Serious Labor Shortages Are Threat to Economic Recovery

Help Wanted. Now Hiring. It seems like everywhere I go I see signs announcing the need for workers to fill vacancies.

As it turns out this appears to be a national problem, not just a Northland issue. Nearly every restaurant is short of help here. A friend who owns 11 fast food restaurants between Duluth and the Twin Cities normally employs 350, but has to keep things running with 250 employees. Panera Bread has put up a sign that says they're limiting hours because of the shortage of help.

The government's good intentions in providing financial help above and beyond regular unemployment has, for many, become a disincentive for returning to the workplace.

In addition to labor shortages we have materials shortages, partially caused by labor shortages in this arena. According to a Bloomberg article, Biden's infrastructure plan could be hamstrung by the lack of qualified workers to execute this ambitious dream. Currently the U.S. manufacturing industry has 500,000 positions unfilled.

The great irony here is that this massive infrastructure push has as one of its aims to provide Americans with more jobs. But with the shortages in materials, we may end up outsourcing to other countries, benefiting others rather than those we're supposed to be helping. Lumber (now up five-fold) aluminum, copper and cement prices are high due to tariffs, so building homes has become exceedingly expensive. (EdNote: We have lots of copper inside the U.S. borders, but have made it near impossible to mine it.)

An article at CNN.com begins with this telling Q & A: "Chicken, lumber, microchips, gas, steel, metals, chlorine and ketchup packets: What do they all have in common? They're all (nearly) impossible to find."

A New York Times article this past week is titled "How the World Ran Out of Everything." It explains how the evolution of "Just In Time" manufacturing and sales systems resulted in businesses minimizing inventories. The concept of J-I-T is fine when all is good. It reduces waste, and reduces the amount of space you need to store things, which also reduces costs. It's efficient. 

But when the entire system experiences a major hiccup -- like our unplanned year-long pandemic and subsequent lockdowns, these efficient systems can be disrupted in ways many businesses could never have imagined. That appears to be what we are now experiencing, at a time when we believed everything was opening up with clear sailing ahead.

Once again, Andy Grove has been proven right. His book Only the Paranoid Survive details all the forces that businesses must juggle and manage. He then asks, "What happens when one of these forces -- government regulations, consumer demand, raw materials, labor, financial impacts, legal matters, etc. -- hits us with an unexpected 10X tsunami?"  

For businesses that survive this will be remembered as the year of the wake up call. 

The weird thing is that politicians and think tanks will undoubtedly spend gobs of money and time piecing together a strategy designed to ensure that it never happens again. Alas, these things can never be so easily predicted. It will surely come in a manner that was unforeseen. Like Pearl Harbor. Like 9-11. Like the Housing Crisis. Like the Pandemic. It will be original. It will be different next time.

Something to think about.