Serious labour shortages are being experienced in developed countries, notably in the US, the eurozone and the UK. There are several reasons for this. Globally, many employees left formal work in what’s known as the Great Resignation while Covid-19 government grants resulted in employees withdrawing from the labour market. Countries have started scaling back on these unemployment benefits, but experts predict that the shortages won’t end anytime soon. In the UK, Brexit impeded flows of migrant workers so to mitigate its labour shortage problem, the government is importing truck drivers and food workers through a temporary visa plan. They are issuing 5,000 temporary visas to foreign drivers but they are faced with a shortfall of around 90,000. However, there is no guarantee that drivers or workers from the EU will find it worthwhile to actually take up these temporary visas.
Why is it important?
These labour shortages are having a detrimental effect on developed economies, bewildering companies who never saw this coming, compounding pandemic-related supply chain problems, curtailing economic growth and, in some instances, boosting wages. Economists argue that wage increases are contributing to worries over inflation and in order for businesses to protect profitability, they will have to pass on the additional costs to the consumer, adding to inflationary pressures. But there is a school of thought that suggests these labour shortages are resulting in an increase in productivity. Increased productivity is about doing more with fewer resources largely through an increased adoption of digital technologies and automation.
What can businesses do about it?
One option is for businesses to focus on accelerating automation and digital transformation to mitigate the effects of fewer suitable staff members. Another is for businesses to look further afield for qualified employees, bearing in mind that many workers will be seeking long-term prospects. While the labour market in South Africa is markedly different from developed nations, businesses will not be unscathed. Already compromised supply chains will be further disrupted, so companies should take note of the global picture and wherever possible, reduce supply chain risk, and look for local options. Importers especially should take note of the situation and plan accordingly.
By Faeeza Khan
Image credit: Krys Amon