Employers of blue-collar workers are much more affected by labor shortages

It is not news that the US labor market is very tight. That is, with the unemployment rate near historic lows, employers are facing significant recruitment and retention difficulties. What is less known is that the labor market is tighter for blue-collar and manual services jobs than for the highly educated white-collar jobs. The exact opposite of prevailing trends in recent decades. As employers raise worker pay to attract talent, most of the wage acceleration is occurring in blue-collar and manual services jobs, where wage growth is already above prerecession rates. Wage growth for management and professional workers, which includes close to 40 percent of the workforce and most of total compensation, is accelerating more moderately, again, an almost unprecedented outcome in recent decades (Chart 1).  

  Chart 1 – Wage growth by occupation group, Private sector wages and salaries from the Employment Cost Index, annual rate

Source: Bureau of Labor Statistics and calculations by The Conference Board

The Conference Board Labor Shortages Solutions Survey provides additional detail on how companies are affected by the recent recruiting and retention difficulties. With blue-collar occupations facing some of the most severe labor shortages, it is not surprising that the effects of the labor crunch are being felt more severely by companies composed of mostly blue-collar workers (see Chart 2, in which most of the blue bars are larger than the corresponding white bars for each outcome). As part of the survey, we asked 225 business leaders, mostly HR practitioners, about the specific business outcomes that had occurred as a result of recruitment and/or retention difficulties.

Based on results, 85 percent of companies in “mostly blue-collar industries^[1]” reported recruiting difficulties versus 64 percent among companies in “mostly white-collar industries.” Further, almost a quarter (23 percent) of companies in mostly white-collar industries report having neither recruitment nor retention difficulties, whereas this is true for only 8 percent of companies in mostly blue-collar industries.

We find that companies that employ mostly blue-collar workers have been much more affected by labor shortages than mostly white-collar companies. For example, 37 percent of blue-collar-heavy companies reported a measurable adverse impact on the company’s bottom line (profitability) versus just 9 percent of white-collar-heavy companies reporting the same effect. As a result, employers of mostly blue-collar workers report being more active in pursuing solutions to labor shortages.

When compared to mostly white-collar companies, a much greater share of mostly blue-collar firms saw lowered morale and employee engagement and increased employee attrition. Blue-collar-heavy companies were also more likely to report candidates not showing up for scheduled interviews and a decreased candidate conversion rate. Not surprisingly, we find that 29 percent of mostly blue-collar companies have lowered output or turned down business due to lower capacity, consistent with the National Association of Manufacturers’ (NAM) finding that 28 percent of manufacturers have declined new business opportunities due to a lack of workers.^[2]

 Chart 2 - Business outcomes as a result of recruitment and/or retention difficulties