Employers Grappling With Changing Workplace Where Labor Is Scarce & Workers Feel Isolated

A national labor shortage has created ideal conditions for skilled workers to negotiate for better pay and more flexible work schedules, but also new challenges for employers: Staff members aren’t eager to return to the office; job applicants are demanding higher wages; and mental health has deteriorated for many, in some cases transforming star employees into personnel problems.

Those trends were discussed in detail by panelists from both business and labor during the Workers’ Compensation Research Institute’s annual conference, held in Phoenix on March 21-22.

Employers described the struggle of recruiting enough talented workers to keep up with workloads and maintaining workplace safety while relying on rookies or workers reassigned from other duties.

Labor representatives described the isolation of working remotely for individuals who once cherished office camaraderie and the resentment that developed among some essential workers who never had an opportunity to work from home.

Donna S. Edwards, president of the Maryland State and District of Columbia AFL-CIO, said the COVID-19 pandemic was a tragedy.

“I still know of people who are going to the hospital,” she said. “Firefighters were dying. Bus drivers were dying. We have not had that national mourning over what we went through. We’re supposed to just suck it up.”

By and large, workers are sucking it up — by showing up for work in unprecedented numbers.

At the end of March, 160.9 million Americans held positions in the civilian workforce, the highest employment number recorded in at least the past 20 years, according to the U.S. Bureau of Labor Statistics.

The BLS said at the end of February there were 9.9 million job openings in the United States. That was down from a peak of 11.8 million in December 2022, but still far above the 2.5 million to 7.5 million job openings seen in most months during the past 20 years.

The cost of compensating employees increased 5.1% from last year, compared to a historical rate of 2% to 3%. The unemployment rate stood at 3.6% at the end of February, down from 3.4% in January, which was a 50-year low.

Labor Scarcity

Two centuries of advances in automation have not eliminated the need for human workers.

David Autor, an economics professor at the Massachusetts Institute of Technology, kicked off the WCRI conference in a presentation that debunked the notion that automation eliminates jobs.

“We are not running out of jobs. We are in an historic period of labor scarcity,” he said.

Autor said automation increases consumption, which increases the amount of work. Consumers are insatiable, he said. The more they have, the more they want. As they strive to possess more, they create new jobs.

That isn’t to say that technology doesn’t displace workers. In 1860, 55% of U.S. jobs were in agriculture. In 2010, only 2% were. Humans who may once have plowed fields or herded sheep may now work as automatic welding machine operators, a job title first captured by the U.S. Census in 1940, computer bookkeepers, (1990) or sports nutritionists (2018).

New work, however, requires greater expertise. Autor said automation makes generic skills common to human beings — such as lifting boxes or caring for children — less valuable. Workers who know how to use tools to augment their labor become more valuable. He said the dynamic creates a “barbell of economic polarization,” where more workers with common skills are pushed into low-paying jobs while highly skilled workers are pushed into higher incomes, leaving fewer workers in the middle.

The number of workers available isn’t growing as rapidly as the amount of new work created by technology. U.S. population growth is at the lowest rate since the nation was founded, Autor said.

The population in the United States grew just 0.38% in 2022, according to U.S. Census Bureau data. That was greater than the 0.1% rate recorded in 2021 but the lowest rate for any other year since at least 1900, according to an analysis of Census Bureau data by the Brookings Institute. Most of the uptick came from an increase in immigration.

The labor scarcity created by the low population growth rate has changed the balance of power between employers and labor. Workers who were sent home out of necessity during the pandemic are now demanding more flexibility, Autor said. Unskilled labor is less “sticky,” meaning workers are more likely to leave their jobs for new positions.

Bust and Boom

For some employers, the COVID-19 pandemic brought on a bust, followed by a boom.

Steve Perroots, vice president of global claims at Marriott International, said the hotel chain had to lay off much of its workforce at the outset of the pandemic. It offered early-retirement incentives to its most experienced workers, only to ask many of them to return to their jobs when the economy recovered more strongly than expected.

“They didn’t come back and say, ‘sure, pay me what you were paying me. Do you really need me? How much is it worth to you?'”

Perroots said some of the workers who accepted offers to return had been out of work for more than a year. They were rusty and some were assigned to tasks to which they were not accustomed. The workload increased rapidly, leading to fatigue. In some cases, workers bypassed safety protocols in the rush to keep up. The result was a surge in workers’ compensation claims, he said.

