Location is Everything
For several reasons, manufacturers of all sizes are taking a hard look at location – both where they produce and where their supplies are located. Recent upheaval and supply chain issues, including the COVID-19 pandemic and trade disputes, have driven home the point for companies that it is irresponsible to maintain just one point of production far away from their consumer base. In addition, rising labor costs in China and other parts of Asia, when coupled with the economic power of the U.S. consumer, are encouraging manufacturers to rethink their conventional goods production strategy.
Of course, the issue of relocating production closer to home dovetails with another high-profile challenge: hiring difficulties in the USA and other developed nations.
Chnging Workforce Demographics
Apart from the wage angle, hiring difficulties have also led many businesses to expand their horizons when it comes to recruitment considerations, which includes lowering their standards in terms of qualifications and experience. Teenagers are now filling an essential gap for businesses across the U.S. who are struggling with a labor shortage. In May 2021, more than 22% of teens ages 16-19 had a job, the highest level since 2018, according to the Bureau of Labor Statistics.
Companies and other employers are also beginning to introduce phased-retirement and part-time work opportunities. Americans’ increased longevity, coupled with the need to finance a growing share of their care, are significant factors driving older adults to delay retirement and remain in the labor force. While the U.S. workforce is expected to grow at just 0.5% over the next decade, adults over age 65 represent the fastest-growing segment. By utilizing their potential, companies are able to draw on several other benefits, such as retaining skilled workers for longer, and enabling them to pass on key institutional knowledge to their younger colleagues.
Looking elsewhere for workers will also result in many companies opting to import workers from overseas in order to resolve hiring problems and offset the increasing wage and product costs driven by current inflation. This may however be bad news for American talent, as the presence of foreign guest workers can depress wages and conditions in the sectors that employ them, argued Kent Wong, director of the University of California, Los Angeles Labor Center and former staff attorney for the Service Employees International Union. “Historically, employers have pushed for relaxing visas and relaxing immigration policies in order to maintain a low-wage workforce,” he said.
Global businesses that have established connections and an existing pipeline of migration workers will enjoy far greater flexibility in their hiring process. During 2020, the COVID-19 pandemic had a significant effect on immigration and visas, fueling calls for lawmakers to allow for additional H-2B visas, those allocated to temporary seasonal workers in non-agricultural jobs, such as hospitality, landscaping, food service, and processing.
Perhaps unsurprisingly, the unemployment rate for leisure and hospitality workers, while shrinking, was still the highest of all industries in the BLS May jobs report, at 10.1%. In a June 21 report, Goldman Sachs economics researchers wrote: “We expect that the collapse in visa issuance during the pandemic will reduce the labor force for the next few years.” That collapse reduced the labor force by 750,000 people, with 450,000 of those stemming from a drop in temporary worker visas and 300,000 from immigrant visas. “Since the loss in immigration in 2020 won’t be offset by higher immigration going forward, most of this drag will persist,” they continued.
In response, the U.S. Chamber of Commerce has advocated expanding legal immigration and access to worker visas by doubling the annual H-2B visa quota and introducing a permanent exemption for returning workers, among other measures. While many agree that more worker visas are generally beneficial to the economy, it may not be a straightforward solution.
“The labor supply everywhere is disrupted,” said Abigail Wozniak, a labor economist at the Federal Reserve Bank of Minneapolis. “It might make sense on paper to open the doors to more foreign workers, but these disruptions are happening in the individuals’ home countries as well, matching the right employers with the right employees takes time, and employers who aren’t accustomed to the rules of various worker visa programs are unlikely to adopt them suddenly.”