Shortages by Sector

From restaurants and hotels to health care and public education, total employment during the pandemic has fallen stepwise in many sectors critical to the service economy and failed to recover to pre-pandemic levels. In those workplaces where employers once relied on workers’ willingness to tolerate the unilateral authority of a boss — whether a department director, school principal, or shift manager — they now find their operations understaffed, afflicted by recruitment failing to offset turnover.

Solutions such as hiring bonuses or anti-enticement agreements among employers can do little to ameliorate this fundamental shift. Take the example of public school teaching, a sector that nationwide employs over three million teachers across nineteen thousand operating districts.

Since the Ronald Reagan administration, state and federal governments have embarked on a quixotic saga to revolutionize this sector through carrot-and-stick funding tied to standardized testing and the opening of a predominately open shop — publicly funded but privately managed charter schools. In 2001, this dream became federal law with the No Child Left Behind Act, which mandated testing and ranking of public schools.

Testing is no longer a diagnostic tool for teachers to use according to their professional judgement; standardized tests became an existential threat for many schools determining whether they will remain open or closed. The Barack Obama administration intensified the trend, converting federal funding into competitive grants based on test scores in the Race to the Top program of 2009.

As control over the classroom receded with the growing assault on teachers’ autonomy and prestige, the professional was fundamentally transformed and deprofessionalized.

It is little surprise then that public school districts are witnessing record retirements and quits. Before the pandemic, eight million people — from bus drivers and teacher aides to janitors and cafeteria workers — worked for public school districts. As of the end of this school year, there were only 7.75 million people employed in public education, according to the Current Employment Statistics (CES) survey of the Bureau of Labor Statistics. (The CES is an establishment survey that does not further disaggregate employment in schools, while the Current Population Survey of households does not regularly ask for occupation. The unions, however, could easily determine the size of the teacher shortage in their well-organized states.)

That represents two hundred fifty thousand workers missing from public schools, many of them teachers — a gargantuan staffing challenge that at the current rate will take years to meet.

Another example: the accommodation and food-service industries. Before the pandemic, these workplaces were rarely celebrated for the respect, autonomy, and encouragement offered by managers and customers. Working for tips, with a pace of work commonly beyond the individual workers’ control, the sector has become an unfortunate touchstone for one’s social class position in America.

The results of this shortage are evident to anyone who has been to a bar or restaurant. Spendable income flushed the sector over the past year of reopenings, yet total employment in the “food-service and drinking places” statistical category remains seven hundred fifty thousand workers below its level of February 2020.

One explanation is simply that, at the higher prices required to raise wages in this industry, there will be a lower level of demand. Another is fewer workers are interested in working in an industry where sickness easily spreads.

But the fact is that entrepreneurs in this industry have to contend with the new reality — and negotiate with labor to do so, whether individually or collectively, as the great success of the Starbucks union campaign shows.

Shortages in Health Care

The health care sector is particularly afflicted by the new dynamics of the labor market. Unsurprisingly, the pandemic has driven up workloads more in this employment sector than any other. Adding to the demand for health services is the fact that, across the country, insurers report higher utilization rates as individuals are making long-deferred appointments for regular checkups and appointments.

Hospitals are going to extraordinary lengths to recruit labor to meet this demand. Hospitals are offering $20,000 sign-on bonuses for nurses and paying travel nurses $3,000 per week. In states without collective bargaining or staff-ratio laws won by unions, the tremendous demand for labor stems in part from record-high turnover in the profession. Quit rates in the health care and social assistance sector spiked in 2021, from a prepandemic level of around 2 percent to a high of more than 3 percent late last year.

In absolute terms, this means that whereas from three to four hundred thousand workers in this sector quit their jobs before the pandemic, in recent months the number of quits has been above five hundred thousand and at times close to six hundred thousand.

Unlike the regionally decentralized and highly competitive food and hospitality industry, hospitals are not able to simply adjust the pace of work. Rather than lowering caseloads and ceding control over the pace of work to the nurses themselves, hospital administrators know they can offer higher salaries for short-term employment — costs ultimately shifted to insurers and, through them, to the public.

The multi-payer environment facilitates this shift, as a divided insurance industry has little incentive to place a total cap on hospital revenues. The result is a hellish “churn and burn” system of labor relations more akin to an Amazon warehouse than to an institution of care and healing.

For nursing homes, which are much less able to set their own prices to pay higher salaries and hiring bonuses, the situation is catastrophic. There were 3.4 million people employed in nursing and residential care facilities before the pandemic; today the number is around 2.9 million. The trough was only reached this year, and it is uncertain whether or to what degree any recovery will be possible.

