Talent Acquisition and Retention in the New Normal
Just a few years ago, the idea of a labor shortage in the United States would have been unthinkable. Now you see help-wanted signs promising great benefits and high wages everywhere, from fast food joints and restaurants to hospitals, hotels, and retail stores. Employers of every type are reporting historically high quit rates and they are feeling the pain of staff shortages.
Employment numbers aren't adding up.
There were more than 10.9 million job openings at the end of July 2021— an all-time high, and an increase of 749,000 in one month.1 Things improved slightly by the end of August 2021, declining to 10.4 million openings at that point, which is still a remarkable number.2
In September 2021, the unemployment rate fell to just below five percent (4.8%), which is lower than the pandemic peak unemployment period ending in April 2020, but higher than pre-pandemic levels in February 2020.3
And while employers are seeking millions of workers, millions of workers are leaving their jobs. The “great resignation” may have peaked in August 2021, when 4.3 million Americans quit their jobs.4 Over the last year, resignations have been highest in the tech and healthcare industries and are highest among mid-career employees, ages 30 to 45.5
What's causing the labor shortage?
Some may argue that there really isn’t a labor shortage since there seems to be plenty of workers available to fill open jobs. The bottom line is that a whopping 65% of employees are now looking for new jobs, while positions go unfilled.6
The issue is really recruiting and retention difficulties that are plaguing industries like manufacturing, healthcare, leisure, and hospitality. As of June 2021, the manufacturing industry reported 826,000 unfilled jobs and an unemployment rate of more than six percent (6.3%). Healthcare had 1.5 million unfilled jobs and an unemployment rate of seven percent. In the hotel business, 96% of respondents report having open positions they can’t fill, with 63% report being severely understaffed.7
It’s common for employees to assess their work situations, especially with life changes like marriage, childbirth, or relocations. But the pandemic is exacerbating the problem of employee discontent. The availability of other jobs, “widespread self-reflection, and increased ability to work from anywhere” is creating what Brooks Holtom, a professor of management and senior associate dean at Georgetown University’s McDonough School of Business, calls a “perfect storm colluding against employers.”8
There are many theories about why potential workers aren’t working.
One often cited but somewhat questionable theory is that expanded unemployment benefits caused workers to stay home. While it’s true that the unemployment stipend had the biggest impact on the lowest paid workers, a Society for Human Resource Management (SHRM) August survey revealed that just 11% of respondents said the expanded benefit allowed them to be more selective about taking a new job. Only nine percent said they’re earning more on unemployment than they would with a job.9
Moreover, labor market data indicates that lower-wage workers are returning to work more quickly than others, with 75% of the jobs added nationwide over the last five months in the lowest wage sector — leisure and hospitality.10
Fear of exposure to COVID is a real concern for many employees. More than 3.2 million aren’t working because they are afraid of contracting or spreading the virus.11 This concern increased with the spread of the Delta variant.
The cost of childcare, which peaked in 2020 as the number of providers fell, also continues to specifically impact working parents.12
Lack of properly skilled workers, which was an ongoing problem in manufacturing long before the pandemic, is another contributor to the labor shortage. Rising interest in the “gig economy” — gig workers make up 10%-30% of the U.S. workforce — is also a factor.13
Employers must adapt to changing employee value and needs.
Eighty-eight percent of hiring executives are reporting higher-than-normal-turnover. So, it’s time to implement different recruiting practices.14 A recent SHRM survey of human resources executives indicated that to fill critical openings, 57% of employers are offering referral bonuses; 55% are hiring external or temporary workers, 44% are upskilling and reskilling staff; and 43% are boosting pay.15 Other ideas include using new technologies to streamline recruitment, as well as shortening the recruitment process with fewer interviews and faster hiring decisions.
And of course, employers must adapt to changing employee values. Here’s what job seekers tend to want most:
Flexibility. For many employees, working remotely became the norm during the pandemic — and they liked it. While there probably won’t be a shift back to “all in” working at the office, there’s likely to be much more flexibility for remote working at least a few days a week.
According to Indeed, 52% of job seekers said that working flexible hours is among the most important benefits they’d consider when deciding whether to accept a job offer. Thirty-three percent count flexibility among their top three factors in choosing to apply for a new position.16
Better compensation. Workers are generally unmotivated to return to low paying, high-stress jobs. With the federal minimum stuck at $7.25 per hour and below the poverty level — where it has remained for more than a decade — people just aren’t that interested.
To attract workers, stem the tide of resignations and approach a living wage, many companies have moved to a minimum of $15 per hour for non-exempt workers. For higher wage earners, non-monetary benefits are often of greater interest, but a bonus or pay increase can go a long way toward showing employee appreciation.
Retirement programs are also important to recruiting efforts, as more employees consider their financial futures.
Meaningful benefits. Many companies are revising their benefits plans to include career training and upskilling. Encouraging an “always learning” work environment not only addresses skills gaps, but also reflects a change in corporate mindset and an investment in the future of employees.
Health insurance on the first day of work is now more desirable than ever, and wellness programs, including gym memberships and mental health support, are also attractive.
The labor shortage could take years to resolve.
Employers will need to be creative over the next few years, as the labor shortage is unlikely to end soon. Dante DeAntonio, economist for Moody’s Analytics, suggests it “could play out over two, three years.”17
To acquire and keep top talent, as well as create a desirable work culture, companies must stay on top of employee preferences and hiring trends. Synovus can provide the employment insights you need, as well as help make employee benefits packages more attractive to high-quality candidates.
Important disclosure information
This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.
U.S Chamber of Commerce, “Worker Shortage Crisis Intensifying as Job Openings Rise Month over Month,” September 8, 2021
U.S. Bureau of Labor Statistics, “Economic News Release: Job Openings and Labor Turnover,” November 12, 2021
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