Overall, the worker shortage may have more to do with a strong economy and a decrease in the cost of education. Both trends are excellent signs for clients in terms of saving for retirement. These trends may be hard for your clients to decipher and may be worthy of discussion at your next client meeting or phone call.
Where, oh, where did the retail workers go? Or the restaurant servers? Estimates are that there is a shortage of nearly a million retail jobs in 2021. How can the economy be heading toward recovery with so many folks out of work? It turns out that the story we hear about worker shortage is short-sighted, and may be the confluence of several trends, all pointing to your clients having an easier time saving for retirement. It's also notable that employers, like Target, who raised their wages and expanded employee benefits report no difficulty in hiring.
First, where did the retail workers go? According to some sources there are a missing 303,000 retail workers. According to others, there are 960,000. Which is true? The difference is key to part of the short-sighted story telling around the worker shortage.
An assessment of where these workers went needs to start with who they are. Retail workers are often college students or recent college grads, driven to work by a need for cash to pay for college or a shortage of jobs. While the enrollment numbers of college students dipped in 2020 and 2021, the numbers for grad students went up, by between 4.6 to 6.2% or nearly 125,000. That’s more than 1/3 of the missing 303,000 retail workers. The trend of returning to school should be seen as a favorable one, as it means higher salaries and the ability to save for retirement.
Adding to the absence of post-college age workers, the number of teens working during the summer as fallen by more than a million since July 2019. For those in the college years (18 to 19 years old) there was a 7.8% drop in summer employment. This trend of decreasing youth employment (replaced by internships and education) tracks other strong economies. This drop in youth employment explains some of the worker shortage as well as indicates a stronger economy on the horizon.
Additionally, changes in college tuition, which had been rising steadily each year, now may trend towards decreasing. Many schools are making structural changes that could reduce students’ costs, connect programs of study to workplace demand, and meet older students’ needs for retraining. This downward trend in tuition is partly driven by a decline in demand. Enrollment in college has been decreasing over the last decade from 20 million students to 17.5 million this year.Additionally, a drop in population caused by the 2008 recession may extend additional pressure on demand and decrease prices further. Decreasing college costs means less of a demand for part-time retail work by college students, and thus a decrease in those working retail.
Pandemic savings data supports this analysis. According to analysts “the number of Fidelity IRA accounts that received a contribution increased by 35% and the average contribution per account rose by 5%.... The number of new, traditional, Roth and Roth for Minor IRA accounts increased by 56% from 2019 to 2020. That’s in line with data from Charles Schwab, which reported a 50% increase in IRA openings during the first two months of 2021 over the first two months of 2020, a slightly different time period.” Additionally, a third of those with 401(k) accounts increased their savings rate in 2020.
Additional savings created by the pandemic, including paused gym memberships, savings from commuting or even just not buying lunch may also decrease seasonal retail workers. Many who work a holiday season in retail or food service do so to help pay for presents. With savings in the bank from a decreased cost of living, they now won’t need the added income.
Even more significantly, and perhaps lost in the pandemic news cycle, is information concerning those who worked more than one job. According to the Bureau of Labor Statistics, those who were working a full-time job plus a part time job decreased from 7.2% of the work force to 4.6%. The two areas where workers were most likely to have multiple jobs were in, you guessed it, food services and retail stores (both industries combined for a total of 31.2% of multiple job holders).
A particularly interesting detail may be that those with more than one job can leave their part-time worries behind thanks to the increase in the child tax credit, which now amounts to roughly $300 per child, or for a family with three children roughly $9,000, an amount potentially on par with the cost of childcare some workers may have been covering through weekend and night work. This data also explains both a shortage of workers as well as a stronger economy.
Back to those numbers about shortages in the retail industry, while the Bureau of Labor Statistics cite to a shortage of 303,000 workers, the Department of Labor estimates that there are about 965,000 open jobs in the industry. But not all of the job shortages are due to retail workers leaving. According to Coresight, an analytics group, there were a total of 4,500+ store openings in 2019, up from 3,737 in 2018. And in 2021, the rate is higher. That means there were already worker shortages going into the pandemic. A similar trend can be seen in restaurants, according to a study by Yelp. This trend also explains the shortage as well as indicates a strengthening economy.
Overall, the worker shortage may have more to do with a strong economy and a decrease in the cost of education, both excellent signs for clients in terms of saving for retirement. These trends may be hard for your clients to decipher and may be worthy of discussion with them at your next client meeting or phone call.
These articles are prepared for general purposes and are not intended to provide advice or encourage specific behavior. Before taking any action, Advisors and Plan Sponsors should consult with their compliance, finance and legal teams.
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