Solving the labor shortage paradox through higher salaries, flexibility and internal mobility
There is no doubt that we are headed toward an inflection point in what has been a perplexing labor market. The COVID-19 pandemic ushered in an unprecedented spike in unemployment to levels not seen in over seventy years. Yet despite improved economic optimism – marked by a glut of available jobs and companies eager to hire – unemployment continues to remain high.
With more than seven million Americans set to potentially lose their pandemic-related unemployment aid in early September, competition for talent could be fierce in the coming months, although the spread of the Delta variant may continue to result in workers delaying their return to the labor force. Further complicating matters is the ever-widening skills gap across the entire workforce and a disconnect between employers and employees regarding which skills are most in demand.
On the plus side for workers, this talent shortage has resulted in employers offering increased salaries to entice individuals back into the workforce, although businesses themselves may be struggling with how to determine the right salary to offer in an uncertain and constantly evolving labor market.
Conversely, as recruiting new talent has become increasingly more challenging and expensive, and with no guarantee that unemployment benefits may stop – or that unemployed individuals will rush back to the workforce en masse if they do – organizations may need to instead recruit from within and prioritize reskilling current employees to move them into roles they are struggling to fill with new hires.
First, we must try to get a better understanding of why people haven’t returned to work in larger numbers in the first place. While blame was originally placed on extended unemployment benefits, recent evidence has shown that the reasons are more nuanced, as workers haven’t re-entered the workforce even in states where benefits have ended.
In reality, the labor shortage is likely due to a complex mix of parents facing uncertain childcare responsibilities, fear of returning to public-facing work because of the Delta variant – especially if the wage on offer is low – and individuals simply taking time to reevaluate their career trajectory and plot next steps.
Yet demand for workers has continued to surge. In their recent Career Mobility Outlook survey, Randstad RiseSmart found that 92% of employers are planning on hiring in the next three months, forcing businesses to get creative and explore new ways to lure workers back. The most obvious solution is pay hikes and bonuses, and Bloomberg recently reported that corporations are currently offering the biggest pay increases since the 1980s.
Just as data analytics should shape the post-pandemic hiring strategy of every organization, an ongoing and in-depth analysis of current market and compensation data is the only way to ensure that your organizations’ compensation package is competitive to make sure you won’t lose out on the best talent.
However, given surging inflation, simply increasing salaries may not be enough to recruit the best talent. My colleague Mike Smith, global CEO of Randstad Sourceright, says flexibility is a key component that must be paired with improved compensation.
“With federal unemployment benefits set to expire, employers should embrace flexibility to entice unemployed individuals back into the labor force,” said Smith. “In addition to improved compensation, organizations should consider offering flexible hours, work-from-home options, and incorporating a total talent management strategy that utilizes contingent workers to fill short-term employment gaps. This approach offers the added benefit building relationships with temporary workers who could be transitioned to permanent roles in the future.”
While increased compensation and flexible work options are key ingredients to attracting talent in today’s highly competitive labor market, businesses should also consider focusing more on how they can promote internal mobility within their organization by reskilling current employees to fill open positions.
I’ve written about the long-term importance of reskilling for both workers and organizations, but businesses are also increasingly realizing that internal recruitment and redeployment can be a more cost effective short-term talent solution when compared to attracting and competing for talent in a tight labor market.
According to RiseSmart’s Career Mobility survey, 87% of employers believe that at least 10% of their open jobs can be filled through internal mobility in the coming months, while more than a third are planning to fill anywhere from 25% to 50% of positions with internal candidates.
By hiring internally, companies can reduce their recruiting and onboarding costs, fill positions faster, and get existing workers up to speed more quickly than an outside hire. And businesses who retrain and redeploy their workers also benefit from improved employee engagement, and as a result, better retention.
However, to achieve true organizational agility, it is essential that organizations map out a clear reskilling strategy that offers training opportunities to all employees and takes a data driven approach to determining both what skills the business needs and what competencies will engage employees to future-proof their careers.
Solving the current labor crisis is a riddle that all organizations are trying to unlock, and it remains difficult to predict how the market will evolve given the spread of the Delta variant and uncertainty around unemployment benefits.
To weather the storm, it is crucial that organizations examine all tools at their disposal to meet workforce needs, and that entails taking into consideration factors such as improved compensation, flexible work arrangements, the use of contingent talent to plug short-term workforce gaps, and increased investment in internal mobility that will benefit businesses now and in the future.