a term coined by Harvard Business School researchers and used to designate people who are missing from the workforce in at least one of three ways.
- Missing hours: These are employed with part-time work but looking for a full-time position.
- Missing from work: These are unemployed workers currently looking for work.
- Missing from the workforce: These are unemployed people who are not seeking employment but would return to work if given a good opportunity.
Economists generally call these groups underemployed, unemployed, and discouraged workers. Hidden workers remain “hidden” from hiring teams for several reasons—and understanding those reasons can help your team find them. Below are some common scenarios.
- Candidates with skill gaps could be trained but often are not given the opportunity. Researchers call this the training gap. They might apply for an open position if job training is part of the onboarding process.
- As helpful as they may be, Applicant Tracking Systems (ATS) often use such narrow filters that candidates who meet skills criteria are unnecessarily removed from the candidate pool. For example, a hiring team might filter candidates to remove people with gaps in employment, which will filter out candidates who learned new skills during a stint of unemployment or a self-funded career break. Switching to affirmative filters can help.
- Hiring hidden workers is not prioritized. It’s treated as a nice-to-do activity, not one that’s vital to the company’s health and prosperity. Presenting research showing the potential gains of hiring hidden talent and the losses of not hiring them can get the buy-in you need.
Knowing who is likely to become a hidden worker can help you figure out where to find them. Harvard researchers identified several “categories” of hidden workers. These categories are situations in which a person might become a hidden worker. It’s important to note that a hidden worker may identify with more than one category.
Lets take a look at a few of those categories and how you can find and attract hidden workers who might fit that profile.
| Category | How to attract |
| Caretakers of children or adults. | Offer childcare and/or eldercare services or vouchers. Offer remote work schedules. |
| Refugees, asylum seekers, and immigrants. | Work with local groups that assist these groups to offer training and job opportunities. |
| People previously incarcerated. | Work with local organizations that assist the previously incarcerated to offer training and job opportunities. |
| People without traditional qualifications, degrees, or advanced degrees. | Remove degree requirements from and include the words “no experience necessary” in job postings. Offer upskilling and certification opportunities to entry-level applicants. |
| People who are long-term unemployed or have no history of employment. | Write job postings to specifically invite these groups. Be sure to include training information and information regarding organization initiatives to hire from these groups. |
Hidden workers offer advantages to companies willing to look for them. They’re waiting to cross paths with the right opportunity—and your competitors are less likely to be recruiting from the hidden worker talent pool. Designing a hiring strategy around identifying, hiring, and training (if necessary) these candidates means you’ll have access to an otherwise untapped talent pool.
Because hiring hidden talent often involves on-the-job training, you end up with a workforce that is trained to do the job exactly as you want it done. Providing training and mentoring also increases employee retention, productivity, performance, and satisfaction rating. How? On the one hand, it demonstrates to your employees that you value them and believe in their potential. On the other hand, it prepares them for the exact responsibilities they’ll have on the job. It’s easy to see how increased retention and satisfaction naturally lead to boosted morale, closer-knit company culture, and a better working environment.
When morale is high and a company culture feels authentic, it becomes easier to attract and hire in the future. People want to work where they feel valued and like they can make a difference. Provide them a place that meets those needs, and you’ll have an endless pipeline of excellent candidates.
Creating hiring strategies that target hidden talent starts by understanding why workers are hidden from your view. Take into account your industry and its challenges, your hiring practices, pay and benefits, and your company culture. Here’s a quick guide to troubleshooting:
- Are you making job offers but not getting job acceptances? Maybe there’s a problem with pay, benefits, or culture.
- Are you getting candidates but not qualified ones? Maybe it’s time to create more robust training programs.
- Are you not getting any applicants at all? Then it’s probably time to adjust your search filters, revamp your job listings, and add verbiage tailored to the types of applicants you want to attract. (This may take additional research.)
Pro Tip: Struggling to appeal to your ideal applicant pool? Create in depth personas to help you better understand and speak to the people you want to hire.
Finally, consider how your hiring process can attract specific hidden talent pools. Creating a detailed roadmap to identify, target, and acquire your workforce from one or more of these groups will be instrumental in getting you across the finish line. Here are some questions you can ask during the process:
- What hidden worker profiles could your team most easily target?
- Which hidden worker profiles most closely match your workforce needs?
- What skills are the easiest to learn on the job, and what skills are the hardest?
- Who are the people in your organization that you can tap to help train new hires?
If you’re having trouble getting buy-in from key decision makers, consider presenting your plans in terms of return on investment (ROI). The opportunity cost of not having the people needed to run your business is huge, often bigger than the cost of hiring and training new people.
Final thoughts & recap
Creating a talent pipeline is the key to success but requires reimagining during labor shortages. Offering training, internships, and other opportunities can be more cost-effective than suffering a long vacancy in search of “top talent.” Getting buy-in from all stakeholders can be difficult, as building this infrastructure often takes a significant investment of time, money, or both. Presenting a detailed plan with outcomes can help you win the support you need.
Small business owners can find hidden talent by asking current employees why they choose to work for you versus competitors. Investigate how you can improve their working experiences and use that information to entice new employees. And don’t forget to tap into your employees’ networks (and offer a finding fee!) Chances are they’re connected to people who would be excellent candidates for your business if given a little help to get up to speed at the start.
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