With over 4 million Americans quitting their job in August, September, and November 2021, the “Great Resignation” is no longer a pandemic trend, but a paradigm shift in the workforce. Many employers lament this talent shortage as a signal that no one wants to work. The narrative to date has focused on unemployment benefits and has portrayed this issue as a matter of “lazy and entitled” workers. Similarly, as most people would not drive twice as far to pay twice as much for the same product, the behavior of today’s workers is not caused by laziness but by rational decision-making.
While employers are used to having more leverage than they do today, the reality is that the same market forces that drive the success of a business’s product or service are now impacting their ability to secure talent.
Many businesses that are familiar with the impacts of economic globalization through e-commerce are now seeing these same forces impact their workforce. With the increased availability of remote work, the demand for job seekers is not limited to a specific geography, which means employers have more competition than ever before.
Just as e-commerce has benefited the most adaptable companies and put those that relied on only a geographic footprint out of business, the shift in the job market has the same power. Even companies without remote positions must consider that a job seeker with the skills to work remotely may do so, which reduces the supply of local talent. Just as consumers will not pay more for a worse product, job seekers will not take less pay for a lower-quality, less flexible job.
This is also complicated because the labor market has a backward bending supply curve, which is a fancy way of saying that, beyond a certain level of pay, most workers will value increased leisure time over increased revenue. This effect also extends to the quality of position in terms of flexibility and culture, where individuals may take pay cuts to move to companies that provide a better environment or lifestyle beyond a certain level of pay.
While this is an overly simplistic analysis, it is illustrative of today’s labor market. The reality is that the worker shortage doesn’t impact employers with quality jobs; it affects employers without quality positions. These could be employers that pay a low wage, have poor working conditions, a toxic company culture, or all the above.
Many employers have been quick to increase wages but still cannot find talent as they overlook other elements of the equation. Workers have more options now, especially with the rising gig economy, and attracting and retaining talent is about more than just pay and location.
Our recent talent survey of over 200 local individuals found that while wage was important, an opportunity for career advancement was even more critical. Even if you are fully staffed today, 58% of currently employed individuals we surveyed were actively looking to leave their job.
Many see the worker shortage as an opportunity to shift to new markets, leaving behind lower-paying local jobs for higher-paying global careers. This means that even companies with talent may face high turnover if they have a poor working environment, low wages, or little opportunity for advancement.
What does this mean for employers struggling to attract or retain talent? While there is no quick fix, we can learn from history. In 1914, a time of labor unrest, Henry Ford announced he would pay $5 a day to his workers, double the industry standard. In 1926, he would go on to standardize the 40-hour workweek with no reduction in pay, slashing in half the industry standard of 80 hours a week or more.
At the time, Ford said, “It is high time to rid ourselves of the notion that leisure for workmen is either ‘lost time’ or a class privilege.” Many were concerned about productivity declines, but when Ford saw productivity gains, eventually, the world followed suit. Adjusted for inflation and the current work schedule, that $5 a day in 1926 is equivalent to over $100,000 a year today.
Of course, not every company is Ford; what about other employers? The federal minimum wage in 1968 was equivalent to $12 an hour in today’s economy, but that adjusted rate has been steadily declining since. Additionally, if the minimum wage had kept pace with workers’ productivity, it would be over $26 an hour today.
Like in 1926, now many are again questioning if we can also increase productivity by reducing working hours and raising wages. The four-day workweek is being slowly adopted worldwide by companies looking to attract talent, including Kickstarter. After adopting the four-day work week, Wanderlust has seen a 136% year-over-year growth in gross merchandise volume.
Rethinking and reimagining pay and working schedules based on empirical evidence like Henry Ford did rather than just copying his practices of $5 a day and 40 hours a week is critical for employers to attract and retain talent today.
What about employers still struggling to hire after increasing pay and flexibility? Instead of competing in today’s red ocean of talent poaching, maybe it is time to find a blue ocean of talent.
A recent study from Harvard found that there are 27 million latent workers nationally. This is a talent pool that wants to work more, but they are currently not able to. This includes part-time workers who want to go full-time, and workers who have been so discouraged they have stopped looking for work, even if they want to work.
If they want to work or work more, why are these latent workers not applying? In the study, 84% found the application process too difficult, and many of these individuals had to submit between 20 to 40 job applications to get a single offer. Employers who are willing to rethink job descriptions, streamline their applicant tracking system, and remove excessive experience and background requirements will have a competitive advantage in attracting an untapped pool of talent. Removing unnecessary barriers also helps employers tap into the talent Charlotte Works and Goodwill work to upskill and prepare for careers.
Another key finding from our talent survey was that job seekers valued an opportunity for career advancement even more than a position’s salary. This underscores the importance of continually investing in employee training and development for talent attraction. While this is often cost-prohibitive for small and medium businesses, Charlotte Works and Goodwill have funding and services specifically designed to help companies with the training and development of workers.
With quit rates at a recent high, how do you retain talent? The top reasons from our talent survey were flexibility, company culture, and workload balance. Embracing remote work when possible, looking at preventing burnout, and keeping workers safe are all critical parts of a multi-pronged talent retention strategy.
As an employer seeking commitment from job seekers, what are you willing to commit to providing in return for loyalty and productivity? We invite you to look at your talent development efforts and recruitment efforts, but most of all, look at your core values. Those lived values will drive job seekers to you and inspire them to stay.
Money is an essential factor, but company culture and commitment to your workers are equally important. Before you renew your employee-focused efforts, take time to analyze the number of quality jobs you currently offer, consider assessing and updating your staffing plan, but most of all, don’t be a “lazy and entitled” employer in the eyes of job seekers.
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