Staffing Shortage or Product Supply Shortage. Are we seeing the Domino Effect Already in Businesses?

I was cruising through several Facebook posts last night, just before I went to bed. I came across one post, on a local community page, that questioned the status of a very popular fast-food restaurant since the dining room had been closed again! I immediately thought about my last blog post, in which I mentioned the 15–20-year-old workers who were going back to school now, creating a labor shortage (especially in the food service industry.) Based on the comments to the post, other things were to blame for the closure; or so it appeared on the surface to those who were commenting. Several did mention the staffing shortage, and some mentioned COVID, but many more started talking about the shrinking menu. At that location, they were out of wraps and salads. At another location, milkshakes were limited (and that is one of their main products) and the side condiments were nonexistent. Someone else verified that they had a similar experience at a completely different location.

What was happening? Of all those who commented on the post, there was one person who worked at one of that restaurant’s locations. The restaurant employee stated that the distribution centers didn’t have the supplies to provide to the restaurant and in addition, the restaurant currently can’t get many of the items that they typically feature on the menu with many more items that are quickly disappearing.

Was this a product supply shortage or was it a labor shortage that impacted the product supply chain?

Remember in the last blog, I mentioned the Domino Effect? I wouldn’t be surprised if we see things like this happen more frequently. This is different than the famous 2020 Toilet Paper Crisis that swept across America. That shortage was caused by panic and over-buying. This product shortage happened over time, and as a result of many other variables. If you don’t have the people to produce the product, and/or there isn’t a distributor to take the product to the retailer, then the retailer won’t have the product to sell to the customer. The supply decreases while demand increases, which either drives up the price of the product, or the product merely disappears from the menu (or the store shelves, or the online-shop.)

I frequently see comments from some people who express the notion that if businesses would pay more, they would attract more labor. That is partially true. However, the complete truth isn’t that simple, nor is it always feasible. I don’t want to editorialize here. I’m not expressing my personal opinion about labor rates, but want to share some facts. There are all types of jobs which require various levels of training, experience, and education. Not every job requires the skill level necessary to pay each person $40k/year, and not every business can afford to pay salaries in that range when they cannot receive enough return for that expense. So just offering more money will not necessarily fix the labor shortage crisis we are facing. It is a complex problem, and it has complex cyclical effects on the economy as a whole.

If enough time passes, and this trend continues, many of the companies that are seeking labor, will cease to exist, or find alternative solutions, like automating as much as they can to decrease the need for those workers.

If the retailer doesn’t have a product to sell, or labor to sell it, they aren’t generating revenue. If they can’t generate revenue, they can’t pay labor. If the retailer doesn’t exist, the supplier doesn’t have anyone to distribute product to. If the distributor doesn’t have businesses to sell the products to, they also won’t have the revenue to pay labor. It goes on and on and on.

There will come a day when unemployment assistance will dry up. The job market will have been reduced and finding a job will be extremely difficult. For many, it has already been difficult. As a child, my mother always said, “You should be careful what you wish for, it may just come true.” I am not suggesting that anyone is wishing for what is happening to our businesses, but the course that we are taking, has foreseeable consequences and just may lead to the inevitable. If we don’t do something about the labor shortages now, we will have to deal with job shortages, sooner, rather than later.