Topic HR Strategy

Worker Shortages vs. Material Shortages: Which Matters Most and Why?

Worker Shortages vs. Material Shortages: Which Matters Most and Why?

Small and multinational organizations point out worker and material shortages as the primary issue in business management. Since 2019, the National Association for Professional Employer Organizations (NAPEO) has continually assessed over five hundred organizations to determine what keeps business owners up at night. 

Unsurprisingly, the outcomes differed drastically from December 2019 to December 2021. In 2021, two key factors emerged as top challenges for business owners: worker shortage and material shortage. 

Which is more vital? The answer depends on the industry, year, and how the question is phrased. 

Why is there a Worker Shortage? 

One of the challenges of the pandemic economy is the persistent worker shortage, with business owners struggling to find workers amid the well-known great resignation. Research points to a myriad of factors being responsible for the shrinking workforce. 

Health Effects of the Pandemic 

Millions of American workers are challenged with long-term symptoms after contracting COVID-19, with the majority being unable to work because of chronic health problems. The disease has left 1.6 million individuals missing from the full-time workforce. Many workers are incapacitated for months with persistent symptoms like fatigue, memory loss, brain fog, and heart palpitations. 

The Urge for Better Paying Jobs 

Most employees are quitting their positions at record rates, with some hunting for better-paying jobs with benefit packages while others venture into entrepreneurship. According to Business Insider, a $15 minimum wage is not a living wage for most households, and workers are moving towards jobs that will fulfill their wage demands. This migration explains the labor shortage in small firms or organizations that offer low worker wages, with businesses that pay high wages not experiencing such problems. 

Why is there a Material Shortage? 

According to Reuters, US manufacturing activity increased as the economy reopened to increased demand accumulated during the pandemic. Material shortages can thus be attributed to factors such as: 

Increased Demand for Materials 

Most organizations and their suppliers are finding it hard to match increasing demand levels. While the available material would usually be manufactured into goods that meet the demand in the market, there is the unavailability of enough raw materials to meet the unforeseen surge. This shortage is partly the result of a preference for goods over services during the pandemic, which strained supply chains. Disruptions in labor in industries that manufacture and supply raw materials also contributed to the shortage. 

Transportation Difficulties 

Ceptech net reports that weather conditions such as storms battered parts of the United States through 2020 and the first quarter of 2021. The situation interrupted logistic routes, which delayed deliveries of raw materials. 

Reliability of Transportation Companies 

With limited driver availability, some organizations were understaffed and unable to deliver material on time. As a result, lead time and delayed production were significant challenges in most firms. 

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Which Matters More: Worker or Material Shortages? 

Employee and material shortages have developed to be a significant area of concern for most companies. The combination of worker and material shortages harms the construction industry supply chain across the US, leading to delayed deliveries and a persistent increase in prices. 

Both worker and material shortages are significant for businesses, but according to CNBC, comparing the significance between worker and material shortages depends on your industry. 

Industries like professional and business services, education, and financial services are mainly impacted by massive job resignations and understaffing. At the same time, sectors like construction, manufacturing, and retail that depend on raw materials or goods are affected by supply chain problems. 

According to the 2021 NAPEO survey, business owners and key decision-makers pointed  to material shortages linked to supply chain problems and worker shortages as the most challenging aspects of operating a business.   

The initial effects of the pandemic throughout 2020 caused business owner concerns to shift from employee-focused to financial. While in 2019, business growth and success concerns dominated the perspective of business owners.   

According to the survey, 24% of business owners rated material shortages as the most challenging problem, while 21% cited employee shortages.  

Worker shortages may be a more significant concern for some companies, but they are easier to solve than material shortages. Business owners can solve employee problems by improving recruitment procedures and offering competitive wages to workers, while the only solution to the material shortage is to wait out the slump.   

Industries can promote the well-being of their workforce by developing compensation packages that incorporate their health and livelihood. Employees also value the opportunity to grow and develop in their areas of expertise. Employees that feel a progression in their profession at work are more likely to stay at your organization for the long term

Why is a Shortage of Workers a Primary Concern for Business Owners? 

The worker shortage is a significant area of concern because companies in industries will be competing for talented personnel, with firms that offer lucrative wages and benefits more likely to retain their staff. Companies in industries that don’t rely on supply chains will also need to focus on acquiring new workers to replace those who have resigned. 

Industries that rely on supply chains cannot work at full capacity due to the current problems, and thus don’t need to recruit as many new workers. But as the supply chain issues whither, the need for new talents will also increase. 

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