Despite the labor force participation rate rebounding post-pandemic, a new report finds that worker shortages remain a persistent problem for U.S. employers—and that upskilling may be a key to addressing the challenge.

The 2024 Labor Day Report from Littler’s Workplace Policy Institute, the employment law firm’s government relations and public policy arm, delves into 10 key issues that employers face. Leading the pack is the ongoing worker shortage.

About 1.7 million workers are missing from the post-pandemic workforce, the U.S. Chamber of Commerce reports, while data from the Conference Board shows that 38% of small firms are unable to fill open positions. At the same time, the “skills gap” in the workforce is accelerating as automation and AI create significant shifts in how work is performed.

“We continue to see a labor shortage and an urgent need to upskill the current workforce to adapt to the new world of work,” says Michael Lotito, Littler shareholder and co-chair of the institute. “As corporate executives and business leaders look to the future, they are focused on realizing the many benefits of AI to streamline operations and guide strategic decision-making while cultivating a talent pipeline that can support this growth.”

What is driving ongoing worker shortages?

Littler researchers cited several factors driving persistent worker shortages in the U.S.

They wrote that the pandemic prompted many Americans to reconsider career paths, guided by a new emphasis on work/life balance. This has funneled talent into new industries and roles and, for some, has meant an increased reliance on part-time work.

At the same time, some highly specialized positions remain open because the requisite skills and experience are in “short supply,” they say. Meanwhile, employers continue to struggle with regulatory and visa changes that make it more difficult for non-U.S. workers with the right skill sets for those roles to obtain work authorization visas.

“These considerations, combined with certain jobs that are increasingly affected by automation and artificial intelligence, indicate a need for educating and increasing the skills of the current labor force,” Littler researchers wrote.

Acute worker shortages in healthcare

One of the industries hardest hit by worker shortages is healthcare. New research from Mercer found that hiring troubles began even before the pandemic.

According to the report, Future of the U.S. Healthcare Industry: Labor Market Projections by 2028, demand for professionals in the nation’s healthcare occupations is outpacing supply within the U.S. healthcare labor market.

Mercer’s report outlines the factors:

• accelerated resignations, including due to burnout among healthcare workers
• an aging population
• wages that lag the broader labor market

These drivers are particularly seen among primary care physicians, advanced practice providers and nurses.

“Based on our research, the persistent rise in healthcare costs, combined with the critical shortages in labor, could present a looming threat to the viability of certain healthcare systems,” says Dan Lezotte, a partner in Mercer’s U.S. Partner, Workforce Strategy & Analytics practice. “The challenge of attracting and retaining the right healthcare professionals will significantly complicate operations in specific locations and further exacerbate the disparities in health equity, particularly between rural and urban populations.”

To combat labor shortages, he explains that employers will need to develop comprehensive plans to attract and retain talent—from creating strong compensation and benefits packages to deploying creative ways of sourcing talent, redesigning work, optimizing schedules and more.

“It is also crucial for healthcare systems and governments to work together to address specific labor gaps across locations and occupations, including subspecialties within healthcare labor, such as physicians who specialize in women’s health or young children,” he says, adding that through collaboration, states can close these gaps and create stronger healthcare systems.

According to Lezotte, the labor shortage for healthcare employers represents the broader need for HR functions across industries to think strategically about long-term workforce planning.

In healthcare, “this includes determining and implementing the optimal ratio of registered nurses to certified medical assistants and/or nursing assistants, and planning two to three years out for what specific talent and how much of that talent will be needed,” he says.

A backdrop of uncertainty

This work must be undertaken in an increasingly volatile environment for HR leaders.

For instance, Littler’s report details how the upcoming U.S. election season may impact labor and employment law across several areas and examines the proliferation of employment-related legislation at the state and local level amid Congressional gridlock. For example, since last year’s Labor Day Report, Littler’s Workplace Policy Institute found that more than 275 bills that regulate labor and employment have been enacted at the state level.

“We are heading into a contentious election that has already proven to be unpredictable and is poised to create even more uncertainty for employers, no matter the outcome,” says Shannon Meade, the institute’s executive director. Meade adds that at the same time, the growing patchwork of state and local requirements across the U.S. is exacerbating compliance challenges for companies.

“That issue, coupled with looming changes following several Supreme Court decisions that have the potential to upend rulemaking, gives C-suite executives much to contend with in planning their workforce-related strategies,” she says.