Read Time 7 Minutes
Every once in a while, something big rocks the notion of “business as usual.” After digging into the question of what on earth is going on with Birmingham’s labor market, it’s fair to say the pandemic is the thing that’s done it in 2020-21. Keep reading to find out what we learned about why it’s so hard to fill certain jobs and what we can do about it.
Birmingham’s been having a strong recovery from COVID—why the labor shortage?
So how did we get to where we are now?
In April 2020, according to the US Bureau of Labor Statistics, 2,187,300 people in the state of Alabama were part of the civilian labor force. By April 2021, that number had grown by a scant 2% to 2,232,000. If you do the math, you’re looking at fewer than 45,000 more people across the entire state in the workforce after the weirdest year ever.
Meanwhile, unemployment in the state went from 13.2% in April 2020 to 3.6% in April 2021, a drop of 73%. It’s worth noting that this falls right in line with drops across the southeast ranging from the lowest at 3.6% in DC to the highest at 12.2% in Kentucky.
For the non-numbers-oriented people, this means that percentage-wise, more people are working now than were in April 2020, but the total number of people in the labor force hasn’t risen as quickly as demand for pretty much everything has.
That said, because of how unemployment numbers are calculated, the numbers also miss people who may have decided to opt out of the workforce altogether. As you probably know from people in your own circles, there are a bunch of reasons people are taking a break.
For Hire signs everywhere
If you’ve been out to eat lately, whether it’s fine dining at Frank Stitt’s restaurants or a fast food joint, you’ve likely seen signs saying something along the lines of “pardon the wait—we are having trouble hiring staff.” Turns out, it’s not just restaurants that have been having trouble finding help.
“Across all industries and sectors, we are experiencing a labor market shortage. When the pandemic hit, the labor shortage, which we usually see in construction, began to affect all of our industries from manufacturing to retail.
Now, as we are trying to come out of the pandemic, what we are experiencing is a shortage of people wanting and able to come back to work, whether because of childcare issues or extended unemployment benefits.
For some people it’s been more cost-effective to stay home and care for their child(ren) versus going to work and having to figure out child care or pay astronomical prices to send their child to daycare.”Antiqua Cleggett, Director, Central Six AlabamaWorks!
In this market, we’ve seen restaurants like Half Shell Oyster House get creative, offering a $100 signing bonus on completion of training, an additional $200 on the second paycheck and an additional $300 at the completion of 90 days. We’ve heard of others getting creative as well.
We’re particularly curious to know if the childcare challenges everyone has faced during the pandemic will lead to lasting changes, such as more on-site childcare or hybrid work arrangements that allow some work-from-home and some work in the office.
At the same time, Tropicaleo’s doors have been shut for eight weeks now, due to labor and supply chain issues
Marrero offered a lot of insights into how the current economy looks and why he believes people are making certain choices, particularly from the perspective of people who work in the restaurant industry.
On why many people decided to take a break from working:
“The pandemic had people in their homes for a lot of time without a job. With a break on student loan payments and a pause on evictions, people were able to sit down and reprioritize their lives. Some people decided to find a different job or move to a different industry.
Some people are still getting unemployment benefits and want to take a little bit of extra time that they’ve never been able to have. When you work two or three part time jobs, you never really have time off.”Gabriel Marrero, owner, Tropicaleo
As you can imagine, this isn’t just a local issue
This reasoning fits with what Neil Irwin wrote in an April 16, 2021 The New York Times article entitled “Unemployment is High. Why Are Businesses Struggling to Hire?”
In short, he argued that:
“The restaurant industry faces a particular challenge. The sectors that have thrived during the pandemic have been on hiring binges, often paying higher wages than restaurants do. Amazon alone added 500,000 employees in 2020, with a wage floor of $15 an hour.
Companies like Walmart, Target and home-improvement and grocery chains have all been hiring aggressively with wages at or not far behind those levels…those with some in-demand skills—whether in construction or commercial truck driving—can do even better.”
In April 2021, leisure and hospitality wages in Alabama rose to a historic high of $14.17 per hour, according to the Alabama Department of Labor.
Once you factor in the costs of employment, such as transportation, childcare, meals out and the rest, you can see why some people would consider new paths in an economy brimming with more options than ever.
Federal unemployment assistance is about to end in Alabama
It’s worth noting that on May 10, 2021, Governor Kay Ivey announced that Alabama will stop participating in the federal pandemic unemployment compensation programs on June 19, 2021.
- Provided additional money on top of state unemployment benefits
- Provided benefits to people not normally included
- Extended benefits past when they would normally end
- And provided additional money to people with mixed earnings
She cited the continuing labor shortage in the face of a higher number of available jobs as one of the reasons for ending this assistance.
At that time, Alabama Department of Labor Secretary Fitzgerald Washington stated:
“We have more posted job ads now than we did in either February or March 2020. Ads for workers in the leisure and hospitality industry are up by 73%. Overall, ads are up by nearly 40%. There are plenty of opportunities available in multiple industries in Alabama.”
Also, after June 19, the requirement to be actively looking for work to be eligible for unemployment benefits comes back after a temporary hiatus due to the pandemic.
Slow population growth is putting a damper on Birmingham’s labor market
According to a June 8 report by Ty West in the Birmingham Business Journal, Birmingham is one of a number of cities around the country that’s particularly vulnerable to the labor shortage that’s hitting not just our fair city, but many places across the US.
The reasons he cites for our particular predicament? Slow population growth and net migration. To put it in perspective, he wrote:
“While Nashville is adding 55 people per day and Atlanta is adding 94, Birmingham added an average of one person per day in 2020.”
He argues that to get out of the current situation, Birmingham will need to focus on workforce development, which was already a priority in the years leading up to the pandemic, *and* attracting new people and talent to the area.
We know of three organizations working to bring people here and would love to know of others:
If you *are* working, wages are up
According to the Alabama Department of Labor, average weekly earnings in the state in April 2021 were at historic highs:
“Total private average weekly earnings rose to $968.19 in April, up $33.09 over the month, and $67.81 over the year.
Leisure and hospitality weekly earnings rose to $384.01 in April, up $23.17 over the month, and $54.58 over the year.
Hourly, total private earnings rose to $27.35, up $0.86 over the month, and $0.79 over the year.
Hourly, leisure and hospitality earnings rose to $14.17, up $0.45 over the month, and $0.94 over the year.
All wages quoted above represent historical highs.”
Meanwhile, there are even more new jobs coming to our area
In addition to the groups we mentioned above working to bring jobs to our area, we hear about businesses that are planning to bring new jobs here and new small businesses that are starting.
Just last week, we announced that Bill Smith, founder of Shipt and now Landing is bringing his new San Francisco-based biz to The Magic City, and along with it, 816 new full-time jobs and a built-in workforce development plan.
So where does this leave us?
Antiqua Cleggett of Central Six AlabamaWorks! said it’s really important for both potential workers and employers to understand how skills gained in one arena are transferable to another, and that technology is becoming more important in every field.
If you need help with your resume, applying for jobs, figuring out free training opportunities or anything related to getting back into the workforce, your local career center can help.
To sum up, Patrick J. Murphy, Ph.D., the Goodrich Chair of Entrepreneurship at UAB, explained:
“While many businesses have begun resuming normal operations and are ready to hire, many potential employees are not yet ready to snap back.
The fact is, businesses are reopening in a different socioeconomic reality than the one we were in when everything locked down in 2020.
It will take 6-12 months to balance out the supply-demand spread we are seeing right now in the general labor market.”
We’ll be keeping a close eye on how Birmingham’s labor market is shaping up over time.