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What is a Labor Shortage?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 13 November 2016
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Labor shortages are situations in which the pool of trained laborers for a given task is less than the current level of demand for people with those skill sets. Sometimes referred to as an insufficiency in the labor force, this type of condition can exist within a specific company, a community, or throughout a nation. The only solution to a labor shortage is to offer incentives for qualified candidates to train for the necessary tasks, enter the workforce, and thus restore the balance between the supply and demand for those particular skills.

A labor shortage often comes about when significant numbers of qualified workers are leaving the labor force, either by retiring or by going into a difference profession or field. In order to offset those losses, employers will take steps to find people who are capable of mastering those same tasks and are willing to enter the workforce and fill the gap left by the departing employees. In order to accomplish this task, employers often find it necessary to offer competitive incentives that attract employees and motivate them to stay with the company over the long term.

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Ebbs and flows in the workforce due to retirement and changes in profession are not the only reasons for a labor shortage. Natural disasters sometimes create situations where an area is left without an adequate pool of laborers for a period of time. When this is the case, the goal is to attract willing workers with the right skill sets to relocate to the area, and fill the demand for qualified workers. If the attempt is unsuccessful, employers go out of business and the economy is adversely affected over the long term.

It is possible for a labor shortage to develop in just about any type of industry. Depending on the location, some communities suffer from a lack of professional services, such as trained medical personnel. Religious organizations may find themselves unable to attract enough qualified individuals to serve in various capacities at an organization headquarters, or to serve as clergy in local congregations. Industries that are growing at rapid rates may experience temporary shortages as steps are taken to train new laborers to meet the increasing demand.

In any situation where a labor shortage exists, two basic options are open. The first is to use automation to minimize the number of laborers required to meet the market-place demand, an option that can be expensive at the onset and virtually impossible in some industries. The second and most common approach is to offer competitive wages and benefits to attract people who can train for the type of labor needed, and continue to offer incentives that keep those individuals in the labor force over the long term.

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