The Labour Market Paradox – Can Direct Sourcing Solve It?

The Current Labour Market Landscape

It is no secret that the Covid pandemic has not been ideal for the labour market. In 2020, around 255 million full-time jobs were lost worldwide, four times greater than the great recession. Furthermore, the US could see a loss of anywhere between 36 and 130 million full-time jobs.  

“While there are expectations that a robust economic recovery will occur in the second half of 2021 with the roll-out of vaccination against COVID-19, the global economy is still facing high levels of uncertainty, and there is a risk that the recovery will be uneven” International Labour Organisation 

The Labour Market Paradox

According to the Financial Times, even though millions of people remain unemployed, businesses worldwide can’t find enough people to hire. Companies such as Delta Airlines were forced to cancel 100 flights due to cabin crew shortage, and global fast-food chain McDonald’s resorted to paying people to show for an interview. There has been a notable rise in the number of open roles in the IT, Finance, Recreation and Travel sectors. 

There are three potential explanations for the puzzling shortages:  

  • Over-generous benefits – US unemployment benefits in some states are more than twice the minimum wage. In Europe, many countries also offered generous pandemic payments, such as a €350 weekly payment in Ireland to unemployed people.  
  • Fearful workers – while vaccine rollout has had a positive impact in the fight against covid many remain fearful of the virus, especially with the emergence of new strains such as delta and lambda. 
  • Reallocation of labour between industries – Many service businesses have seen many former employees move into different sectors over the last year and are not returning.  

How to solve it

While some of the causes of the labour market issues will solve themselves, government benefits are likely to be wound down by the end of the year, driving people back to employment. As the fear of covid dissipates, many more workers will come back to work, especially in service and customer-facing roles. However, sectors such as IT and finance are unlikely to benefit from this rebalancing. Organisations in these sectors will continue to struggle to find the required talent due to increasing demand and a labour supply that can’t keep up.  


Higher levels of automation may ultimately solve this labour supply problem. Recent advancements in automation have broad applications within the service sector, and the COVID-19 pandemic prompted many companies to accelerate their adoption of such technologies. However, labour markets may be unusually tight during the investment phase of the transition to higher levels of automation, as new investment demand is typically the forerunner of greater productive capacity. 

Gig Work

Many organisations will move to use gig workers on a project basis to plug their labour holes. The gig economy has seen rapid growth over the last 15 months.  

“People may return to the historical norm of having a portfolio of incomes rather than a single job.”  – Paul Donovan Chief Economist, UBS Global Wealth Management 

Direct Sourcing

While gig work will help businesses access talent, it can be challenging to procure talent in a timely manner. This is where direct sourcing can help. We believe that direct sourcing will help businesses navigate the war for talent. Direct sourcing gives you a more flexible and talent-centric model of engaging with contingent workers by creating a closer relationship between your organisations and the workers you need to get the job done. Direct sourcing’s technology-first approach to engaging contingent talent ensures organisations have an on-demand talent pool. At CXC, we help companies‘ source, manage, engage, and retain top-tier contractor talent with a dedicated recruiting team to source workers using your brand.

Find out more about CXC’s Direct Sourcing Solutions

This blog post references the world economic forum article here 

Contact Us