The mismatch between job seekers and job openings has remained a primary concern for economies across the globe. Who can forget the severe impact of the 2008 recession on the US labor market? During the recession, over 89 million workers lost their jobs, while only 82 million were hired. By October 2009, the unemployment rate surged to a 27-year high of 10.1%.However, after that, the labor market situation kept on improving until the world was hit by COVID-19 As the world struggles through the deadly pandemic, nearly every industry has been negatively affected by the disease.
Firms facing cash flow issues are forced to lay off workers amid the COVID-19 crisis. Besides that, the number of jobs is declining, while the employee pool is expanding rapidly. Not only are new graduates looking for work-from-home options, but a large number of laid-off workers are also left searching for alternate positions. While most of this news is disheartening, it does mean that this is an excellent time to outsource. More expertise is available, at more efficient cost-levels, with experienced professionals now willing to work on a contract basis.
In the rest of this article, you will learn the real impact of COVID-19 on the labor market. However, before we begin, it’s important to understand that there is another reason that contributes to a mismatch between the number of job seekers and the number of available jobs. Let’s discuss this reason in detail.
General Factor Widening the Job-Worker Gap
One significant factor that leads to a higher gap between available jobs and the number of job seekers is the poor pairing between employers and employees. Each worker and job has unique characteristics so some job-worker pairings prove more productive than others.
It is extremely difficult for workers and employers to predict the right pairing. Not every company or job seeker is willing to invest time and resources to search for the best match. This mismatch can be between the skills and location required for a particular job versus the skills and geographical preferences of the job seeker.
This idea was first introduced in the 1970s by a group of European economists who tried to understand the alarmingly high unemployment levels in some countries. Since then, economists in the US have been investing in this mismatch and discovering whether it is a reason for high unemployment in the country.
We are not talking about one skill set. Each industry, occupation, and education level has its own set of required skills. Even the geographical characteristics can be measurable at different levels, for example, they can be measured in terms of metropolitan statistical areas (MSAs), states, and even broader regions.
In the contemporary labor market, most jobs are created in technologically advanced companies, whereas the majority of job losses occur in other industries. Since the newly created jobs, such as those in high-tech companies require different sets of skills from what unemployed workers possess, companies and workers struggle to find the best matches.
For instance, there’s not much they can do if a majority of jobs are lost in the construction and manufacturing sectors, whereas a number of jobs are created across education, healthcare, and the technology sectors.
Yet, studies suggest that the overall state of economic activity, including the launch of new businesses and their growth levels, is the main driver of the labor market. Since economic activity has been severely affected by the COVID-19 crisis, the labor market suffers.
The Impact of COVID-19 on the Labor Market
With lockdowns imposed by the government, offices and factories were closed and people were confined to their homes. Small and medium-sized businesses, which are the biggest employers in the country, have had to lay off workers.
As a consequence, job seekers are increasing and the number of available jobs is declining.
Let’s take a look at some recent events in different industries that highlight the impact of COVID-19 on the labor market:
Logistics and Manufacturing
- General Electric made 2,500 workers redundant, i.e., 10% of its workforce for jet engine division.
- 100 workers were laid off by Arconic, a lightweight metals manufacturer, from its factory in Lafayette, Indiana.
- A metal plating finisher in Michigan, Marsh Plating Corporation, laid off 97 workers temporarily.
- When shipments from China stopped, the Port of Los Angeles laid off 145 drivers.
- Wayzata Home, a cabinetmaker in Minnesota, was forced to lay off all 141 workers.
- A woodworker located in Michigan laid off 25 workers for the time being.
- When operations for the Michigan-based Tilden Mining Co. came to a halt on April 26, the company temporarily laid off around 680 employees.
- 360 workers were temporarily laid off by Mitchel Plastics in Charlestown, Indiana.
Restaurants
- Reportedly, Ritz-Carlton hotel’s facility in Philadelphia, Pennsylvania, let go of all restaurant staff.
- Burgerville in Oregon made 162 workers redundant.
- A Starbucks competitor in Washington D.C, named Compass Coffee, let go of 150 of its staff. That’s 80% of the coffee shop staff.
- 95 workers were laid off by Dyn365, a restaurant in Austin, Texas.
- Eatwell DC, a restaurant group in the District of Columbia, laid off 160 employees.
- 40,000 workers were temporarily laid off by the parent company of Bubba Gump Shrimp Co. and Del Frisco’s, Laundry’s Inc.
- The provider of food services in Levi’s Stadium of Santa Clara, CA, Levy’s Premium Foodservice, laid off 613 works.
Technology Sector
- As Airbnb decided to stop projects associated with transportation, luxury stays, and hotels, it laid off 1900 employees that constituted 25% of its labor force.
- Bird, a vehicle-sharing platform, laid off 406 employees from its staff of 1,300, that is, 30% of the workforce.
- Four Silicon Valley startups, namely Eight Sleep, Triplebyte, Cabin, and The Guild, laid off a total of 75 workers.
- After being hit by the COVID-19 crisis, a car rental startup, called GetAround, laid off over 100 employees.
- Compass, a real estate startup in New York City, let go of 15% of its staff.
- ConsenSys, a cryptocurrency incubator, laid off 14% of its workforce, reportedly 91 employees.
- DataRobot, an AI company headquartered in Boston, laid off an undisclosed number of employees.
