The turnover tsunami of 9.3 million US open jobs is now being joined by a new storm: labor wage increases. Total private sector US wages are now up 7.9 percent from February 2020, and the wages for low-wage earners in leisure and hospitality are up 10.4 percent, according to the US Labor Department.
Many employers planned on a three percent wage increase for 2021. But they were wrong.
The shortage of US workers and the pressure to raise wages is likely to continue due to structural issues with the US
economy, such as an aging workforce, low birth rates, and the difficulty with automating professional services roles. In the short term, worries about catching COVID19 may keep some unemployed from returning to work in factories, retail, and restaurants. Supplemental insurance benefits may make it challenging to recruit lower wage workers in some low-minimum wage states. The supplemental benefits are scheduled to end in September, and some states have begun to provide the unemployed hiring bonuses to return to work and get off unemployment benefits.
(Chart at right is from The Wall Street Journal.)
Even after September, the longer-term labor pressures on the US economy will continue. The US workforce is aging, with a birth rate that is one of the lowest in the world and immigration that is flat (because it is a political football). Making matters worse, America’s 73 million baby boomer, technically skilled workforce is steadily retiring. Some experts point to automation as a solution. Still, while manufacturing has been automated for the last 40 years, the US economy is filled with professional services jobs that are hard to automate. Making matters more challenging, the US has had a long simmering labor shortage in STEMM (Science, Technology, Engineering, Math, and Medicine) jobs for decades and now the shortage is estimated at 1.1 million workers overall.—which hurts our economic competitiveness.
The Conference Board believes that this “aging workforce” problem will slow the US GDP significantly in the future, leading us to the stagnation problem Japan has experienced for years.
Below are seven long-term solutions to recruiting and retaining the workforce you need:
1- Build a post-pandemic brand.
Companies need to put in place long term strategies to attract talent for the rest of the decade. The brand needs to speak to the cool work your employees do and describe how it carries a higher purpose for humanity. As well, you need to be transparent about your pay, benefits, and work culture, having employees speak to these issues on your career site.
But in 2021, the traditional definition of employer brand will not be enough to retain your best employees. After working from home for more than a year, office workers have a new attitude about what they want in a job and an employer. While working at home was initially stressful for those who had not worked from home before, many people adjusted well to the change. Today’s office workers know they are more productive at home, and most are more independent. A recent survey shows that 65 percent want to continue to work remotely full time and 31 percent are open to hybrid working. Moreover, when they go into the office, they want a different office environment. Office employees want a safe office with little exposure to COVID19 and an excellent environment for collaboration and meetings. If required to work in the office, they want an environment without the disruptions of open office bays and overbearing managers.
Define your vision of the hybrid workforce and future office. Your current and future employees want to know how your work environment will change in 2021. Can employees still work from home? Will they need to come into the office one or two days a week? Will employees who are tired of remote work be able to return to the office four or five days a week. How will the office layout change? Will there be better distancing, changes to prevent constant interruptions, improved air exchanges and filtering, more and improved video conference rooms. How will the norms of working together change to adapt to the more digital experience? Learn more here from those who have had remote or hybrid workforces for years.
2- Offer competitive pay and benefits
You are not going to win the war for talent on the cheap. Workers know there is a shortage and are getting better at negotiating for more money. Moreover, millennials are maturing and are choosing employers that offer subsidized health care, 401ks with a company match, and good paid time-off policies, including paid-time-off for paternal leave for both genders. Women and people of color are looking for companies that have transparent pay practices to guard against pay inequity and work cultures that feature great onboarding, coaching, collaborative teams, empathetic leaders, and career development.
3- Move with speed, which requires digitizing your recruiting processes
The early bird does get the worm. The company that responds quickly to its job applicants, assesses, and interviews them before others have a higher success rate in getting accepted job offers. Speed means having leaned out hiring processes. To win the war for talent, it is critical that companies clearly define their hiring processes, provide exacting clarity of everyone’s role in the process, train them for their roles, and measure their success. After leaning out your processes, then it is wise to invest in digital technology. With the digital technology available, companies can have processes that move at digital speed to assess and interview job applicants and promptly offer them jobs.
