Help wanted notices and sign-on bonuses are more prevalent than ever, particularly among blue-collar and service industry workers. According to the Bureau of Labor Statistics, job openings rose to a record 9.3 million in April, 2021, an unprecedented number that has remained stagnant in the following months.

The COVID-19 pandemic didn’t cause the labor shortage, but it certainly amplified the tightened labor market and accelerated the future state of work, particularly for blue-collar workers. Other factors that contribute to labor challenges include the increase in e-commerce, demographic shifts, evolution of the gig economy, lack of access to and high cost of childcare, and pandemic relief and unemployment benefits.

Following are five factors driving the labor shortage today.

Increase in e-commerce. Along with retail, one of the sectors facing the biggest challenges in labor is supply chain and logistics. Before the emergence of the coronavirus, e-commerce was on track to continue its explosive growth. The pandemic simply fueled adoption and accelerated digital transformation, forcing businesses to adapt to today’s shift in consumer behavior and shopping habits, and within unexpected generations and cultures to boot. Businesses had no option but to shift quickly to remain afloat during this time of economic uncertainty, and in turn created more blue-collar jobs to fill.

Shift in demographics. Over the past 50 years, the country has undergone massive cultural and societal changes, including shifts in education level. Millennials today are generally better educated, with approximately 40% holding a bachelor’s degree or higher, compared with 29% of Generation X and 25% of Baby Boomers. As Gen X steps into more senior positions that Baby Boomers have retired from, Millennials and Gen Z now make up the majority of the workforce. In addition to there being fewer people in the labor market overall, today’s candidates look to white-collar positions to utilize their degree, while the blue-collar jobs candidate market continues to shrink.

Evolution of the gig economy. Many gig worker businesses such as Uber, Lyft, DoorDash and InstaCart offer people the ultimate flexibility and the option to work whatever hours or days they want — a perk coveted and prioritized by the younger working generations. Before COVID-19, independent workers were a growing part of the labor force, with more than a third of workers being involved in the gig economy. In 2020, their wages and participation grew 33%.

Lack of access to and high cost of childcare. This factor is due to higher operating costs among providers, higher expenses for parents, and increased scarcity, since some childcare centers closed permanently during the pandemic. Across the U.S., 72% of families report paying more for childcare now than before the pandemic, and many parents are opting to reduce their work hours or leave the workforce completely to care for their children.

Pandemic relief and unemployment benefits. Temporary stimulus checks and greater unemployment benefits during the pandemic gave many Americans breathing room to reevaluate their career paths, whether in search of more money, greater flexibility or a higher level of personal satisfaction. In addition to unprecedented layoffs and furloughs in the face of the pandemic, a dramatic number of employees resigned in search of new opportunities or a change in industries. A record 4 million people quit their jobs in April 2021.

Here are three key considerations for businesses navigating the labor shortage.

Compensation. First and foremost, competitive pay is critical to reducing turnover and attracting workers. Large companies such as Amazon.com, Walmart, Costco and Target have increased pay for their distribution workers to anywhere from $15 to $24 an hour — up from the minimum wage of $7.25 to $14 depending on the state. Businesses must also consider the gig economy, with the average Uber driver making $18 an hour. Further, organizations are seeing success by offering workers sign-on bonuses. In May, 2021, Amazon announced that it was hiring 75,000 employees throughout the U.S. and Canada, offering a starting pay of over $17 and $1,000 in sign-on bonuses, plus an additional $100 for proof of vaccination. Today, Amazon employs almost 1.3 million people, up 63% from a year ago. 

Flexibility and work-life balance. Today, schedule flexibility and a healthy work-life balance are almost as critical as pay for workers, if not their top priority. Approximately 80% of young workers say they seriously consider how a position will affect their work-life balance prior to accepting a position. Employers who are unable to offer work-from-home opportunities are offering different shift options to cater to their employees’ schedules for childcare, with four 10-hour days becoming more popular. Reportedly, 73% of workers would prefer an extra five days of paid time off over an increase of $1 an hour, leading to employers offering additional PTO and additional flexibility to take time off in smaller increments for appointments.

Increase productivity and efficiency. Businesses can reduce their labor needs by improving the productivity and efficiency of their workforce. Labor management systems (LMS), gamification and other tech-based approaches can help boost productivity by an average of 10% to 15%. Additionally, a well-run incentive program that is aligned with corporate metrics such as gross margin and labor spend can increase productivity by 5% to 10%. While financial incentives are most effective, non-monetary incentive programs can be successful as well.

Businesses can also help reduce labor needs through a variety of automation opportunities, including autonomous mobile robots (AMRs), picking systems (pick to light), packing systems (put to store) and more. While automation is initially capital-intensive, organizations can experience a large payoff in the long run.

In this unprecedented market, one thing is for certain: the labor shortage isn’t going away anytime soon, and businesses must be agile and adaptable to stay ahead of the competition.

Brandon Vallonio is consultant, supply chain solutions, and Tom Stretar is vice president, technology, at enVista.