The staffing shortage will be permanent

Most hourly staff businesses have struggled with labor shortages since the pandemic. Government restrictions, initial mass layoffs, and a shift in consumer preferences have all been touted as the underlying cause of the pandemic-induced staffing shortage.

Except the pandemic wasn’t the main cause, the staffing shortage was already underway.

Prior to the pandemic, unemployment was already at record lows at 3.5%.

The actual cause is America’s changing demographics. Its aging workforce has caused a collapse in the US labor force participation rate, dropping from 67% at the turn of the millennium to 63.3% in February 2020. A 2019 study by the Brookings Institution estimated that the labor force participation rate would decrease to 58% by 2050 due to the aging workforce. However, because of the pandemic, we’re already four years ahead of schedule. The pandemic simply accelerated the staffing shortage timeline.

While the severity of staffing shortages will rise and fall with the business cycle, it will continue to worsen. Every business will have to pick how they adjust to the shortage:

1. Pay higher salaries to attract staff from a shrinking talent pool
2. Reduce the operations and revenue of your business
3. Schedule smarter and become more efficient with your staffing levels

If you’re not actively pursuing (3), you’re accepting the first two by proxy. It might not occur in the next three months, but it will happen. The inertia of our aging workforce is half a century in the making.

The path to avoiding higher wages and reduced operations requires you to fine-tune the way you run your workforce. 

How to staff more efficiently 

Use precise labor forecasts

Choosing staffing levels based on manager intuition has been the default for most companies. This approach may prevent egregious over and understaffing, but it misses the small shift details that add up. Staffing based on a “busy lunch rush and a quiet afternoon” isn’t specific enough and will create many instances of overstaffing, even if it’s only 15 minutes of someone’s shift. 

Across a whole team, these 15 minutes per worker can result in your needing multiple extra staff over a day. To thrive, you must know your demand indicators, create staffing ratio to demand units, and then ensure all your managers are building schedules according to this demand. 

Adjust staffing levels during shifts

Another outdated concept is the belief that a schedule is finished once it’s published; this assumes that nothing changes once a schedule is created and staff are working their shift. The problem is that call-outs, no-shows, and random downturns in demand are almost inevitable. Your managers must be prepared to anticipate and react to these challenges during shifts, adjusting labor accordingly. 

Enable your managers to make the right decisions

You can’t leave staffing levels to chance. Your managers need the right tools to support them so they can optimize their schedules to customer demand. Beyond this, you need to have complete visibility into when, where, and how managers are actively adjusting their labor – this is the only way to know for certain that you are staffing efficiently.

Many businesses won’t do this. They will continue on their current path of paying higher labor costs to attract a shrinking talent pool, as well as reducing their operations and losing customers because they don’t have enough staff. 

You need to make the choice not to be left behind.