A ‘blue-collar boomerang’ is coming—but it’s still not enough to solve the labor shortage

After bouncing back from the onset of the COVID-19 pandemic, the U.S. labor market has been incredibly tight—especially in blue-collar industries where the number of open jobs far exceeds the number of available workers. 

But that may be shifting as companies right-size their workforces. A number of experts predicted that, unlike most previous U.S. recessions, the expected downturn in 2023 could start with white-collar layoffs. Many blue-collar workers took on low-level white-collar jobs such as customer service and administrative roles during the pandemic—largely because many didn’t want to put their health at risk doing in-person work. That meant blue-collar jobs that traditionally would have been consistent hires really weren’t filled. 

“Bigger companies—in particular technology, finance—hired a lot of jobs that had the flexibility to work from home during the pandemic, and that pendulum is starting to swing back the other way,” Dave Gilbertson, vice president at UKG, noted Tuesday during a labor market briefing. 

“Now, all of a sudden, a lot of those jobs are either not as great as they seemed or those jobs are going away…especially in the technology and finance sectors,” Gilbertson says. “As that happens, there is a blue-collar boomerang that comes right back because the blue-collar industries have been desperate to hire over the past couple of years.”

With the onset of the recent tech and finance layoffs, those workers who fled their blue-collar roles may start to return. Now that doesn’t mean that all white-collar employees who were laid off are going to take on blue-collar roles. Executives, financial professionals, and engineers, for example, likely won’t leave the industry—they’ll simply find open jobs at other employers. 

It’s the workers in the front-line, white-collar roles such as customer support, early career coordinator jobs, and administrative roles that will likely be part of this expected “blue-collar boomerang” over the next six months, Gilbertson tells Fortune. In many cases, these types of roles were over-hired by technology companies in 2020-21 and are now the first to be let go. 

“The profile of those individuals has typically been folks that worked in retail or restaurants or skilled nursing facilities that were attracted by higher pay, greater flexibility, and the ability to work from home,” Gilbertson says. “As those jobs start contracting, there is a likelihood that those employees will boomerang back to the industries in which they have experience that still have plentiful jobs available, as those blue-collar industries generally were not able to over-hire during the pandemic.”

This boomerang will likely be good news for the U.S. economy, Gilbertson says, noting that it will help reduce tightness seen in the blue-collar sectors of the labor market. But it likely won’t solve the long-term labor shortage issues that stem from the fact that the U.S. population is aging and experiencing a declining birth rate. 

“My fundamental contention about this labor market is that we have got a demographic issue, not a pandemic issue. This is not going to get better as the pandemic subsides,” Gilbertson says. “We, pure and simple, don’t have enough people to work the jobs that are available.”

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