Here's how leaders can navigate labor shortages and skills mismatches

First things first: GDP, both globally and in the U.S., has recovered to pre-pandemic levels, although it has not gotten back to the pre-pandemic growth trend. In fact, U.S. GDP pulled off the GDP recovery to pre-pandemic levels in the second quarter of 2021. But it often takes longer to recover jobs after a downturn—and due to the lingering effects of Covid-19 and accelerating automation, it may take even longer this time. The U.S. still has 1.2 million fewer non-farm jobs than it did before the pandemic.

What’s different about this recovery, however, is the unemployment rate. Coming out of the Great Recession, unemployment remained stuck above 9% until the fall of 2011. Today, unemployment is at 3.6%, its lowest level since 1969.

As any hiring manager can tell you, the U.S. labor market is extremely tight right now. There are more than 11 million job openings and only 6 million unemployed workers actively looking for work. Several factors explain where the missing workers went. The pandemic prompted a wave of early retirements. Other workers left the labor force to start their own small businesses. Others have exited the labor force and would be willing to come back, but not quite yet. In addition, immigration had already been falling since 2016, and it plummeted once the pandemic hit.

A lot has been written about how the tight labor market is tipping the balance of power toward workers. But the overall jobs picture is less rosy for women and minorities.

The pandemic has caused many women to step away from work. As of April 2022, out of the 1.2M missing non-farm payroll employees, 800,000 are women and just 400,000 are men. Household surveys also validate this: in terms of the full labor market (farm + non-farm) there are 400,000 more men in the workforce (either working or unemployed and actively looking for work) than there were two years ago before Covid—but there are now 950,000 fewer women. That is a stark difference: men in the labor force are up by 400,000, while women in the labor force are down by nearly one million compared to two years ago. Some women have exited to take care of kids or elderly parents, or to protect their own health or that of their loved ones. On average, women typically stay out of the labor force for longer when they are unemployed, and the risk is now growing that some of these women will stay out of the labor market permanently. Expanding access to affordable childcare could remove one of the biggest obstacles for many women to return to the workplace.

More Black and Hispanic workers have also exited the labor force during Covid, with many of them taking care of kids or sick relatives. Labor force participation rates for Hispanic workers declined by 1.9 percentage points (vs -1.3 percentage points for white workers, -0.8 percentage points for Black workers and +0.3 percentage points for Asian workers).

However, hiring difficulties are more complicated than the sheer number of missing workers. The job openings that exist are typically for higher-skilled positions, and many people who are looking for work don’t have the skill sets employers are looking for. It’s not just a numbers game. It’s also a structural mismatch within the job market—and one that is growing more urgent as the adoption of automation technologies accelerates.

What’s a leader or CEO to do in light of today’s labor shortages—not to mention skills mismatches that could become more acute over time?

Job number one is retention and recruiting. Wages are rising, but many workers today say that compensation is table stakes. They are also looking for meaning and purpose in their work, flexibility in how they work, and good colleagues. Companies will need to double down on efforts to attract more diverse talent so that the exodus of women and minorities does not set back years of progress.

Second, in the medium and longer-term, CEOs and leaders can plan strategically for what jobs will look like in the future and the skills that will be needed. Workers consistently say that they value the chance to learn and grow. Giving proven employees the training and skill building opportunities they need to advance internally can be a win-win.

The United States also needs CEOs and leaders to engage in a broader way. Most workers will need greater technology skills and more social and emotional skills in the future. We need to deliver the right training at scale and make it easier for people to transition from shrinking occupations (like administrative assistants, customer service, or food service) into growing occupations (like healthcare services and STEM occupations). There are good examples of companies doing this, but most are training dozens or perhaps hundreds of employees, not nearly at the scale that is needed.

Given that 17 million workers will need to completely change industries over the next decade as automation advances in the workplace, the U.S. needs a mini-“Marshall Plan” for skills, with large-scale, digitally-enabled partnerships involving government, employers, and educational institutions. Every company and organization can play a role in moving away from the old paradigm of four-year degrees and shift towards skills-based recruiting and more modular and targeted training and educational programs.

The jobs numbers are signaling that the bounce-back from the Covid recession is not going to be a simple matter. Businesses are going to have to navigate demographic trends, technology trends, and skill shifts—all while reimagining the employer-employee relationship.

This article originally appeared in Forbes.

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