In today’s fast-paced and competitive environment, businesses constantly strive to stay ahead. But what happens when they have difficulty finding the right talent for important roles? The impact of skilled labour shortage has far-reaching effects on the organization, influencing productivity and employee morale.
This article will explore the significant challenges a lack of skilled labour poses and its impact on businesses.
What are some of the reasons for the labour shortage?
The current labour shortage is driven by several factors, including an aging workforce, changing demographics, and the growing demand for skilled professionals in emerging fields. Additionally, some employers contribute to the problem by maintaining outdated hiring practices, being inflexible, or harbouring biases that deter high-quality and qualified candidates.
A lack of diversity and inclusivity in the workplace can further exacerbate the shortage, as talented individuals from underrepresented groups are overlooked. Addressing these issues requires better recruitment strategies and a shift towards more equitable and supportive work environments.
One of the biggest burdens companies face due to a skilled labour shortage is hiring candidates who may not be the perfect fit for the role. According to a report by The Public Service Commission of Canada (PSC), many employers make hiring decisions based on their unconscious bias, which leads to overlooking a better fit and missing growth opportunities.
While those unconscious decisions might cause labour shortage issues, they have many implications that could lead.
In a survey conducted by the Canadian Manufacturers & Exporters (CME), manufacturers highlighted three major impacts of skills shortages such as hiring unqualified or wrong candidates, missed opportunities, and low-quality outcomes. These challenges are just the start, so let’s explore how the shortage of skilled labour can affect various aspects of a business and the economy as a whole.
1- Driving up Costs
As companies scramble to attract and retain talent, they often have to increase wages, benefits, and training costs. Businesses are engaged in fierce competition for skilled workers. However, this competition has a downside:
- Frequent Turnover: Skilled workers are in high demand and often move from one employer to another for better pay and benefits. This turnover forces companies to repeatedly invest in training new hires, which can be costly and time-consuming.
- Offering Attractive Wages and Benefits: With so many job openings, companies have little choice but to offer higher wages to retain their employees and prevent them from jumping ship to competitors.
- Unfair Advantage for Small Businesses: Small businesses often struggle more than large corporations during labour shortages, as they may lack the resources to offer competitive wages or comprehensive benefits. While large companies can invest in automation or relocate operations, small businesses face unique challenges, such as higher recruitment costs and difficulty retaining talent. This disparity can widen the gap between small and large enterprises, making it harder for smaller players to survive in a competitive market.
2- Increasing Safety Risks
The shortage of skilled labour can also pose safety concerns, especially in industries where specialized knowledge and training are essential. Here’s how a lack of qualified workers can lead to high safety risks:
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- Inadequate Training: Well-trained and experienced workers typically gain an understanding of safety protocols. However, when companies are forced to hire less skilled workers, these individuals may not be fully aware of the risks entailed by those tasks, leading to accidents and injuries.
- Increased Workload: Existing workers and supervisors may end up with additional responsibilities or work longer hours to compensate for lacking the required skills. This can lead to fatigue, which also increases the likelihood of accidents.
- Delayed Maintenance: A shortage of skilled repair workers can lead to postponed maintenance of heavy equipment, increasing the risk of wasted time, breakdowns, and workplace accidents.
3- Hindering Productivity
Productivity often takes a hit if your company struggles with a skilled labour shortage. This can manifest in several ways:
- Missed Deadlines: When you have non-qualified people or if your organization is understaffed, projects may be delayed, or deadlines may be missed altogether, as skilled workers aren’t available to do the job efficiently.
- Lower Quality of Work: Inexperienced workers may produce poor work, leading to costly mistakes and rework.
- Lost Revenue: Delays and errors can result in missed revenue opportunities, further straining the company’s bottom line and profit projections.
4- Missing Opportunities
A skills shortage not only affects day-to-day operations but also hinders companies from pursuing growth opportunities. Some key areas where businesses may fall short include:
- Delayed Projects: Labour shortage can result in missed opportunities, impacting customer satisfaction and the company’s chance to thrive.