Alleviating Shortages: Unemployment or Power Sharing?

Employers as a class have a solution to this problem: reduce spending, and through it, employment. By exhausting savings, the current inflation may accelerate this process as workers lose whatever discretion they have learned to exercise over the course of the pandemic. There needn’t be any conspiracy for this dynamic to play out. The only question is when the large price-setters will feel comfortable enough to bring stability on their terms.

Unfortunately (and revealingly, given the Democrats’ weakness), the leadership of both political parties seem to share in much of the diagnosis behind this prescription. Shown both in the failure of Congress to enact President Joe Biden’s social spending package and the Federal Reserve’s turn toward higher interest rates, there is a prevailing belief in the world of business that the unemployment rate is not high enough for American workplaces to function.

While the particular effects of the pandemic are playing out in specific ways across the various types of workplaces in the American economy, all employers must today acknowledge that the balance of power in any particular employment agreement has, at least temporarily, shifted against them. This is, apparently, too much for those managing the nation’s economy to tolerate.

Signaling to his fellow employers, Elon Musk set the tone this month, announcing he thought a 10 percent reduction in staff at Tesla — ten thousand layoffs — would be necessary to send a message about who exactly has power over the company’s offices and factories. Speaking the same day about the Bureau of Labor Statistics’ employment measures, Federal Reserve chairman Jerome Powell offered similar judgement in the ergot of economics: “You’d still have quite a strong labor market if unemployment were to move up a few ticks.” After the last meeting of the Federal Open Markets Committee on Wednesday, Powell reaffirmed this interpretation of the problems in the economy. The tight labor market, he said, “has led to real imbalance in wage negotiating” which should be corrected by “mov[ing] demand down.”

Collective Bargaining Can End the Labor Shortage

But there is an alternative public response to the new balance of power in the labor market: lock in the concessions employers are granting in particular industries through collective bargaining.

Among high-salary white-collar workers, these norms have already shifted. But for the great mass of workers in the service sector, such individual bargaining can only do so much. Collective action will ultimately prove the decisive test. Where collective bargains are struck and workers have greater collective control over the standards and pay rates in their industries, coordinated solutions to the problems of recruitment and retention become possible.

In Los Angeles, for example, United Teachers Los Angeles recently opened salary negotiations with Los Angeles Unified School District, demanding a 20 percent wage increase over the next two years — an amount that, if granted, would begin to raise the income for teachers to the level of the average bachelor’s degree–holding worker and equalize their position among their colleagues in the professions. The Houston Independent School District, without collective bargaining, recently granted a 17 percent wage increase over three years — a recognition of the necessity of narrowing the historic gaps in professional salaries that have grown between the public and private sectors.

For those other sectors where unions do not yet exist, now is the moment to build them.

At the state level, recently passed legislation and executive orders in New York, Michigan, Colorado, and Nevada have proposed a common experimental approach: single-industry boards in the nursing homes, agriculture, and home care sectors, empowered by law to issue recommendations over working standards and even wages. Similar legislation to establish a board for the fast food industry is currently working its way through the state capital in California.

Workers’ representatives are included in these boards, though it remains to be seen how much say workers themselves will have in the representatives or whether employers will abide by the recommendations. Nevertheless, their existence offers a new target for concentrating organizing projects.

At the federal level, the PRO Act amendments to the National Labor Relations Act remain as dead as the Build Back Better agenda. With jurisdiction over the private sector, the federal labor board and its twenty-six regional offices remain one of the most potent instruments for governing collective bargaining. But absent a crisis in their shops that bring employers to seriously consider public regulation of the fierce power struggle that characterizes every union campaign, there is little prospect of federal legislation to embolden the board. Indeed, the prospect that a worker-friendly board will unleash such power struggles is surely behind Republican Party opposition to the Pro Act.

Rather than wait for laws authorizing collective action, now is the time for creative organizing to force this decision. Only workers themselves can empower unions to lock in the gains made possible by the new reality in the labor market. Labor’s traditional weapons of collective disruption — picket lines, strikes, and boycotts — can pressure employers to consider collective bargaining as an alternative to the current problems experienced as labor shortages.

Once they do, we can then begin to discuss whether the “labor shortage” really represents an excess of jobs for too few workers. Until then, employer complaints should be celebrated as evidence that workers have power — and as holding out the possibility that they might learn to use it.