Why is there a labor shortage? Ask workers

The labor shortage today is no secret. Billboards and store windows announce that businesses are hiring—indeed, begging for—workers, and owners lament the inability to find them. Government data show that job openings outnumber the unemployed. Wages have seen their biggest increases in decades, yet total employment in Minnesota has yet to breach pre-pandemic levels. Workers are coming back, but not in the numbers economists would have predicted given the strong availability of jobs and steadily rising wages.

There is no straightforward answer to this puzzling dynamic. But to gain some understanding, the Minneapolis Fed has been seeking insights directly from workers and job seekers through an effort dubbed the Worker Experience. The most recent survey, conducted in November and December with help from 14 job-service organizations that are part of the Minnesota Employment Services Consortium (MESC), captured the experiences of 221 job seekers across the Twin Cities region.

The observations offer a snapshot of job seekers’ perceptions of current opportunities as well as barriers to finding a good job. Respondents overall were modestly upbeat about current job opportunities. Pay is important to them, and many are seeking sizable raises. But many are also seeking work flexibility, especially opportunities to work from home. Among the potential obstacles to finding new employment, job seekers said the largest barriers stem from employer practices.

Demographics, work history, and objectives

Respondents to the survey were largely female (76 percent), single (68 percent), and receiving some form of government assistance (74 percent), most often food assistance. Black or African American respondents made up 45 percent of the sample, while 35 percent of respondents were White. Respondents skewed younger than the overall labor force, with half of respondents under 35 years old. Education background was fairly diverse: 32 percent had a high school diploma or less, while 34 percent had a two-year degree or more. One-third estimated their annual household income at less than $10,000, and another 37 percent said it was between $10,000 and $30,000.

Almost 40 percent of respondents were currently working, including some who had recently reentered employment thanks to a job assistance program. Less than 20 percent had been laid off from full-time work—a widely assumed path when it comes to joblessness—while about 40 percent had spotty or less-intensive work histories.

Overall, respondents were modestly upbeat about their job prospects, likely because job postings are comparatively strong in the economy right now and wages generally have been rising. Job seekers have taken note; better pay was cited most often as one of the top three objectives in searching for a new job (see Figure 1).

Job seekers also had aggressive goals relating to pay. Less than 40 percent of respondents earned more than $20 an hour at their most recent job. But 74 percent reported that they were seeking at least $20 an hour or more in a new job (see Figure 2). Every wage category over $20 per hour saw a notable increase, which suggests that everyone, regardless of recent wage history, was looking for a sizable wage increase.

But it’s not all about wages. More than 30 percent of respondents cited the ability to work from home as the single most important employment goal—a larger share than those citing higher wages.

One woman from a small community north of the Twin Cities said she had to leave multiple jobs because the hours didn’t work for her as a single mom. She said the bigger objective during the job search was to work from home, and she recently took a third-shift marketing job “because it is home based. It’s hard some days with my son, but I push through it.”

Obstacles to job matching

The survey also sought to better understand how various obstacles—personal circumstances, employer practices, or other barriers—might impede the job search.

Respondents were most likely to see employer practices—such as low pay, lack of response to job applications, and other factors—as the most significant barriers to obtaining a job (see Figure 3).

Many respondents pointed to the lack of contact from employers after applying for an open job. A Twin Cities man with a two-year degree and background in finance and real estate said, “No one calls back even to say ‘no thank you.’”

A St. Paul woman said she was laid off from a full-time management job more than a year ago and applied to more than a half-dozen jobs in the past month. “I am not sure why it’s been so difficult. … I am open to changing careers and to taking lower-level positions and have applied for some of these types of jobs as well,” she said. The problem? “I’m not hearing anything back when I apply for positions. Most companies are not responding at all.”

That’s not to say that job seekers ignored the impact of their own circumstances on job outcomes. For example, among a lengthy list of potential job obstacles, job seekers identified their lack of hard skills (such as education and job experience) as the most significant personal barrier to finding a preferred job (see Figure 3).

However, these personal shortcomings were deemed less of a barrier than employer factors. Similarly, availability and affordability of housing and child care were also cited as obstacles to finding a job, but less so than employer factors.

Job seekers were also asked what efforts they would undertake to find a preferred job. For example, employers might assume that job seekers will move closer to where the jobs are. That assumption doesn’t prove true in the case of these survey respondents. Almost 40 percent of respondents said they were not at all likely to move to a new location to obtain a preferred job, and one-third said they were only somewhat likely (see Figure 4). Though the survey did not ask about underlying rationale, there could be myriad reasons. Job seekers may not want to leave due to existing support systems they have in place where they currently live. Also, job openings are strong virtually everywhere, so job seekers may believe they don’t have to move to find a preferred job.

One-third also said they were unwilling to work a different shift or work schedule. One reason likely stems from lack of transportation, including poor transit access to some jobs. A woman from Maplewood, Minnesota, noted that she had to resign from a job due to lack of transportation, which is also a problem “when it comes to job searching because there may not be a bus that will go near a job,” or run at the necessary time.

Two to tango

In general, many job seekers were as confused about their difficulty in landing a job as the employers that complain they can’t find anyone for a plethora of openings.

A mother in a northern suburb said she has been out of the workforce for a few years, but because she has a master’s degree, was looking for a certain level of pay and benefits. She noted that employers often do not list wages on job postings, “so I waste my time on low-paying, entry-level jobs,” and employers never respond “that they got it, are considering me, or have discarded me, or why they didn’t select me. Very frustrating.”

A woman from a western suburb mentioned that many jobs she’s interested in “all seem to require a bachelor’s degree and sometimes a couple of years’ experience.” But the pay is more entry level, so “the skills/requirements don’t match up. We all have to start somewhere, but where I’ve looked doesn’t want to give trainable, educated people a chance.”

A man from a southeastern suburb said his unemployment benefits “ran out a few weeks ago, and I currently have no income coming into my household of three at all.” He was looking for a job that is amenable to a shared child-custody schedule. But more than anything, he needed income “as soon as possible, regardless of the field or industry.” His greatest frustration? “The amount of time it is taking employers to respond on a decision and/or schedule an interview. I have no income currently, and cannot wait weeks to understand more about a job prospect.”

Multiple lenses

Another goal of the Minneapolis Fed’s Worker Experience initiative is to understand the experiences of different subgroups of workers as they navigate the labor market.

Initial high-level analysis suggests that certain characteristics seem to influence the job search experience.

For example, Black and African American respondents to this survey were more likely to be employed while looking for a job compared with White respondents (40 percent and 30 percent, respectively). Among those looking for a job (rather than, say, training), Black and African American respondents reported applying to slightly more jobs overall, and their sentiment toward current job prospects was slightly more positive than White respondents. Black and African American respondents were also notably less likely than White respondents to see potential obstacles of almost any sort—whether personal or employer based—as a barrier to employment.

However, these correlations do not necessarily reflect all populations of either Black or White job seekers. That’s because both individual and group experiences related to job search are also likely affected by age, education, and other factors. This particular sample of Black and African American respondents skewed much younger, with almost 70 percent under the age of 35; this population also had a higher share with a high school diploma or less education (40 percent) and smaller share with degrees (21 percent) compared with White respondents (20 percent and 53 percent, respectively).

It’s hard to tease out causality in the experience of one specific job-seeker group compared with another different, but similar, group. But hearing from job seekers can start to provide a more nuanced look at the complexity of the labor supply, as well as some guideposts for policymakers and future research regarding the worker experience.