We are about to enter one of the hottest job markets in a decade. The $1.9 trillion American Rescue Plan will boost the economy, and even now, we are already operating with 13% more open jobs than we had a year ago. My own estimates and those from Goldman Sachs are that the unemployment rate will drop to around 4.1% by the end of 2021. However, a recent report from The Conference Board warns of an extreme shortage of “blue-collar” workers.
Here’s what to expect in the months ahead:
Prepare for wages to go up. Every study of employment and hiring shows that wages go up during a labor shortage. I don’t need to remind you how hard it was to hire software engineers during the last upcycle. I’m very sure that most of you will need to revisit your compensation strategies. The Conference Board survey found that the first action 82% of companies take when they can’t find needed talent is to raise wages, followed closely by increasing social media marketing.
Invest in employment brand, sourcing and job advertising. The second thing to consider is how well you’ve funded and managed your talent acquisition team. Job advertising, employment branding, sourcing and search will all be critical. I predict that coming into the second half of this year, you’ll be doing some serious searching for sales, service, production, logistics and professional roles.
Accelerate your internal talent marketplace. The third thing that happens during a labor shortage is that time to hire goes up. It starts to take months to find people, and employees with in-demand skills start job-hopping. This makes an even bigger case for internal mobility.
One of the most exciting innovations in HR is the creation of internal talent marketplaces. Big companies like Cisco and IBM have had strong internal mobility programs for years. Now, technology can help any company manage and facilitate internal mobility much more efficiently.
For example, if you have a good talent mobility system, you can find identify employees with key skills (such as marketing professionals, software engineers or analysts) and move them from business unit to business unit based on demand. This is a good thing for employees’ careers and greatly increases the dynamism of your company. It’s also much less expensive than hiring externally.
Fire up your engagement and people analytics teams. During a competitive labor market, people can feel less attached to their employer. An employee might have a negative situation at work and start to feel a bit unsettled or unhappy, and then, before you know it, they’re scanning jobs on LinkedIn. You can keep retention high with a strong focus on employee engagement, belonging and feedback.
The most important employee engagement actions you can take are those that employ “listening.” This means using the processes and tools at your disposal to collect and analyze employee feedback and behaviors; teaching managers, leaders and even your HR professionals how to pay attention to feedback and behavior trends; and holding people accountable for making necessary changes and resolving issues. It’s important to shore up your listening strategy now; waiting until the job market heats up will be too late. Note: You can also expect lots of vacation and leave requests once life returns to near normal.
Double down on your employee experience programs. Finally, continue to invest in EX, which encompasses the creation of strong onboarding programs, making sure work is productive for employees, setting clear goals and targets, and giving employees development, career growth opportunities and on-the-job learning. Now is also the time to coach leaders on goal management, their own coaching skills and ways to remove productivity obstacles. I also suggest you brush off your skills in organization design. As the economy heats back up, “piling on more people” won’t necessarily help the company scale.
Studies show that, while labor productivity is rising, our GDP will not be able to rise without more workers. The Conference Board study points out that the low birth rates, coupled with four years of reduced immigration, are going to slow economic growth in the U.S. Japan, Germany and now China already are experiencing this effect. As their populations age, there are fewer people in the workforce. I believe we are going to see changes in immigration policies, work permits and family incentives (part of the American Rescue Plan) to encourage people to come to this country and to have children.
I’m very optimistic that 2021 will be an exciting year as the economy continues to heat up and people get vaccinated. I look forward to working together to make the “post-pandemic” economy productive and fulfilling for our teams.