2021 Labor Markets & Their Impact on the Future of Work [Video]
Tight labor markets have talent acquisition teams and hiring managers working overtime to fill open roles in a timely manner. But is putting in extra hours enough to get talent in the door faster — and keep them there?
The statistics paint a sobering picture. The U.S. unemployment rate in May fell by 0.3 percentage points and stopped at 5.8 percent, just over one percentage point since Dec. 2020's 6.7 percent.
With fewer people than expected starting back to work, there are more job openings than unemployed workers. And while some companies are trying to entice employees with substantial pay increases, it's not enough. Instead, many employers are being challenged to re-evaluate the entire experience of how they attract and retain talent to meet demand.
Phenom CEO and co-founder Mahe Bayireddi teamed up with Fred Goff, CEO and founder of Jobcase, and Joe Fuller, Professor of Management Practice at Harvard Business School to discuss the current labor market and its impact on the future of work.
Watch the full panel discussion in the video below, or read on for highlights!
Understanding How We Got Here
The global Covid-19 pandemic took organizations to places they've never been before. Many employees began working from home for the first time ever — and communication, collaboration, and project execution went from in-person activities to fully digital exchanges. While many workplaces started to shrink — causing fear and uncertainty to peak — others experienced hiring spikes that forced them to get creative and embrace new strategies to meet demands.
Now, employers are facing new challenges as they reopen their doors. Many people are choosing not to return to work, due to a variety of factors like stimulus handouts, childcare needs, and uncertainty about kids returning to school.
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"All of us have been intrigued, perplexed, alarmed by some of the trends we're seeing in the labor market recently," Fuller said. "There's been a significant ramp up in postings and employers beginning the reopening process — trying to rehire workers or fill spots that were vacated when they had to suspend operations."
HR and business leaders should direct their focus to what a candidate has done — and can do, based on their work experience and skills — as well as make educated hiring decisions that are based on complete data, he said.
State of the Economy: Inflation, Wages, and Consumer Behavior
Companies have seats to fill, but can't get talent in the door. Meanwhile, banks like the San Francisco Federal Reserve have said once inflation increases and the labor market loosens, they can start scaling the amount by which they support the economy.
Ultimately, inflation needs to reach a certain goal before banks can decrease the amount of financial help they're giving to the economy — and the U.S. Federal Reserve wants to reach an inflation of 2 percent.
As hiring continues to be a letdown, especially in food services and construction, wages and benefits are on the rise as tactics to attract potential employees. While companies like McDonald's have raised compensation on average by 10 percent an hour, others like Chipotle are offering mental health care plans and debt-free degrees for workers.
"The wages are going up," Bayireddi said, spotlighting the recent changes in supply and demand. "But most importantly, the primary driver of what we're seeing is consumer behavior has changed, and that is really what is creating different kinds of dynamics across talent markets, because the talent pools that used to be there don't exist anymore."
"Maybe we'll call it the great shuffle."
According to Goff's observations, there's an emerging appreciation of the imbalance between the number of jobs available and the number of candidates companies are attracting. So why is it difficult to find talent that's open to work?
"That's where both the data and the anecdotal evidence get really interesting," Goff said. "First, I reject the notion that this whole conversation of the extraordinary unemployment — let's change that — it's not a conversation on giving someone an extra couple meals at The Cheesecake Factory. It's about what's the right job to entice people to be interested."
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In the industries that maintained operation and employment during the pandemic, like transportation, warehousing, logistics and delivery, pay got progressive, Goff said. And now, organizations have a new level of pay to offer in order to compete.
Demand for jobs from industry to industry — and workplace shifts — shakes things up for business and HR leaders alike. "There's a shuffling as people consider what is the company that I'd like to have our labor apply to," Goff said.
"Underneath that, you have a shuffle for different cultural issues. With knowledge workers, some companies are having to make choices — is it full-time or remote — an employee base may choose different employers based on how the management decides that."
More than ever, workers are considering company culture and safety when making employment decisions. For instance, being required to wear a mask could attract, or deter, different people. Goff said for now, people will continue to move around for work while job market details, like those of compensation, benefits, safety and wellbeing, and more eventually become available.
