Where Have the Front Line Workers Gone?

By now, we’ve all seen or experienced some aspect of the labor shortage evident in the US. Many restaurants and stores have curtailed hours or reduced their capacity because they do not have enough staff to operate at 100%.

This is not a COVID-19 problem, at least not directly. The labor shortage exists in states without any COVID-19 restrictions as well as in those that have them. Employers are offering unprecedented levels of hourly pay and even sign-on bonuses. Yet, they still can’t get their businesses to full employment.

It is frequently stated that people are not returning to work due to the COVID-19 “assistance” payments from the federal government. These $600/week payments were, in many cases, being supplemented by additional state aid. That brought the total aid per week to an amount greater than what many of the recipients were being paid by their employers. While these assistance payments were coming, it was more profitable for some people not to work, which would understandably lead to a labor shortage.

However, those federal and state payments ended over a month ago. One would think that a lot of people would have by necessity “re-entered” the workforce during the month of September. But by the end of September, the unemployment rate was unchanged from August and the number of American’s applying for unemployment benefits had increased for the third straight week.

The unemployment rate in the US is presently at 5.2%. This is not as low as it was before COVID-19 hit (3.2% in February 2020). The difference between then and now translates into 2.7 million people not working today who were working before the pandemic started. We apparently have jobs aplenty and jobless people aplenty, but no matches between the two. Why is this happening?

According to the Bureau of Labor Statistics, the worker shortage is mostly concentrated in the front-line service occupations as well as production and transportation jobs. Whatever the problem is, it is not the result of some long developing labor shortage trend. This condition didn’t exist prior to COVID-19 (only 19 months ago). In February 2020, restaurants and shops had enough staff to operate at 100% capacity. You didn’t see visible personnel shortages in airline workers or other transportation operations. Plus, employers in those areas didn’t have to go to extraordinary measures (sign-on bonuses and such) to hire new employees.

The people that work in these front-line service jobs are typically younger, and as we’ve seen statistically, their health is generally less affected by COVID-19. So where have these people gone in the last 19 months? If they are still not working for some reason, how are they supporting themselves now that the COVID-19 assistance payments have ceased? There is no visible evidence in stores and restaurants that the end of that “free” money has compelled millions of people to return to those jobs.

Did all those service workers find jobs in different fields when their former employers closed up shop during the worst of the COVID-19 pandemic? Mathematically this can’t entirely account for the shortage because if it did, the overall unemployment rate would then be much closer to its pre-pandemic level. Is there now simply a lack of interest within the existing labor force to work in those front-line service jobs? There seemed to be no hint of that prior to the pandemic.

It is always possible the Federal Government is either inaccurate or not being truthful about the unemployment rate. The recovery of the labor market may in fact be happening at a much slower pace than what the government is telling us. But while that could account for the staffing shortages we see with our own eyes, it doesn’t offer an explanation for why these jobs aren’t currently being filled.

Try as we could, we couldn’t think of a good explanation for this. There are a few possibilities however:

• People don’t want to return to service jobs where they will be asked/required to get vaccinated and wear a mask all the time.
• People are afraid (because of COVID-19) to work in a job that has them physically interacting with potentially infected customers.
• The people that were in these jobs have found other employment that pays better and allows working remotely (from home).
• Now that the COVID-19 assistance payments have stopped, the people who were relying on them to live (instead of working) are applying for unemployment benefits so they can continue not working.

If any of the above are true, it does not bode well for the future of businesses that rely on front-line service workers. These workers include restaurant servers, hosts/hostesses, clerks, cashiers, flight attendants, production line workers, etc. We predict some service-related businesses that had been experimenting with new kinds of automation prior to the pandemic will now fully adopt those technologies. Some examples of this are the ability to scan Q-codes on a restaurant table to see a menu, ordering and paying from a kiosk present within an establishment, and the ability to order and pay for your meal with your phone in advance of your arrival at a restaurant. Many of these technologies were forced into service earlier than planned last year because of COVID-19. They had kinks, but it was better than providing no service at all. While originally intended to help stop the spread of the virus, these measures also reduce or entirely eliminate the need for certain jobs in the service industry.

One other possibility is that the forced isolation briefly imposed on everyone because of COVID-19 brought with it time for introspective thinking and self-evaluation. Service jobs typically have long hours (many people have two jobs), low pay, and are physically exhausting. There is often no opportunity to remove oneself from the 24-7 cycle and take stock of progress towards life goals. The COVID-19 lockdowns provided that opportunity. As a result, some people may have chosen to embark on a much different lifestyle and/or vocation that does not include fulltime employment as an hourly wage earner.

A potential indicator of this is the dramatic increase in the number of children being home schooled. With 19% of children now being homeschooled (compared to only 3.3% before the pandemic) a lot of parents are now at home teaching their children each day instead of working in the jobs they had before the pandemic.

If some or all of these things are truly what is happening, we should not expect to see the unemployment rate drop much further in the long run. Maybe we should all be preparing for a brand-new concept of “customer service”.