While remote work isn’t an option for most hotel employees, Marriott does use hybrid work as a recruiting tool for positions that don’t need to be on site, Peroots said. There was pushback when Marriott started returning employees to the office, he said, but remote work isn’t optimal.

“You learn a lot by being in the same room with other people doing the same job as you do,” Peroots said. “Socialization. Camaraderie. Teamwork. You lose something.”

Remote work wasn’t an option for most workers in the health care industry, either. A major challenge during the pandemic was avoiding burnout, said Anne Marie Watkins, vice president of national patient care services for Kaiser Permanente.

Watkins said retaining workers has been a challenge. There is a shortage of nurses nationally, but the supply is uneven, she said. California needs 40,000 more nurses while in Florida there are probably too many, she said.

An analysis by Health Affairs, released April 13, says that the number of registered nurses in the United States decreased by 100,000 in 2021, the largest decline recorded in four decades. The decrease is especially troubling because the greatest reduction was among young nurses. While the total population of RNs dropped by 1.8%, there was a 4% decline in nurses under the age of 35, according to the analysis.

Watkins said Kaiser hasn’t had trouble recruiting recent graduates, but it’s not safe to staff health care facilities with too large a proportion of workers who are fresh out of school. There has to be a good mix of newer and more experienced caregivers, she said. That makes employee retention crucial.

“We can’t just keep paying people more and more and more,” Watkins said. “We have to find other things to make the profession more attractive.”

The health care profession, however, is becoming more challenging. Watkins said there’s been an epidemic of violence against healthcare workers.

“It’s an extremely underreported issue,” Watkins said. “We don’t know why, if it’s just an after-effect of what we’ve all been through.”

Back to the Office, or Not

The transition to remote work that started out of necessity during the height of the pandemic is now being offered by employers as an employee-retention tool.

Paul Kearney, chief claims officer for AF Group, said the carrier invested in information technology to make the transition to remote work. Chat bots, text messages and electronic payment systems are among the new tools used to preserve “customer connectivity,” he said. The company’s executives also went on a “listening tour” to hear from employees last year as the company developed a business continuity plan.

Most employees now work two to three days a week in the office.

“It turns out that this hybrid model has been well received by many of our employees — well, most of our employees,” Kearney said.

There is one cause for concern.

Kearney said a proper investigation of workplace injuries is more important than ever for employees who work remotely. “There are no unbiased witnesses in households,” he said.

In addition, remote work, while advantageous for some, can breed resentment among workers who are unable to work from home.

Evelyn McGill, executive director of the Virginia Workers’ Compensation Commission, said her agency started transitioning to remote work well before the pandemic.

She said three-quarters of the commission’s employees now work from home, but there are some positions that have to be performed at the commission’s offices.

“Some are among the lowest paid,” she said.

McGill said the commission shows its appreciation to office-bound workers by hosting luncheons and giving small bonuses. Also, “I go to the office every day for that very reason,” she said.

McGill was among several speakers who said mental health has been a major concern. She said the commission is training supervisors to recognize mental health issues.

“A five-star employee before COVID is now on a performance-review plan because of some issues they are struggling with,” she said.

She said another employee became “nasty” while working remotely. McGill said she suggested that the worker return to the office so she could become accustomed to working with people again.

“She didn’t like that, but she improved,” McGill said.

Jenny M. Burke, vice president of impairment practice for the National Safety Council, said remote work has an isolating effect. Workers who may have been struggling with mental health issues before the pandemic lost the personal support of coworkers. She said while workers generally are more willing than before the pandemic to acknowledge they are struggling, they are still reluctant to seek therapy through employee assistance programs.

Post-pandemic directives requiring workers to return to the office can generate new personnel issues, she said.

“If you go back to work you may be the one who didn’t get to go half-hybrid,” Burke said.

“You’re getting mad.”

Edwards, the AFL-CIO official, said many essential workers who are unable to work from home perceive remote and hybrid work arrangements as preferential treatment. “Without a good explanation, that anger starts to build,” she said.

Edwards said many workers won’t seek help through employee assistance programs because they don’t trust them. She said her union is offering peer-to-peer counseling as an alternative.

Remote work brings its own issues. Edwards said workers who work from home may be reluctant to report work injuries, knowing that a workers’ compensation claim will trigger an investigation. “Do you really want your supervisor to see how you live?” she said. “Is that going to have an impact on workers’ comp reporting?’

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