As US businesses begin to emerge from Covid, many are now facing a labor shortage crisis. After nearly 18 months of being locked down and vaccination rates increase, Americans are heading out in droves to their favorite restaurants, bars, and retail establishments. While this is a positive sign, it’s presenting a big problem for businesses across the country as they struggle to keep up with the surge in demand.
According to a May 6th, 2021 Department of Labor Report, 16.2 million are claiming unemployment benefits. Not all news is negative. April’s ADP payroll report states that 742,000 jobs had been created. iCIMS’ April report indicates that job openings are up 22%, hiring is up 18%, and job applications have decreased by 23%.
Some economists are attributing the labor shortage to the federal government’s expanded unemployment benefits of $300. As we hear about positive trends in the job market, frustrated business owners are left wondering if the federal government has gone too far with unemployment assistance programs. Are capable Americans content sitting at home collecting unemployment than finding work?
Doing the Math
While many restaurant and retail establishments employ high school and college students, most are staffed by adults outside of those demographics. The United States Census Bureau study indicates that these low-skilled workers are younger, less likely to have a college degree, and live in poverty. According to a report by Data USA, the average salary for restaurant workers is $22,426.
While the $300 in additional benefits was instituted at the start of the pandemic, is it still necessary as the economy comes roaring back to life?
At $45,188 or $40,976 in annualized benefits for Kentucky and Kansas, what would motivate anyone to find work until benefits expire, given current pay in these low-skilled jobs?
Is An Uprising Happening?
On March 4th of this year, Tech Talks published an article on How AI can help SMBs and workers make the $15 minimum wage transition. The current administration’s push to raise the minimum wage fell flat on March 5th. When presented with the dichotomy of not working or working, most will go with the former when the pay is significantly higher.
Two ways out of this conundrum: reduce unemployment benefits or raise the minimum wage. It’s not an easy answer as there are many complexities involved like virus concerns, access to childcare, social unrest, etc. This comes at a time when America is getting back on its feet. Many businesses will not service their clientele as we head into the busy spring and summer months.
It’s not just restaurants and retail. We see staffing issues in the manufacturing and supply chain arenas. If not addressed, this labor issue can lead to higher prices for consumers, product shortages, or worse, the businesses that were lucky enough to survive Covid will be forced to shut down.
Are AI-Driven Platforms the Answer?
Talk to any small to the mid-size business owner, and they’ll say their biggest expense is labor. Oftentimes, this represents 20-30 percent of their gross earnings. According to JP Morgan Chase, outside of the big brands like Walmart, McDonald’s, and Amazon, these fearless entrepreneurs represent nearly 99 percent of America’s 28.7 million firms.
Artificial Intelligence is the ability for a computer to think and act like a human, which has become more prominent in recent years. Businesses accelerated their rate of technological adoption to survive during the pandemic. AI-driven platforms are proving to be adequate replacements for repetitive tasks that can easily be automated:
| Human Task | AI-Driven Technologies |
| Cashier | AI-powered overhead cameras enable one to shop and leave the store without having to pay a cashier. Customer is then billed later for their purchases. |
| Cook | AI-powered fry cook robot that works faster, more accurately than a human |
| Waitress | AI-driven digital menus via QR code where customers are presented with ‘Amazon-like’ menu recommendations based on one’s favorite food and drink items. |
AI will not replace the need for humans in these lines of work. It can, however, significantly reduce the need for labor. Consider a business that would need 5 workers in each of these situations. With properly placed AI platforms, the need for these types of employees can be reduced by as much as 60-70 percent.
A full-time employee paid a minimum wage salary will earn $600/$2400 in a given week/month. Multiply this by 3 employees, and your labor costs total $7,200 a month plus benefits. Many of these AI tools that can help drive top, and bottom-line growth are a fraction of your labor expense.
What’s Next?
Labor Shortage + Higher Wages = Inflationary Pressures
There’s no end to the labor uprising dilemma. Businesses will need to turn to AI-driven automation to remain competitive to keep both labor and prices in check.
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