Social Dynamics are Changing Hiring Practices
As the pandemic begins to recede because people are getting vaccinated (nearly 57% of U.S. adults were fully vaccinated as of mid-July), the effects of lockdowns induced by COVID-19 remain….
As the pandemic begins to recede because people are getting vaccinated (nearly 57% of U.S. adults were fully vaccinated as of mid-July), the effects of lockdowns induced by COVID-19 remain. Those aftershocks present numerous challenges to employers who are looking to expand their workforces through high-volume hiring. The social dynamics — individual actions and group-level behaviors — in play during these dynamic times are:
- Rising Labor Costs
- Housing Shortages
- Resistance to Long Commutes
- Shifting Retail Buying Habits
What’s more, Baby Boomers (workers ages 56-75) are leaving the workforce faster than anticipated because stocks and residential real estate are valued at record highs and refinancing of mortgages is easy with so much cash available from banks, making it easy for 15 years of senior-level talent to leave the workforce quickly.
So, what should an employer do to meet challenges related to hiring and retaining a high-caliber workforce? Hope that things return to “normal” eventually? As the saying goes, hope is not a strategy.
Instead, our advice is to strengthen your understanding of trends affecting your pool of potential workers and take appropriate actions in response to those occurrences. In this piece, we offer guidance on how to thrive in today’s ever-changing business environment based on our breadth and depth of experience in high-volume staffing and predict what the future holds.
Paying Workers Competitively
The unemployment rate stands at just under 6%, which means that there are about 9.5 million Americans who are actively looking for work. There are multiple reasons why so many people are still looking for work while so many jobs remain unfilled.
First, there are reports that people searching for work are simply “going through the motions” to receive unemployment benefits – state payments plus a $300 weekly supplement through early September that is part of the federal pandemic rescue plan – that may be more generous than what a person can make by working.
A study released in April by the National Bureau of Economic Research, a private non-profit research organization based in Cambridge, MA, found that a 10% increase in unemployment benefits during the pandemic led to a 3.6% drop in job applications. The expanded benefits are scheduled to expire in September, which may increase the number of job applicants throughout the economy.
Second, people are worried about contracting COVID-19 on the job, but that fear should recede as more people get vaccinated.
Third, many potential employees are needed at home because child care is difficult to find or too expensive to make working worthwhile.
According to the U.S. Bureau of the Census Household Pulse Survey taken in late March, 8.4 million people (14% of adults) were not working because of a need to care for children, not in school or a daycare center, or to care for an older person in their family.
This phenomenon highlights a big challenge for employers to find workers. As service businesses re-open full-scale and manufacturers respond to market demand by increasing their output of goods, employers can’t find enough workers because schools, daycare centers, and elder care are not operating as they were before the pandemic.
As a result, there is a low supply of workers relative to demand, which is driving up wages.
If you are an employer, this set of circumstances means that you should be prepared to pay more for workers, knowing that doing so will help your business move forward and that failing to pay higher wages could result in your business declining. As the old saying goes, “You have to crack a few eggs to make an omelet.”
Likewise, you should think creatively about potential hires and possibly take chances on workers who may not have experience in your particular industry but have the basic skill sets and desire to learn quickly and become team players.
If the pandemic has taught us anything, it is that the old ways of doing things may not be possible in these unusual times and that things may never go back to how they were.
As schools re-open and unemployment benefits expire, more workers will enter the workforce, but the influx of workers will not depress wages significantly, if at all. That is because companies such as Amazon, Starbucks and Target are paying workers a minimum wage of at least $15-$18 an hour, and in many localities employers will need to compete with those companies to attract the best workers. Companies that are unable or unwilling to pay a minimum wage in the $15-$18 an hour range will earn reputations for being undesirable places to work and will find themselves at a competitive disadvantage that could force them to merge, sell or close their doors.
Companies that are unable or unwilling to pay a minimum wage in the $15-$18 an hour range…will find themselves at a competitive disadvantage that could force them to merge, sell or close their doors.
A Window Into Housing
A key reason that workers are demanding higher salaries and wages is that the cost of housing, along with food, has been on the rise. According to Redfin, a Seattle-based discount real estate brokerage firm, the median sales prices of homes in urban, suburban and rural areas have increased significantly over the past year. Those numbers are 15.9%, 15.5% and 14.3%, respectively.
Price growth in urban areas is at a near-record high while rural price growth reached a peak of 17.9% last October and has declined since then. An interesting aspect of these numbers is that prices are rising faster for single-family homes in urban areas than for single-family homes overall. That’s because people – particularly young families – want to get out of crowded apartments and into more spacious single-family homes which are more conducive to remote work and have ample space for children to receive online educational instruction.
Likewise, as remote work becomes an increasingly permanent feature of the economy, many people want to move from cities and suburbs to rural areas to obtain more space and participate in recreational activities and hobbies that are easier to enjoy in large open spaces than in the confines of densely populated areas.
