Labor Shortages Mean Benefits Shine

Recent trends have helped to exacerbate the shortage of workers available to many businesses, putting a spotlight on the importance of well-constructed compensation and benefits packages.

Prior to the start of the pandemic, several long-term demographic trends—including minimal growth in the number of working-age Americans, a diminishing number of working-age adults without a college degree and historically low U.S. birthrates—formed a perfect storm that left countless businesses struggling to fill staffing vacancies, says a new study.

According to the Conference Board’s Committee for Economic Development’s new Solutions Brief, “The U.S. Labor Shortage: A Plan to Tackle the Challenge,” even before the pandemic took hold, the U.S. labor force was already showing signs of being stretched.

The analysis shows that, while labor force participation data as of March 2022 indicates workers are returning to workplace, employers are still unable to fill available jobs in a tight labor market. Part of the issue is that fewer Americans are receiving bachelor’s degrees or any education after high school, negatively affecting the skills pipeline that feeds the labor market. Additionally, there has been a recent decline in immigration, resulting from both the pandemic and policy action—all factors contributing to the stagnant growth of the U.S. working population.

More workers can lead to more production, more wages and more consumption, the brief says. By contrast, slower labor force growth will pose a challenge for American businesses dependent on the talent available to them when they compete in the global marketplace.

The brief suggests leaders in business, education and public policy collaborate to address the challenges of a tight labor market through initiatives focused on increasing Americans’ participation in the workforce. This includes focusing on increasing public-private collaborative training efforts, particularly in community colleges, and business leaders embracing competency-based hiring and promotion models based on skills rather than degrees.

The brief also points to the importance of reforming occupational licensing requirements, expanding the Earned Income Tax Credit, expanding workplace flexibility for workers with dependent care responsibilities, supporting older workers and creating incentives for unemployed/underemployed workers to upgrade their skills.

“U.S. companies of various sectors and sizes are struggling to fill jobs, as quit rates in the U.S. are at record-high levels, and so is the average time to fill open positions,” says Lori Esposito Murray, president of the Committee for Economic Development. “Businesses and policymakers alike must develop ways to encourage workers to reenter—and remain in—the workforce. A two-tiered approach, aimed at boosting labor participation for workers already in the U.S. and augmenting the workforce through immigration, is the best path forward. Such an approach was needed before the COVID-19 pandemic and has only become more pressing in the years since.”

As companies across the country look at ways to attract and retain talent, a study from Mercer highlights the importance of understanding what employees want in an employer.

In its 2022 Global Talent Trends Study, “The Rise of the Relatable Organization,” Mercer says that four in five C-suite executives believe that individual and business agendas have never been more intertwined, making it crucial for companies to be more open and easier to relate to.

The majority of employees want to work for companies that reflect their personal values, the study says. By the same token, the study suggests, people no longer want to work “for” a company, and instead they want to work “with” a company.

According to Mercer, nearly all executives (96%) say the labor market is currently employee-centric, and 70% of HR professionals are predicting higher than normal turnover this year—most notably with regard to younger workers and those in the digital space. Working in partnership means reassessing the employee-employer relationship and understanding the value in “partnering” over “leading.”

“The future of work will succeed only if everyone feels they are getting a fair deal and benefiting from an equitable relationship between employer and individual regardless of employment status and the type of work they do,” says Kate Bravery, report author and global leader of advisory solutions and insights at Mercer. “Today, it is not only knowledge workers who are demanding flexible options to fit around their life, but all workers—from shop floor workers to truck drivers. Leaders are also grappling with issues of fairness with what is offered to frontline workers versus managers, and with pay for people doing the same job from different locations. They are also grappling with career and health parity for new hires versus current employees.”

The study shows that 90% of HR leaders think there is more work to be done to build a trusting culture at their company, yet only 30% of executives see the return on investment of building a healthy, resilient and equitable future of work. Additionally, 62% of employees would join a company only if they can work remotely or in a hybrid engagement, and 74% believe their organization will be more successful with remote and/or hybrid working.

By contrast, the majority of executives (72%) are concerned about the impact of remote working on the organizational culture, as 75% say they have an apprenticeship culture today where people learn side by side—requiring a redesign of learning.

A staggering 81% of employees feel at risk of burnout this year, up from an already concerning 63% in 2020, the study says. Respondents say the top reason for burnout is not feeling sufficiently rewarded for their efforts. Over one-third (36%) of companies are introducing a strategy to address mental or emotional well-being this year. Good mental health has always been part of overall well-being, and businesses are doing more to help employees achieve it.

“A fundamental change in people’s values is underpinning a structural shift in the labor market. There is now increased pressure for organizations to contribute to society in a way that reflects the values of their customers, employees and investors,” Bravery says. “The challenge is making progress here, whilst grappling with inflationary pressures, pivoting to new crises and tackling differing views on the future of work.”