4- Fix the bad experience
According to Deloitte, 83% of job applicants rated their job search experience as poor. According to The Talent Board, the average time it takes a job applicant to complete a job application is an hour. One-third of applicants will quiet the process if it takes too long. Worse yet, more than half of job applicants never hear back from a company regarding the status of their application.
It doesn’t have to be this bad. With the digital tools available in today’s applicant tracking systems and chatbots, companies can significantly improve the job applicant’s experience. Today’s chatbots can let job applicants know within seconds of a decision in the applicant process (such as being recommended for an interview). And if the job applicant is a bad fit, they can recommend the candidate to another open job for which they are better suited.
Companies working with the chatbot AllyO have seen their net promoter score for job applicants soar to more than 90%. Think about that. Even among job applicants who are denied a job, they feel so good about the process, they are willing to recommend their friends apply for a job at that company.
5- Remove bias and hire better job candidates—even during a shortage.
Despite more than100 years of empirical evidence, many hiring managers and recruiters do not use unbiased methods to select new hires. Too many depend on “gut feel” or years of experience without further clarifying if it is the right years of experience and the right knowledge, skill, and abilities. The consequence is to blindly hire suboptimal job candidates while you believe you are hiring the best.
Now there is growing evidence that sticking to our biases may actually be costing the US economy $5 trillion a year. I know that sounds ridiculous, but the analysis from McKinsey and Company and others is compelling.
Companies can significantly improve their hiring outcomes by following these four steps: 1) Conduct project-based assessments. 2) Revisit your job postings. 3) Use structured interviews, 4) Use (real) AI technology to re-biases candidate search and screening. Learn more here.
6- Target new entrants to the workforce and the overlooked and receive a federal subsidy.
Some 200,000 US veterans leave the military and enter the civilian workforce each year. Hiring veterans is a smart recruiting strategy. In addition, companies can earn a tax credit of $5,600 for hiring veterans and up to $9,600 for hiring long-term unemployed veterans with service-connected disabilities (known as wounded warriors).
The US also has more than 70 million formerly incarcerated workers. That staggering number is larger than the population of France. With new federal legislation, companies can earn a $2,400 federal tax credit for each formerly incarcerated individual hired. There are limits on jobs some formerly incarcerated can hold based on their crime (such as those with SEC violations cannot work as stockbrokers or in finance). During the screening of the formerly incarcerated, look for those who have taken advantage of programs to reform and reskill themselves. These workers are also exceptionally reliable and loyal. You can recruit them directly by posting jobs at 70millionjobs.com.
7- Reskill your current workforce. It costs less than recruiting.
It is actually less expensive to retain and retrain your workforce than to recruit in today’s environment. It can cost $4,000 to recruit an entry-level worker and only one-third of that cost to retrain a worker. In the future workforce, the average worker will change employers 10 times and careers six times over their careers. Companies that learn to retrain their workers for today’s agile work environments will be the ones that win the war for talent by hanging onto their talent for the long haul. More importantly, companies need to put in place learning and collaborative cultures to retain their best employees.
Today’s double tsunamis of labor shortages and higher wages are not going to end soon. The US’s labor shortage is caused by structural factors that will take years to correct. Hiring can no longer be a seat of the pants activity. The companies that invest in these long-term solutions will come out ahead in the decade’s war for talent.
Victor Assad is the CEO of Victor Assad Strategic Human Resources Consulting, managing partner of InnovationOne, and Sales Advisor to MeBeBot. He works with companies to transform HR, implement remote work, recruit executives, and develop extraordinary leaders, teams, and innovation cultures. He is the author of the highly acclaimed book, Hack Recruiting: the Best of Empirical Research, Method and Process, and Digitization. Subscribe to his weekly blogs at www.VictorHRConsultant.com.