Kent Mahoney, executive vice president North America with Proxima, discusses the hurdles that businesses are facing today in the form of severe labor shortages and rising wages.

There’s a marked shortage of labor across business sectors, especially in lower-paid jobs, Mahoney says. He attributes at least part of that trend to continued federal assistance in the form of extended unemployment benefits, which serve as a disincentive for many to reenter the workforce. Concerns about the safety of the workplace as the pandemic slowly abates are also a factor. When the payments run out, however, expect a flood of applicants, he says. But with companies already taking steps to counteract the impact of fewer workers, fewer jobs might be available for those seeking employment.

Companies for which a high level of customer service is vital are raising wages to attract people back to work. But others, especially in the manufacturing and warehousing sectors, are opting for robotics and other types of automation that reduce their need for human labor. The first quarter of this year saw a 20% year-over-year increase in the sale of industrial robotics, Mahoney notes.

Some U.S. manufacturers are planning to bring back production that had been offshored in prior years. In theory, that trend should provide new opportunities for American job seekers, although automation will curb the need for large numbers of humans on the factory floor. Companies considering such investments are in the “wild optimism” phase, Mahoney says, and will likely ramp up their use of automation at a slower rate than many have predicted.

Businesses are also grappling with rising costs in other areas of the supply chain, including raw materials, packaging and shipping. Such increases are forcing them to bring procurement practices into “sharp focus.”