Tag: How the Labor Shortage is Impacting the Supply Chain

As the COVID-19 pandemic continues to present challenges to the US economy, labor shortages are contributing to the ongoing supply chain disruptions facing many industries. Companies are finding it difficult to find the right candidates for the jobs they’re looking to fill while millions of Americans are quitting their jobs or threatening to strike or walking out for better working conditions.

One industry in particular affected by the labor shortages brought on by COVID-19 is the   shipping and warehousing industry. At the Port of Los Angeles, for example, there aren’t enough workers to unload goods from ships, causing shipping delays across the US. Additionally, a shortage of truck drivers is contributing to the problem. Ninety percent of leaders who spoke to the U.S. Chamber of Commerce said labor shortages are impacting economic growth in some areas.

To help remedy the problem, President Joe Biden announced the Port of Los Angeles will be open 24/7, with logistics companies FedEx and UPS making similar pledges. Another potential solution is increasing immigration through offering more worker visas in order to bring in more workers to the country.

Difficulty Hiring During COVID-19: Labor & Visa Shortages

US Chamber of Commerce Chief Policy Officer Neil Bradley told CNN Business that immigration is one of the key ways to solve the labor shortage. However, despite immigration’s potential to add additional employees to the workforce, the number of immigrants US employers can hire has remained flat. Additionally, while there are options for workers with a high level of education, there aren’t as many visa options for employers needing seasonal or temporary worker visas or workers in many service industry roles.

The Chamber of Commerce requested Congress and the White House to double the cap on employment-based visas, specifically to double H-1B temporary worker visas and H-2B visas for seasonal workers.

“When we see these workforce gaps in the nonprofessional roles for instance, US companies are not typically able to turn to the US immigration system to help fill that need,”  said Caroline Tang, immigration shareholder in the Austin office of Ogletree Deakins.  “Across the board, there’s just a tighter labor market now in terms of candidate availability, people willing to do certain types of work or wanting to come back to work in environments where they will be more physically closer to other people, which oftentimes are the roles that really heavily impact our supply chain.”

Also contributing to the ongoing supply chain disruptions is the labor shortage that’s impacting  a wide variety of industries. Some of the factors impacting the labor market during the COVID-19 pandemic include the demand for higher wages as the prices for goods and services rises, as well as better benefits and protections for workers. Additionally, some workers aren’t able to come back to work because they’re taking care of family members sick with COVID-19, or are sick with the virus themselves or childcare problems. Many workers are also leaving their jobs in record numbers, and are delaying coming back to work. For example, in August, 4.3 million Americans quit their jobs.

“I think everyone has been impacted by the Great Resignation as people are calling it. And certainly, that has impacted a lot of the industries that impact our supply chain and a lot of areas in the US,” Ms. Tang said.

Specifically, Ms. Tang said the semiconductor industry in particular is impacted by the labor and supply chain shortages. The shortage is expected to last until 2022 and beyond, and impacts a variety of industries from the automotive industry to appliances and toothbrushes.

“I work extensively in the semiconductor industry. They have definitely been impacted by pandemic related supply chain issues, which we can tell from the cost of automotive prices here in the US since all these cars rely on microprocessors,” she said.

Even though many of the supply and labor shortage issues are expected to last for many years to come, companies can take steps to help mitigate some of the problems they’re facing, Ms. Tang said.

US Company Workers Offshore Solve Some of the Visa Quota Issues

“For the companies that have international offices, they have a wider footprint and have some options with staffing their workers in other countries. So, for instance where companies hire some college graduates from the US who are not able to get one of those H1-B visas, they might potentially work in the person’s home country where they don’t need a visa to work. And that way they can keep that person working on the same project and still contributing research and development efforts for that company,” Ms. Tang said.

If a company doesn’t have international offices, handling visa shortages and delays may be a little harder.

“If a company doesn’t have an international footprint, it’s hard. I’ve been talking to employers that say, ‘Hey, we are just sort of living with the fact that we might only have these employees on our payroll for two to three years because of their visa limitations.’ We need to be considering what we’re going to do about succession planning and making sure that we diversify our employee population as much as possible. I think it’s definitely requiring a lot of creativity from employers,” Ms. Tang said.