The Importance of Agility, Learning, and Making an Impact
When it comes to helping candidates find the right role, their ability to make an impact and support the organization's purpose are most important.
The job seeker has to consider the experience, knowledge, and skills they're able to present to a potential employer, as well as the professional actions they took that made the biggest impact at their previous organizations, according to Bayireddi.
"That's a very important aspect to manifest in your resume," he said, and added that every skill can be connected to one of those actions. "If people can really connect that in their resume in an effective format, they have a high degree and high likelihood of getting hired," Bayireddi said. "Even in the interview, that's what people are expecting."
From there, employers and candidates must both look at the company's purpose and align it with the job seeker's experience and values. If the candidate really wants to learn, grow, and help drive the company's purpose, then they'll have a more meaningful, satisfying career at that particular organization.
"Don't just learn for a particular wage group, but learn for an impact and the wage will follow," Bayireddi said.
AI's Impact on the Workforce & Wages
AI, Bayireddi said, is key in determining what type of candidate a company wants to hire, as well as what work and responsibilities will be the most meaningful.
"That needs extreme personalization."
Right now, a mix of automated and manual work is best. For example, automating sourcing, screening, and scheduling helps recruiters hire best-fit talent faster, and it helps indicate where certain talent is most needed within the organization.
Automation within your CRM helps recruiters find top talent more quickly, as well. And as organizations automate these time-consuming tasks, it gives recruiters more time to focus on more meaningful work — like building relationships with candidates and advising hiring managers.
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"Personalization and automation are complementary skills," Bayireddi said.
As automation takes on more tasks and opens up new opportunities for employers, companies should start to understand how this all plays into wages — a trend that's starting to surface now.
"The talent pools are constantly changing, irrespective of the industry we belong to," he said. "On top of it automation is going to play a humongous role."
As employers consider tasks that can either be automated or require a human element, wages must be taken into account. In some cases, Bayireddi added, it might be more cost effective to have a person handling a job rather than an automated bot — and vice versa. The challenge, he said, is that organizations need to embrace constant learning and restructure the workforce in terms of training, compensation, and showcasing their purpose.
Workers have a lot of power — individually and collectively, according to Goff. It means companies have new opportunities while navigating today's labor market. As they watch labor costs rise, he said the acceleration of AI could likely increase — all within the next 18 months.
"This is where we really want to call the leadership to walk the walk," Goff said.
Words of Wisdom: Job Descriptions, Retention, and D&I
Don't recycle job descriptions
An old, reused job description is a barrier to getting the qualified candidates you want; and therefore, the outcomes you want, Fuller said. Even though it's often as easy as adding a few new skills to the listing, companies frequently let descriptions become outdated.
Plus, as college degrees become less critical, job descriptions must reflect what the organization wants in skills and competencies as soon as the role opens up, Bayireddi said.
As organizations grow and roles change, hiring managers and recruiters must work together to align on the critical competencies best-fit candidates must possess to be successful. If not, both parties lose out and increased turnover is inevitable.
But we don't all speak the same language when it comes to skills.
"We're in this period when there's no dominant design emerging," Goff said. "So everyone has a different word for 'self- proficiency.' They have a different word for ‘customer proficiency' in a retail organization."
He believes employers will eventually land on the same language, but employees must come together and establish what that looks like. "There were hundreds of keyboards, [and] we all ended up with qwerty in the turn of the 1900's — we're going to end up with a dominant design and an ontology that we settle on," Goff said.
For now, he said companies can focus on the meanings of words used in job descriptions, and use machine learning to match them with roles within the organization and with candidates.
"Even though it's really messy, for companies and for platforms like Phenom or Jobcase that are proficient in even the most basic kind of machine learning, that can really untangle it for you."
Retention: An evolution in the hiring market
The days of static infrastructure are long over. Retention of hard working employees couldn't be more important, for one, because it's so much more costly to hire new, external people than it is to mobilize and promote your current team members.