Living farther away from traditional centers of employment could be inconsequential to many workers due to the prevalence of remote work and increasing demand for larger commercial space available largely in exurban or rural areas. If workers need to commute to a city center, they can avoid the hassle of driving in heavy traffic by working flex hours or using a ride share service such as Uber or Lyft, which would allow one to access high-occupancy vehicle (HOV) lanes on freeways and do work while commuting to and from the office.
When it comes to residential real estate, a combination of favorable interest rates and low inventories in all types of locations means that housing prices are going up faster than people’s incomes are increasing, and faster than the rate of inflation, which is 4.2% according to the Bureau of Labor Statistics, a unit of the United States Department of Labor.
On the supply side, the federal moratorium on foreclosures due to the pandemic has kept the number of available homes for sales lower than it would be otherwise. Furthermore, home builders have not kept up with long-term demand growth. Single-family housing starts rose last year to 991,000 units but would have needed to be between 1.1 million and 1.2 million to meet market demand.
Additionally, with the cost of building materials on the rise due to more people renovating or remodeling their homes during the pandemic because they want to improve their living spaces, as well as COVID-related supply chain problems domestically and abroad, many home builders constructed fewer homes last year than they had intended to build.
With the nation’s 72.1 million millennials (Gen Y, ages 25-40), the largest share of U.S. homebuyers, believing that buying is more cost-efficient than renting, pressure on demand will continue to be strong.
Housing prices will remain high because more people are seeking housing relative to the availability of housing stock. As affordable housing continues to be a key concern for workers, much like healthcare has been for decades, employers’ abilities to pay competitive wages will become essential to attracting and retaining talent, and to determining the fates of their respective companies.
As affordable housing continues to be a key concern for workers… employers’ abilities to pay competitive wages will become essential to attracting and retaining talent…”
Industrial & Commercial Real Estate Thrive
Industrial real estate has traditionally been the poor stepchild in the world of commercial property ownership. A strong year in 2020, due largely to higher demand for warehouse space to meet consumers’ shift from purchasing products in brick-and-mortar stores to e-commerce websites has given new life to a previously unglamorous market sector.
To put some flesh on the bones, property owners paid $95.9 billion for industrial real estate assets last year, the third-largest total in the sector’s history. In turn, companies leased 524 million square feet of industrial real estate last year, with just under one-third of that total recorded in the fourth quarter, the highest quarterly volume ever recorded in sector history.
As you might expect, e-commerce was the standout performer with 15.3 million square feet (35% of volume) leased, followed by logistics and distribution (14.3 million) and construction materials and building fixtures (10 million).
Higher demand for industrial real estate is a prime example of a market trend accelerating because of the pandemic. According to Craig Meyer, President of Industrial Services for JLL, a commercial real estate services company, “Since 2011 industrial rent growth has been positive and vacancy rates have been at historic lows. The fact that e-commerce still has a long runway for growth makes industrial real estate the darling of the commercial real estate industry.”
In 2019, e-commerce sales totaled more than $600 billion in the U.S. Volume grew by more than 20% last year to just over $790 billion, or 14% of domestic retail sales. As consumers and business customers alike get in the habit of buying things online, businesses of all kinds need to continually develop, or adapt and modify, best practices for serving customers.
The lyrics from the first verse of a Bob Dylan song titled The Times They Are A-Changin’ sums up what’s happening to many businesses and workers:
Come gather ’round people
Wherever you roam
And admit that the waters
Around you have grown
And accept it that soon
You’ll be drenched to the bone
If your time to you is worth savin’
And you better start swimmin’
Or you’ll sink like a stone
For the times they are a-changin’
Although the song was recorded in the mid-1960s to describe those turbulent times of more than a half-century ago, the words have relevance today in the context of hiring workers and conducting business in an environment that has been scarred by COVID-19, and that will feel the pandemic’s consequences for at least the next several years.
Demand for warehouse space will continue to rise as more people prefer online shopping to visiting brick-and-mortar stores. As a result, the need for warehouse workers will grow and other businesses will need to adjust to the demands of e-commerce.
As consumers and business customers alike get in the habit of buying things online, businesses of all kinds need to continually develop, or adopt and modify, best practices for serving customers.
The Path Forward
With people changing their preferences about where they live and work, and what type of work/life balance they want to achieve, combined with the number of Baby Boomers decreasing in the workforce as Gen Xers (ages 40-55) and Millennials (ages 25-39) increase their presence, it is more necessary than ever for employers to cast a wider net than usual to find the team members they need to help their companies remain competitive.
It also means having a willingness to be more open-minded than usual about workers’ habits and preferences and to pay a premium for talented individuals with specific skills of the “hard” technical and “soft” social varieties that can help your business grow profitably.
Considering that many companies need to pay a minimum wage in the $15-$18 range to stay competitive, be responsive to higher housing costs and thrive in a world where most transactions occur online rather than in-person, traditional in-house recruiting, or relying on partners that have not updated their approaches in years, is jeopardizing your future.
As an alternative to doing things the same way you have always done them, our systematic, process-driven recruitment strategy uses the latest technologies to your advantage, including:
- An inverted recruiting model
- Making the process an enjoyable one for applicants
- Accelerating hiring and onboarding activities
For expert assistance with your high-volume commercial and industrial staffing activities…
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