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Managing Risks Caused by Labor Shortages

Here are three key tips agents should pass along to their clients to help them manage risks associated with the shortage of qualified labor.
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managing risks caused by labor shortages

The COVID-19 pandemic caused a dramatic shift in the American workforce, resulting in new and increased risks for employers trying to keep up with labor demands. With the workforce losing millions of Americans since the onset of the COVID-19 pandemic, businesses need to make sure they are managing risks associated with the lack of qualified labor.

Currently, there are around 9.6 million job openings in the U.S., according to the U.S. Bureau of Labor Statistics. However, the number of unemployed Americans is around 6.5 million. The significant gap between these figures means that even if every unemployed person in the country found a job, there would still be 2.5 million jobs with no one to fill them.

COVID-19 and the Unemployment Gap

The inciting incident that led to this current discrepancy was the initial impact on businesses at the onset of the COVID-19 pandemic. At its height, more than 120,000 businesses temporarily closed and more than 30 million U.S. workers were unemployed, according to data from the U.S. Chamber of Commerce. This major event forced millions of workers to reevaluate their priorities and rethink the necessity of full-time work.

The answer to why so many workers have left the workforce is complex. Shifting social and economic priorities, health concerns, caretaker costs and wage inflation that facilitates single-income households—in a November 2022 study from the Chamber of Commerce, 23% of women said they haven't reentered the workforce because others in the family were making enough money—are among the key contributors.

The business closures at the height of the pandemic forced some households to become single-income households. At the same time, the need to work full-time to support the household was superseded by the need to be present to manage the household full-time. Also, in many cases, returning to work for a wage that was negated by ever-increasing childcare costs just didn't make financial sense.

Many young people in the U.S. Chamber survey responded that they are focusing on their education or acquiring new skills before returning to or entering the workforce. Also, a significant number of older Americans were forced into early retirement by the COVID-19 pandemic closures, accounting for 3 million adults 55 and older who have exited the workforce as of October 2021.

Impacts on Key Industries

Instability in the labor pool has resulted in large turnover rates—3.7 million workers quit in September, according to the Bureau of Labor Statistics—which has had serious impacts on industries like manufacturing, hospitality and construction. Without enough staff, production capacity and service quality are affected, which can then affect a company's reputation and profits.

Being short-staffed also affects employee morale as employees are asked to take on more work to keep up with production. Low employee morale can then impair production, quality and safety throughout business operations.

With fewer qualified and skilled workers in the workforce, the burden falls on management to not only train new employees, but also maintain the company's safety culture. This is especially true for businesses with safety-critical roles, such as those that involve an employee operating machinery, equipment and vehicles.

Liability may increase not only when workers are at risk of injury but also when they are at risk of injuring third parties, such as making a patron at a restaurant sick by improper food handling or a bystander being struck when an employee is responsible for a vehicle collision.

Here are three key tips agents should pass along to their clients to help manage those risks:

1) A culture of safety is a key investment. Investing time and money in programs that firmly establish a safety culture is a wise business decision. Having a solid program in place can dramatically reduce the number of injuries and employee downtime. This endeavor should start at the time of hire when new employees should receive appropriate training.

Employers should also perform in-house validation or testing or verify certifications for higher-risk exposures to ensure the new hire's training is up to the company's standards. Relying on prior experience or invalid certifications may not be good enough when enforcing strict safety standards.

Refresher trainings should also be provided at established intervals, and all training from day one should be well-documented. Additionally, specialized training and safety knowledge checks should be part of the safety program for skilled positions or positions with unique or higher-risk hazards. Behavioral observations and coaching can help employees stay compliant with the safety standards set in place.

2) Attract and retain with safety in mind. Even before a new employee is onboarded, businesses should do their due diligence during the hiring process. An established formal hiring program that demonstrates a consistent hiring protocol will reap benefits in the long run. Organizations should maintain an active recruiting pipeline and use a proactive program to consistently attract, hire and retain the top 20% of available candidates. This includes posting job listings with accurate descriptions of the job and expectations.

When bringing on a new hire, in addition to testing and training, background checks should be performed to validate prior employment, criminal history, motor vehicle records or any other aspects that aren't government-mandated that could verify the employee is the right fit for the position. Aptitude tests and physical exams are both great ideas to assess the potential that a new hire can handle the job requirements or to help match them with positions they are the best fit for.

An investment in ergonomics and job aides from the new hire's start can also drive down the physical demand of certain risky jobs.

For example, a business that manufactures boxed cake mixes employed an individual whose job was to carry the large 80-pound bags of flour and pour them into the bulk mixers. This individual took great pride in being the only person capable of doing this particular job—but then was injured.

Seemingly, company leaders found themselves at a loss. Working together with their agent, the business invested in an ergonomic solution to the problem, installing what is called a “vacuhoist." Now, with the push of a button, a suction cup will lift the 80-pound bags, hold them over the mixer, cut them open, pour the flour into the mix and dispose of the empty bags. A risky job that was relegated to just one person was now safer and accessible for more employees.

3) A strong compensation package pays off in the long term. Along with a refined hiring process and continuous adjustments throughout an employee's tenure, developing a retention strategy can also pay off in the long term. Improving the total compensation package makes employment at a business a valuable investment for the worker.

Improving wages, bonuses, benefits and working conditions are great places to start. Adding benefits like childcare, transportation and better healthcare packages can also sweeten the back-to-work deal. And futureproofing with advancement plans and investments in cross-training and education can help seal the deal for some workers.

Steve Gibson is risk control consultant at Westfield. Joshua Dixon is complex claims leader for workers compensation and personal injury protection at Westfield.

Tuesday, November 28, 2023
Recruiting, Hiring & Training