American companies need to find new ways to recruit, develop, train and retain talent as the labor shortage drags on, posing a perceived existential threat.
Boyden's perspectives on the news and trends that are transforming industries
In a survey by the Conference Board, chief executives cited worker shortages as the single biggest threat to their business in 2022. The numbers are historic: In December, the number of job vacancies reached 10.9 million, climbing 60% from December 2019. For every 10 jobs, only six workers were available. In November, a record 4.5 million people left their jobs. Low-income earners comprise the majority, particularly in sectors like retail and hospitality, but employees are stepping down from all levels.
American firms enjoyed an abundance in human capital for decades as more women entered the workforce and globalization opened up new hiring options. But, says Andrew Schwedel of Bain, that expansion has mostly run its course. Other trends have been draining the talent pool. At the end of last year, 88% of men aged 25 to 54 were either working or looking for work, down from 97% in the 1950s. A crackdown on immigration under Trump took a toll. Immigration has continued to decline. And the pandemic is thought to have driven millions of baby boomers into early retirement.
In hopes of enriching their human resources, most employers start with compensation. The U.S. Labor Department reported that companies spent 4% more on wages and benefits in the fourth quarter, year on year—a rise not seen in 20 years, according to The Economist. Many have offered sign-on bonuses, preferring one-time pay-outs. But base pay is rising as well. Walmart has raised its minimum wage, and Amazon raised average wages for its warehouse workers, production and nonsupervisory employees.
Higher compensation can help, but it may not be enough, as it does not address the lack of qualified candidates for many types of jobs. This may require different approaches to recruitment. Companies are revisiting their job requirements and loosening some criteria, broadening opportunities for different types of candidates. The Business Roundtable and the U.S. Chamber of Commerce have called on companies to ease requirements for four-year university degrees and focus instead on workers’ skills.
Another human capital strategy is to offer training in skills that candidates might lack. Google says it will consider completion of its online certificate in data analytics, for example, in lieu of a four-year degree. According to analytics firm Burning Glass, the share of job postings offering training was more than 30% higher in September than in January 2020. This trend is also fueling a proliferation of outside training providers.
Beyond revisiting recruitment and development, human resources managers are looking at improving working conditions and addressing concerns about safety and stress. Zeynep Ton of the MIT Sloan School of Management says that making low-wage jobs more appealing improves retention and productivity. This in turn supports profits. Last year Walmart said that two-thirds of the more than 565,000 hourly workers in its stores would work full time, and have predictable schedules and more structured mentorship.