"Without labor, nothing prospers."
Three industrial revolutions shaped how we live and work:
- First Industrial Revolution. Water and steam are used to mechanize production.
- Second Industrial Revolution. Electric power is used to create mass production.
- Third Industrial Revolution. Electronics and technology are used to automate production.
The transition to a fourth industrial revolution--physical, digital, and biotechnology--appears accompanied by a human phenomenon.
British economist, Dr. Charles Goodhart, describes the turnabout this way: "Since the 1990s, hundreds of millions of inexpensive Chinese and Eastern European workers pushed down wages and prices of products they exported to rich countries. Together with female workers and baby boomers the labor force in advanced economies more than doubled between 1991 and 2018." (The Great Demographic Reversal)
However, as the American economist, Dr. Herbert Stein once said, "If something can't go on forever, it will stop."
Supply and demand reversed
Keeping in mind Dr. Goodhart's concept of declining low-cost labor, and scarcity of help, it's safe to conclude that the global economy is now experiencing an employment revolution, something akin to a "worker's moment." In nearly all sectors, but especially manufacturing, employees are gaining the upper hand as employers scramble to retain and recruit a shrinking workforce.
Worker shortages, clogs in the supply chain, and rising energy prices have resulted in 7.9 percent annual inflation in February, the highest in 40 years. In the U.S. average hourly wages in the private sector rose by one penny last month falling behind inflation. War in Ukraine, and pandemic outbreaks in Europe, U.K., and China, further complicate matters.
In a recent FORTUNE magazine survey, two-thirds of respondents put the labor market as the force most likely to disrupt their business this year.
Speaking to the U.S. Congress, Federal Reserve chair, Jerome Powell, underscored the nature of a highly competitive labor market this way: "What you have is 1.7 openings for every unemployed person. That's a very, very tight labor market. Tight to an unhealthy level," Powell said.
An HR crisis
When it comes to people, here are five overlapping trends which help explain why management is facing labor shortages and employment conditions that will likely continue for some time:
1. Free to choose. The "Great Resignation" is getting a lot of attention and rightfully so. All told, over 38 million workers quit their jobs in 2021. (Bureau of Labor Statistics) Surveys with exiting workers show the reasons for jumping ship include higher wages, better conditions, or different opportunities. Half of Americans who quit their jobs in 2021 made a career change.
Indeed found that 92 percent of those who voluntarily left their jobs since March 2020 did so because "the pandemic made them feel life is too short to stay in a job they weren't passionate about."
This doesn't mean that everyone will have a job. No job seeker is fit for every job.
2. Job flexibility--the holy grail. Returning to the office may look different. The past two years have given white-collar workers the chance to manage their own schedules. Even while being on Zoom. And they like it. This arrangement proved helpful to parents whose children were in school online.
The tech industry, and professional services, may find that a hybrid schedule fits well with newly adopted habits. As for a negotiating chip, flexibility could mean the difference between attracting qualified candidates and not.
|(C) US NEWS|
Hiring will also be more geographically dispersed--removing the pressure to live in high-cost housing markets.
Full-time remote work has a downside. As more employees gather in corporate spaces, those working from home will be at a disadvantage when it comes to mentoring, acquiring behavioral skills, and collaborating with experienced colleagues.
Former Google HR chief Laszlo Bock said, " 'Googlers' who come into the office less frequently will be at a disadvantage for promotions, pay bumps, and desirable assignments."
The idea that out of sight is out of mind, rings true.
3. Baby boomer retirements. From February 2020 to March 2021 up to 2.6 million more boomers retired than expected. (U.S. Federal Reserve, St. Louis) This heavily populated cohort might have left sooner were it not for the Great Recession (2007-2009).
There are two sides to that departure coin. It opens opportunities for next-generation employees but a good deal of corporate culture, history, and know-how walk out the door.
4. Demographic shifts. The working population has started shrinking across advanced economies--the first time since World War II. That decline squeezes the labor force causing prices to go up, contributing to inflationary pressures.
The Wall Street Journal reported that Germany is seeking to attract 400,000 skilled foreigners a year. China, says the Journal, is expected to see its workforce shrink by 100 million over the next 15 years. That's like having nearly one-third of the current U.S. population disappear.
5. A drift toward idleness. Absence is compounding the labor shortage. The labor force participation rate, which peaked at 67 percent in 2000, is now 61.6 percent, 1.9 percent below pre-pandemic levels of 63.5 percent.
One in eight men is neither working nor looking for work. (Nicholas Eberstadt, Ph.D.) Male students now make up a smaller share of all enrolled students in the U.S. than ever before--just 41% of students enrolled in a postsecondary institution in the fall of 2020 were men. (Brookings Institution)
This inactivity, along with an aging population, helps explain why there were 11.3 million job openings in the U.S. in February.
This is a time to innovate. That means solving problems. Differentiating from competitors. Keeping the business alive.
Rethinking process, like the hotel industry making daily housekeeping optional, is an economical way to maintain essential services.
|(C) USA Today|
Even the smallest company can be innovative with feedback from customers and employees.
"The pandemic prompted a widespread re-evaluation of our lives," says Dorie Clark, who teaches at Duke University. One study reported that 54 percent of Americans are currently re-examining their life priorities. The situation is similar in the U.K. "More than three-quarters of Britons said they were considering major life changes, from moving to quitting their jobs, to ending relationships," according to Global Future.
A 2021 Pew Research study showed that only 17 percent of adults now cite their job or career as a source of meaning--down 7 percentage points from four years earlier.
To improve retention, Professor Clark recommends leaders understand what motivates employees. "Recognizing new forces shaping their own career ambitions may enlighten what's going on with others."
The most cost-effective HR initiative is to keep recruiting your own employees. Show your appreciation, dedication, and commitment to existing talent as a way to retain and expand your base. (An Adobe Principle)