- Reduced Innovation: Skilled workers are often creative and bring new perspectives and strategies, which are essential for staying competitive and relevant.
- Impeding Growth: Whether you want to expand operations or offer new products and services, it can become challenging without a skilled workforce. Which can limit the company’s ability to tap into new markets.
5- Impeding Canadian Economic Growth
If you think the effects of a skilled labour shortage only affect individual businesses, think again! It impacts consumers and local communities; the impact can get as big as economic growth.
Organizations lacking the necessary skills and knowledge may struggle to keep up with competitors. This can lead to:
- Lower Productivity: A less skilled workforce can result in lower output, reducing a company’s ability to compete.
- Slower Adaptation: Organizations may struggle to adapt to new trends or utilize new opportunities without skilled workers.
- Economic Discrepancies: Regions that rely heavily on skilled labour may experience slower economic growth than areas with a more diverse job market.
As businesses struggle to find skilled workers, production slows, leading to higher prices and delayed services, which may result in job losses and high turnover.
💡 Did you know that our Career Edge program contributed to generating 1$ billion for the Canadian economy by helping newcomers find job opportunities in Canada?
6- Worsening Unemployment
While a skilled labour shortage can lead to higher wages and increased competition for jobs, it can also contribute to higher unemployment in specific industries or regions. Here’s how:
- Job Losses: Industries that require highly skilled workers may suffer job losses if companies can’t find the talent they need to operate efficiently. These gaps might force companies to downsize or shut down entirely if they cannot recruit workers with the required skills and certifications.
- Reduced Job Creation: Companies may be hesitant to create new jobs if they need help finding the skilled workers needed to fill them.
- Underemployment: Workers may end up in jobs that don’t fully utilize their skills and qualifications, leading to frustration and decreased job satisfaction. Higher unemployment rates may result from workers needing help finding employment that matches their experience and skill level. And that’s something we already see with many of our Career Edge Candidates.
7- Decreasing Employee Morale
When companies struggle to fill skilled positions, the burden often falls on existing employees, which is the human cost of this issue. This can lead to:
- Burnout: An increased workload is often the result of a labour shortage. The overworked suffer from increased stress and burnout. According to a Robert Half report, 42% of Canadian Professionals reported experiencing burnout.
- Limited Career Advancement: In fields where skilled workers are in high demand, companies may struggle to provide opportunities for career growth. This can leave employees feeling stagnant and uncertain about their future.
- Frustration and Discontent: A survey by Monster.com found that 73% of workers feel their employer doesn’t understand the frustration of working in an understaffed company.
- Quiet Quitting: This discontent can lead to lower employee morale and higher turnover rates. So, employees might do the absolute minimum until they find an opportunity well suited to their skills and values.
8- Worsening the Mental Health Crisis
The pressure of working in an understaffed environment can take a toll on employees’ mental health. Long hours, increased stress, and lack of support can contribute to burnout, anxiety, and depression. According to WHO (The World Health Organization), depression and anxiety cost the global economy around $1 trillion annually.
Many people who are struggling with underemployment or unemployment are struggling with mental health issues. A Monster poll on Mental Health in the Workplace reveals that 75% of workers say their mental health at work is negative. The study uncovered the following five factors contributing to their negative mental health:
- 62% say that a toxic work culture is to blame.
- 53% blame a bad manager.
- 48% blame the fear of being laid off.
- 43% say it’s the lack of growth opportunities.
- 43% blame an increased workload.
What can you do as an individual employer about Labor Shortage?
The skilled labour shortage presents a significant challenge for businesses across industries. However, by understanding the potential impacts and taking proactive steps to address these challenges, companies can better navigate this issue and continue to thrive in a competitive market.
One idea is for employers to start tapping into new pools of candidates and keep an open mind about new potential. If you’re ready to take on this challenge and do your part in the Labour Shortage problem, connect with us!