The curious case of the unemployed workers in a labor shortage

The prevailing narrative about the labor shortage is that workers don’t want to work, so businesses can’t hire the people they need to keep up with consumer demand. But there is one key piece of data that undermines that view.

In industries like restaurants and hospitality, unemployment has actually increased more, in percentage terms, than job openings. That is, the number of people who are looking for a job in the industry has seen a higher percentage increase than the number of job openings in the same sector.

In normal times you expect both variables to move in opposite directions. As job openings increase, unemployment decreases. But during in the first months of the pandemic there was a massive increase in unemployment, and in spite of the rapid growth of job openings, the level of unemployment has not come down fast enough. That is why when you compare 2021 vs pre pandemic 2019, you see unemployment has increased much more than job openings.

If the pool of people looking for a job has grown more than the number of vacancies, that should mean it is relatively easier to fill an open position, right? But that is not what we are seeing.

So that begs the question, is it really that people don’t want to work? Certainly some workers may be holding out for better wages and conditions. But wages in the sector have risen dramatically in the second semester of 2021, and unemployment decreased slowly.

A more convincing explanation is that businesses are looking for the wrong people. A very large share of those unemployed are workers who are overlooked by traditional recruiting processes that put too much weight on experience and resumes. Most businesses are going after the same pool of typical employees, while people with criminal records, people with incomplete education, career changers, young and unexperienced, etc., are being sidelined. In the vast majority of cases, they are perfectly capable of getting the job done, but they can’t signal it.

The way in which people and jobs are matched in the labor market is just too archaic for what the economy needs right now.

Our experience at Quantum Talent shows that when you evaluate people based on job-relevant skills and not on resume-based signals, you not only generate a much fairer recruiting process, but also better matches (with longer lasting employment relations).

It is time to overhaul how labor markets work. Luckily, we have the science and technology for the task.