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The US is experiencing a widespread worker shortage. Here’s why.

Retail and restaurant workers are more in demand than tech workers.

One woman talks on the phone while another looks at a piece of paper behind the front reception desk at the Grand Hotel.
Hotel employees are in high demand these days.
Jeffrey Greenberg/UIG via Getty Images

It’s official: The US economy doesn’t have enough workers.

For nearly a year now, the number of open jobs each month has been higher than the number of people looking for work — the first time that’s happened since the Department of Labor began tracking job turnover two decades ago.

At the end of January, the US economy had 7.6 million unfilled jobs, but only 6.5 million people were looking for work, according to data released Friday by the US Department of Labor. This was the 11th straight month that the number of job openings was higher than the number of job seekers. And each month, the gap has grown.

Just look at the chart below. For two decades, there have been more available workers than available jobs. That changed last year.

St. Louis Federal Reserve

Employers have been complaining about a shortage of skilled workers in recent years, particularly workers with advanced degrees in STEM fields. Nearly ever industry now has a labor shortage, but here’s the twist: Employers are having a harder time filling blue-collar positions than professional positions that require a college education.

The hardest-to-find workers are no longer computer engineers. They are home health care aides, restaurant workers, and hotel staff. The shift is happening because more and more Americans are going to college and taking professional jobs, while working-class baby boomers are retiring en masse.

This means that — for once — low-skilled workers have the most leverage in the current labor market.

There’s no better time for working-class Americans to demand better wages, benefits, schedules, and work conditions. It also means immigration reform is more urgent than ever. In order to fill all the open jobs and keep the economy growing, Congress will need to allow more low-skilled immigrants to work. Legally.

Employers need to raise wages by a lot

The numbers are pretty clear about what comes next. If 7.6 million jobs are open and only 6.5 million people are looking for work, then employers need to find a lot more workers. They need to encourage more Americans to join the workforce.

Right now there are 1.4 million people who are considered “marginally attached” to the US labor force and who are not counted as job seekers. They are people who would like to work but don’t need to, or can’t work because of other responsibilities. Their most common reasons for not working are because they’re enrolled in school or taking care of family members, according to the Labor Department.

Economists agree that employers need to do more to entice workers to join the labor market. They need to sweeten the deal.

“Companies looking to attract enough blue-collar workers will have to continue increasing wages and, as a result, possibly experience diminished profits,” wrote Gad Levanon, chief economist for North America at The Conference Board, a global economic research organization that has studied the recent US labor shortage.

Slow income growth has been the most persistent problem affecting the US economy in its recovery from the Great Recession. Wages have barely kept up with the cost of living, even as the unemployment rate dropped and the economy expanded.

That’s starting to change as businesses need to compete harder than ever to keep and attract workers. In fact, wages grew a lot faster in February than they have in a long time.

Private sector workers (excluding farmworkers) got an average 11-cent hourly raise in February, adding up to an average of $27.66 per hour. That has happened only one or two times since President Donald Trump took office. In January, average hourly pay only increased 2 cents.

But even an 11-cent increase is on the low side when you consider how well the economy is performing. When you take inflation into account, workers’ wages have only grown about 1.8 percent within the past year. That’s much faster than they’ve been growing since the recession started in 2007, but it’s still a pathetic amount compared to the sky-high payouts corporate CEOs are getting.

“Until we see wages growth really pick up, I’m going to believe that there are still more Americans out there,” Minnesota Federal Reserve Bank President Neal Kashkari said earlier this month to state senators. “I’m very focused on wages as the best indicator overall of how tight is the labor force.”

But raising wages will only do so much to ease the labor shortage. Businesses will need to hire more foreign workers, too.

The US economy needs more low-skilled immigrants

The new labor market data shows a lot of unfilled jobs that require college degrees — about 1 million in the professional business service sector. That includes lawyers, consultants, and computer programmers. But there are even more open jobs that don’t require that much education. That includes retail, hotel, and restaurant jobs. There’s also high demand for home health aides to care for aging baby boomers.

These are the kinds of jobs that low-skilled immigrants, often from Latin America, have long helped to fill. But Trump’s restrictions on immigration threaten to make the labor shortage worse. Since taking office, his administration has tried to scale back nearly every avenue of legal immigration, ignoring the high demand for unskilled immigrant workers, even at his own golf clubs.

Back in 2017, the Wall Street Journal’s editorial board warned Trump that his restrictions on immigration could hurt the economy.

“If President Trump wants employers to produce and build more in America, the US will need to improve education and skills in manufacturing and IT. But the economy will also need more foreign workers, and better guest worker programs to bring them in legally,” the newspaper said in March 2017.

Darrell West, a Brookings expert on technology and public policy pointed out back in 2013 that the US economy would suffer if Congress didn’t overhaul the immigration system.

America’s immigration system is not designed for today’s economy, and remains largely unchanged since 1965. In fact, of the approximately one million green cards given out by the US in 2011, around 139,000 (or 13 percent) were given out for economic reasons, a number far too small to meet the needs of the world’s largest economy.

Providing more work visas for skilled and unskilled immigrants seems like an obvious solution to ease the labor shortage. But it’s also the solution Trump seems least inclined to take.

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