America’s Labor Shortage Is a Leadership Shortage
U.S. companies are still struggling to find and retain the skilled workers they need. Roles stay open for long periods. Teams are doing more work with fewer people. Plans to expand operations slow down due to the lack of qualified workers in place.
This can be easily presented as a hiring problem. It is, in many ways. But hiring is just one part of the problem. Companies also need leaders who can keep people engaged, help employees grow, and give teams a reason to stay.
That’s where the leadership shortage and the labor shortage meet. When managers are stretched, unprepared, or unsupported, problems with the workforce are harder to solve. Employees lose trust, talent with promise walks away, and companies find themselves hiring for the same open positions again and again.
Why Hiring Alone Will Not Solve the Labor Shortage
At the national level, the U.S. labor market is not collapsing, and the economy remains close to full employment. According to the Bureau of Labor Statistics, total nonfarm payroll employment, seasonally adjusted, increased by 172,000 in May 2026, and the unemployment rate held at 4.3 percent. The labor force participation rate was unchanged at 61.8 percent. There were 7.3 million unemployed workers. This is not a story of high unemployment.
And even with those gains, many employers, including small businesses, are still struggling to fill open positions. They had about 7.6 million job vacancies in April, but made about 5.1 million hires. The gap shows that available jobs don’t always turn into successful hires.
Several factors are contributing to the problem. Older, more experienced workers are vacating full-time work. There are some people who are not in the labor force because of caregiving, health, or family responsibilities. Immigration patterns also shape labor availability and the supply of immigrant workers, especially in specific industries such as advanced manufacturing that rely on hard-to-fill or specialized positions.
Worker expectations have shifted, too. There are still plenty of American workers willing to work, but they’re being more selective about where they stay. Pay is important, and some employers have moved to raise wages, but so are flexibility, stability, growth, working conditions, and the quality of the day-to-day management.
Then there’s the skills gap. The World Economic Forum’s Future of Jobs Report 2025 found that 63% of employers view skill gaps as a major obstacle to business transformation through 2030. The same report estimates that 39% of workers’ existing skills will change or become obsolete between 2025 and 2030.
That’s why just hiring isn’t enough. Companies need to develop the people they have, too. Onboarding needs to be stronger for less-experienced employees, coupled with clearer expectations, consistent feedback, and managers who can help them develop. Absent that support, employers may continue to draw from the labor supply for talent they could have developed internally.
What Is Driving the Labor Shortage
Understanding America’s labor shortage starts with a simple definition: a labor shortage occurs when there are more job openings than qualified, available workers to fill them. That’s been an ongoing issue for U.S. employers in recent years, and sustained shortages can weigh on economic growth.
The pressure was especially acute in the post-pandemic period. A tight labor market and high demand pushed job openings in the U.S. above 10 million in July 2021. The job openings rate was 5.3 percent in January 2024. Openings dropped to around 7.6 million in April 2026, but employers hired only about 5.1 million.
Several things are contributing to the shortage.
- As in other advanced economies, the U.S. population is growing older, with the population age 65 and older growing almost five times as fast as the total population from 1920 to 2020.
- In 2023, the number of older workers retiring hit a record high.
- Labor participation rates have fallen from about 67 percent in 2001 to 61.8 percent in May 2026, below pre-pandemic levels.
- In 2020, 58 percent of working parents left jobs because of childcare issues.
- In 2021, 79 percent of women who left the workforce cited family care.
- Immigration patterns influence the supply of immigrant labor in labor-intensive fields such as food service, where specialized, seasonal, or difficult-to-fill jobs exist.
- Workers are looking for greater pay, flexibility, stability, growth, and improved day-to-day management.
- Skill gaps are still the biggest hurdle, with 63 percent of employers saying they could constrain business transformation through 2030.
- Technology, artificial intelligence, and automation can help ease labor pressures, but companies still need people who can learn to use new tools and deal with changing work.
How Companies Can Respond to the Leadership Shortage
It’s not simply a matter of finding more workers to fill the labor shortage. Companies need leaders who can retain workers, develop skills, and make work more sustainable for the people already in the business.
The latest data shows why this is important. Gallup’s 2026 State of the Global Workplace report found that global employee engagement dropped to 20 percent in 2025, the lowest level since 2020. Manager engagement also dropped from 27 percent in 2024 to 22 percent in 2025.
Leadership pipelines are also under pressure. In 2025, DDI found that just 20 percent of CHROs said their leaders were ready to step into key business roles. It also determined that slightly more than half of vital leadership positions could be immediately filled by internal candidates.
The next leadership pipeline might be narrower, too. A Robert Walters survey in the U.K. revealed that 52% of Gen Z professionals do not want to become middle managers, and 72% prefer a career path of individual contributor. That finding isn’t unique to the U.S., but it suggests a larger worry for employers who rely on younger workers to move into management.
This problem is already apparent in some sectors. Workforce shortages go beyond frontline roles in healthcare, as hospitals and health systems struggle to fill director, executive, and operational leadership roles, Cross Country Search reported in 2026. Other sectors are feeling the same pressure.
Companies can respond in several ways.
- Train managers to retain people
Managers need practical training in areas such as feedback, communication, time management, coaching, and employee development. That’s particularly important when only 8 percent of managers say their company’s leadership development efforts are fully effective.
- Build talent from within
Companies can’t simply hire from outside to fill their leadership ranks. TalentLMS found that 43 percent of managers said their companies hire new managers more often than they develop them internally.
- Strengthen succession planning
Leadership gaps get worse if companies don’t know who is prepared for key positions. Employers should spot future leaders earlier and develop them through mentoring, stretch assignments, and clear development plans, supported by executive recruiters when a senior role has to be filled from outside.
- Support managers under pressure
DDI found 71 percent of leaders said they experienced more stress, and 40 percent said they considered stepping down from their leadership roles to protect their well-being. Companies need to look at the workloads and work hours managers carry, the spans of control they have, and the support they get.
- Improve leadership development
Leadership training is not just for senior executives. TalentLMS found that 45 percent of managers say their company does not do enough to develop future leaders, pointing to a larger development gap.
- Rebuild trust in leadership
When managers or senior leaders are not trusted, employees are less likely to stay. Companies need leaders who communicate clearly, who listen to their employees, who act consistently, and who deliver on their promises.
- Make leadership more attractive to younger workers
Management is high stress and low reward, and if younger workers feel that way, the next leadership pipeline may be smaller. A Robert Walters survey found that 52 percent of Gen Z professionals in the U.K. didn’t want to be middle managers, and 72 percent wanted to be on an individual contributor career path.
- Use flexibility as a retention tool
Flexible schedules, competitive benefits, and wellness support can help reduce burnout and make leadership roles more sustainable. These policies are most effective when managers are trained to apply them fairly and consistently.
- Use technology to support leaders, not replace them
Technology and automation can assist in reducing repetitive work and easing hiring pressure. But companies still need leaders to help employees adopt new tools, evolve their roles, and stay engaged during change.
- Treat retention as a leadership metric
More people won’t fix the shortage when folks keep quitting. Leaders should monitor attrition, listen to employee grievances, and hold managers accountable for developing and retaining talent.
