Supply Chain Disruption Vs Global Labor Shortages

  • Supply chain disruptions and global labor shortages are now a big problem for businesses around the world.
  • Shifts that have taken place in society are becoming more pronounced on the labor market.
  • Many ageing workers retiring or people voluntarily quitting roles just as demand for workers rises.

The Covid-19 pandemic is not only having a seismic impact on global public health but also causing chaos for the economy, with supply chain disruptions and labor shortages a big problem for businesses around the world, reports CNBC.

Demand for workers

Shifts that have taken place in the labor market are becoming more pronounced, with many people voluntarily quitting roles just as demand for workers rises as economies reopen.

Economists say changing demographics like ageing and retiring workers are a factor behind the shortages, as well as border controls and immigration limits, and demands for better pay and flexible working arrangements.

Labor Data from U.S.

The latest labor data from the U.S., for example, shows that more workers are willing to walk away from their jobs or to switch employment.

The most recent U.S. Labor Department’s monthly Job Openings and Labor Turnover Survey, released last week, showed there were 10.4 million job openings in August whereas the number of people leaving their jobs rose to 4.3 million, the highest level seen on records dating back to Dec. 2000.

Shortage of workers

Sectors particularly affected by workers quitting their jobs were accommodation and food services, wholesale trade and state and local government education.

The problem is not just a U.S. one, with many countries around the world experiencing a shortage of workers. It matters because it’s exacerbating supply chain disruptions around the globe, with key industries struggling to regain momentum due to a lack of workers or raw materials.

This disrupts both local and global production and supply networks, hampering economic growth and causing product and service shortages for consumers.


Experts are assessing the potential impact that the worker shortages could have on economies in the U.S., U.K. and euro zone. They also stress that while the pandemic has accentuated and underscored labor shortages, the roots to these problems are pre-pandemic.

“The lack of skilled workers is not only just another symptom of post-lockdown economics but also the result of more fundamental developments in the U.S., the euro zone and the U.K.,” ING economists Carsten Brzeski, James Knightley, Bert Colijn and James Smith wrote Tuesday in a note.

What’s going on with U.S. workers?

In the U.S., they noted that the economy has fully regained all of the lost economic output brought about by the pandemic although “employment remains 5 million [jobs] below February 2020′s level.” This isn’t due to a lack of worker demand, however.

“There are more than ten million job vacancies right now spread across all sectors with a record proportion of companies raising pay to try to attract staff. Instead, it is a problem with the supply of workers, which is both holding back output and increasing inflation pressures in the economy.”

“We believe there is a more permanent loss of workers driven by a large number of older workers taking early retirement.” they noted, adding that border closures will have curbed immigration and slower birth rates mean fewer young workers are now entering the workforce.

“If correct, labour market shortages could persist for a good deal longer than the Federal Reserve expects, which will mean companies increasingly bidding up pay to attract staff,” ING said.

“Not only that, but elevated quit rates suggest that companies may also have to raise pay to retain the staff they currently have given the high costs of worker turnover on moral, training and customer satisfaction.”

The U.K.

The U.K.’s situation has also been exacerbated by Brexit, with many foreign workers that the country relied on going back home during the pandemic.

The absence of workers in critical industries such as meat production, agriculture and transportation has led to consumer panic in the U.K. in recent weeks, with shortages of fuel at gas stations and warnings that thousands of livestock could be culled.

That has led the government to introduce temporary visas for truck drivers and poultry workers and reports of wage increases to attract workers to key industries like hospitality. In the meantime, there are widespread concerns over the rising costs of goods, services and food ahead of Christmas.

Post-Brexit visa rules make it trickier for EU nationals to work in the U.K. in lower-paid roles and ING said this means it will be permanently harder for U.K. companies to source staff from overseas. “Recent temporary visa changes for specific roles, including lorry [truck] drivers, are unlikely to make a huge difference to that story,” they noted.

Like Europe, there are structural challenges facing the U.K. too, namely that working-age population growth is set to slow over the next decade. ING noted that “like the U.S. that may amplify some of the current shortages, but it’s also a structural drag on U.K. potential growth.”

The Euro zone

“At 7.5%, the unemployment rate is now just 0.4 percentage points away from its all-time low, reached in March last year,” ING noted.

Still, while concerns about labor shortages have started later than in the U.S. and are less pressing than in the U.K., “they are increasingly mentioned as a concern for businesses,” ING added.

“More than ever, businesses in industry report labour as a factor limiting production, in services this number is still below historical highs.”

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Source: CNBC


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