- As its events around the globe were canceled, Eventbrite, an event management firm, laid off 50% of its workforce.
- Everlane, a fashion startup, furloughed and laid off over 200 employees from its retail and other divisions.
- KeepTruckin, a trucking unicorn, laid off 1/5th of its staff.
Aviation Sector
- As its planned flights were cut by 80% for April alone, Air Canada plans to let go of 5,100 members from its cabin crew.
- After announcing that it would lay off 10% of its workforce in April, Boeing reportedly let go of 6,770 employees; the figure also includes voluntary layoffs and natural turnover.
- Australia’s biggest travel agent, Flight Center, plans to let go of one-third of its 20,000 workforces.
- Hertz, a popular car rental company, intends to lay off 10,000 employees from its Northern American division.
- Concession vendors of the Miami International Airport, Airport Concessions and Global Miami Joint Venture, laid off a total of 758 workers.
- Prospect, an aviation support service company, laid off around 100 workers at the Charlotte Douglas International Airport.
- Workers in Baltimore-Washington International Thurgood Marshall Airport, Orlando International Airport, and Philadelphia International Airport have also been laid off.
The above-listed examples give you an idea about the seriousness of the situation. You just can’t keep track of the number of lost jobs in Tourism, Aviation, Arts and entertainment, Education, Hospitality, Finance, Logistics, Real Estate, Retail, Technology, Sports, film industry, etc.
Following the situation, imagine how rapidly the job seekers’ pool is growing during these days. With little hope for small businesses, you can’t expect the creation of more jobs, too. Hence, the gap between employee pool and available jobs continues to reach new heights with every passing day.
So how do you address the horrific labor market situation? Let’s find out:
How to Rebuild Jobs Amid the COVID-19 Crisis
According to McKinsey and Company, governments, their partners, and leaders in the private, public, and social sectors need speed, innovation, and focus to manage the fast-evolving job crisis. While the fight against the pandemic is still not over, many countries have shown evidence of a reduction in the number of infections.
Countries that seem to be recovering, plan to transition into a phase in which the lockdowns can be eased while the testing of patients still remains strictly in place. As they transition into this new phase, recreating and safeguarding jobs should become a critical priority for countries, states, counties, and cities. They should first identify the industries most affected by the pandemic and then boldly intervene to drive business activity and recreate jobs for them.
The interventions should also focus on stimulating consumer demand by rebuilding confidence. For instance, countries that faced terror attacks in the past saw their tourism industry collapse. They recovered the lost demand by rebuilding local confidence in the industry and then moved to the global markets. One way to this is to offer discounts and vouchers to targeted customers.
The COVID-19 crisis urges re-skilling in three different areas:
- The need for social distancing requires you to work from home. This calls for innovations in managing employees and work. It also places emphasis on creativity while training employees.
- The re-skilling model values minimal intervention and a new system to spot those skills. For instance, microcredits are expected to replace traditional degrees in some industries.
- The mindset of establishing a competitive advantage for personal profits must shift toward focusing on the overall well-being of society. Competing firms may need to collaborate to create re-skilling opportunities that deliver benefits across the industry.
The following are some steps to achieve a fast labor market recovery:
Build Digital Talent Exchanges
To facilitate redeployment and improve transparency about job openings, industry leaders, groups of companies, and labor agencies can create digital talent exchanges.
This should allow for quicker matches between job seekers and job openings. Companies can easily post job openings while unemployed workers can quickly find vacancies of their choice.
However, small firms often don’t have access to technical infrastructure and market information to help them deploy labor and create jobs. Therefore, establishing talent exchanges dedicated to SMEs should be a great idea. The focus here should be to protect the most susceptible segment of SMEs.
Reskill at Speed and Scale
The decline of certain industries provides an opportunity to train people on the skills that will be demanded in the future. This can be achieved in two ways– quick upskilling to address short-term demand changes and long-term reskilling that allows learners to switch to careers requiring future-skills.
The latter method focuses on digital literacy to allow workers to stay relevant in a digitized and more dynamic labor market.
Create Incentives for Reskilling and Redeployment
In their efforts to support businesses and displaced workers, governments can provide incentives to them to ensure that they are more equitable and productive upon recovering from the crisis. Governments can offer tax rebates and subsidies to firms that invest in reskilling and training of their workforces.
By offering financial support, governments may be able to achieve other objectives, such as an increase in female participation in the labor force and a higher number of registrations of informal businesses.
Final Word
As countries report fewer infections, measures should be taken to save and rebuild jobs. To address the severe impact of COVID-19 on the labor market, interventions and solutions must be planned, deployed and implemented as soon as possible. Here at Fully Accountable we have embraced our remote office skills, and haven’t stopped serving our clients throughout these tumultuous times. Having staff equipped to work from home, and our proprietary software that integrates our clients and employees, has been a true saving grace. While we know that not all companies were as well prepared, we’ve shared this blog with hopes that you can see a brighter future! The aforementioned tactics may appear obvious, but they can help you address the issue at hand.
Chris Giorgio is the President of Fully Accountable. Fully Accountable is an outsourced accounting firm specializing in eCommerce and digital businesses. Chris has served as a CPA, CFO and has over 14 years of experience in the accounting and finance industry. Chris has dedicated his career towards helping entrepreneurs and high-level business owners achieve greater profitability through specialized outsource accounting functions.