How US Immigration Policy Affects the Labor Shortage 

One potential method for addressing labor shortages is to alter current U.S. immigration policy. Despite the ongoing need for workers in all industries, visa caps have remained relatively static, limiting the number of foreign nationals allowed to work in the U.S. long-term. Changes to such policies would be a considerable boon for the supply chain especially, allowing companies to quickly fill roles left empty by the pandemic.

The most likely target for change might be the H-1B visa, which allows employers to hire foreign workers for positions that require particular skills or specialized knowledge. “The annual quota on H-1B visa numbers – it would certainly be helpful to increase that quota,” said Ms. Tang. “That 85,000 number has been static for many, many years. It’s not a fluctuating number based on any sort of economic conditions or economic or supply or demand. So, I certainly think it would be beneficial for the government to have some sort of system where that quota number can have a fluctuating number depending on our economic conditions.”

How Does US Immigration Policy Impact the US’ Supply Chain Woes?

Of course, changes to H-1B policy intended for highly skilled employees, are only helpful to a certain point. Some sectors of the U.S. economy are in dire need of employees for non-professional roles, such as the retail and service industries, where highly specialized knowledge is not as critical. According to the Bureau of Labor Statistics (BLS), foreign-born workers were more likely than native-born workers to be employed in service occupations; natural resources, construction, and maintenance occupations; and production, transportation, and material moving occupations. Companies often utilize the H-2B visa to fill these gaps; again, however, logistical considerations and static caps stand in the way. In May, the BLS released updated statistic revealing that employment fell by 2.7 million among the foreign born from 2019 to 2020, a decline of 9.8 percent.

Ms. Tang points to manufacturing as a key example of an industry for which immigration reform would be a windfall. “For the non-professional roles, I think there is certainly an area where perhaps the government needs to create some sort of a work permit to fill these specific demands that our manufacturers are seeing in that area, with respect to the need to staff their manufacturing facilities,” she said. “A visa that’s available that’s for seasonal or peak load work, but again, there’s a quota on that visa as well.”

Per the BIS, the demographic composition of the foreign-born labor force differs from the native-born US labor force. In 2020, men accounted for 57.3 percent of the foreign-born labor force, compared with 52.1 percent of the native-born labor force. By age, the proportion of the foreign-born labor force made up of 25- to 54-year-olds (71.8 percent) was higher than for the native-born labor force (62.2 percent). Labor force participation is typically highest among persons in the 25-54 age bracket.

“It can be very difficult to get the perspective of timing, and oftentimes, employers who are trying to pursue this H-2B visa, if the pursuit of that visa is unsuccessful and they miss the quota, then they’re out of luck with respect to being able to staff the staff in these areas that really require someone to be doing the frontline work.”

In considering how to alter U.S. immigration practices to address supply chain woes, it is also vital that American workers are not forgotten. Policy changes must take into account a variety of factors to ensure a fair playing field. “There have been some proposals in the past, that number be moved up or down based on for instance, the unemployment rate in the United States, so that you were not disadvantaging US workers,” said Ms. Tang. “But in years when unemployment is extremely low, and clearly we are having labor shortage issues, perhaps we can increase the quota numbers there for the H-1B.”

Aging Workforce and the US Losing its Ability to Attract and Keep Top Talent – Is Immigration Reform a Solution?

The US Census Bureau (USCB) projects that one in every five US residents will be older than age 65, by 2030. Additionally, by 2030 the USCB projects that net international migration will overtake birthrate as the primary driver of population growth in the United States, a first for the US. Accordingly, US will have to rely more on foreign workers as our workforce ages. If the labor shortage continues, the Chamber of Commerce said it’s possible the shortage will pressure lawmakers to act to raise the cap on workers. 

Additionally, bringing in more foreign workers in the US could help boost the economy, as foreign workers tend to be more focused in the service industries and more likely to be of prime workforce age, can fill job shortages and create additional jobs to alleviate the strain on the supply chain. Who wants to live in a country with shortages of basic supplies and poor infrastructure, if they have a choice to live elsewhere?  If lawmakers don’t act, the US risks losing talent and entrepreneurs to other countries that have more flexible immigration policies.

“I think we’re going to see some brain drain from the US to other countries that are perceived as having more favorable immigration systems and policies – for instance, Canada,” Ms. Tang said. Entrepreneurs need workers for their enterprises and have global mobility, and the US’ worker shortage for both service workers and specialized high skilled workers, limits the US’ ability to compete in the world marketplace.

For more articles on immigration and hiring, visit the NLR Labor & Employment section.