"It should really be about retention hiring," Goff said. "It should be about who's in the seat 'x' days later — 90, 120, things like that."
Employers are examining whether there are jobs, candidates, or employees for which retention hiring becomes a realistic goal, according to Goff. Some talent cares about long-term work, while others are interested in earning the income they need now, just to get by, as well as those who like freedom and movement.
Organizations can better retain employees who prefer freedom and movement by offering work arrangements that allow for as much flexibility as possible.
The employee experience is very important for retaining employees, according to Bayireddi, and employers should empower their people based on their individual values, work preferences, and goals. Career pathing is one solution that creates multiple ways to move within a company.
"Management and leadership have to evolve," he said. "We're not stuck in our old primitive of where we used to live."
They also have to clearly communicate what employees will need for opportunities and promotions as they become available. Are there unique skills or required learning courses? How can employees be certain about their ability to be productive when wearing a new hat at work?
Too often, according to Fuller, employees aren't told how to take charge of their careers and meet requirements and expectations needed to be considered for advancement. And they don't have a lot of time, either, because they're also balancing their personal demands.
"The workers are saying, 'I don't know what to do, no one's told me what I need to do differently or need to learn,'" he said.
"Historically isolated pockets of talent"
The social injustice movements of 2020 drove diversity and inclusion (D&I) to a level of priority never seen before. Companies miss hiring opportunities because they only talk about filling recruiting gaps, according to Fuller. He said they should more strongly contribute to more diverse hiring.
"When you challenge them, and say, 'you're trying to respond to a systemic problem, why do you think the systemic problem only manifests itself in the way you source talent,' it's going to take more than that to overcome those systemic effects," Fuller said. "And they tend to get quiet at that point."
Jobcase found in 2020 that although organizations had become flexible with job requirements (criminal records, education, etc.), it wasn't enough for constructive impact on D&I. Goff said companies have yet to implement and sustain change.
Results take "purposeful action," and inequalities are still the biggest concern, he said. The intentions are there, but the follow-through is not. D&I is a lead-by-example practice that starts at the top.
"Visibilities are important," Bayireddi said. Companies should ensure D&I actions are being taken throughout every experience, from hiring to retention and the evolution of employees. "The most important thing that can work here is the AI in the background," he said. "AI itself can't work, but as people take actions, you can really look at where the biases are so that people can address [them]."
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What it comes down to, according to Goff, is that lack of diversity and inclusion in the workforce is directly related to the tight labor market. He said people have been left out of work, and that everyone can solve the problems organizations are facing in today's labor market.
Disruption, Digitization, and Inflation: Impacting the Future of Work
Looking for solutions to help companies now and in the future really gets leaders, legislators, and political executives thinking, according to Fuller. And they must do so in terms of wages and market trends, no matter how difficult they are to navigate.
They've got to determine what makes a good job … a good job.
He considered concerns of trends like digitalization of work and the current demand in wages, and whether they would reach people from outside the labor market because they lack the skills and competencies required for productivity; and therefore, wouldn't merit higher pay.
"They don't have the digital literacy and background coming out of their education years to handle the type of hybrid jobs that seem to be emerging across a lot of industries, Fuller said.
The shift in demand for certain jobs will also shift how they're disrupted, and where AI will be most helpful, he added. "What's going to be more disrupted are the paralegals, financial advisors, radiologists … by AI. The trades people — plumbers, electricians, construction workers, etc. — that's a wildly productive career path that's really strong, that I don't see going away," Fuller said.
HR, over the last 30 years, has designed extremely strong processes to understand what their organization's brand means, according to Bayireddi. "But the problem is the processes — what they built — have to be changed dynamically," he said. "Everybody has to reevaluate every process they have built in the last 30 years."
Then, they should reexamine where the output is lowest in order to reconfigure their recruiting services, deliver individual experiences through personalization, and be more effective.
Bayireddi also mentioned that within the talent journey, an employer, a job seeker, a manager, and a recruiter should work together to ensure the best-fit candidate fills a particular role. It takes powerful team collaboration to make a successful hire — today and for the future of work.
"We're really looking at the overall scenarios [like writing the job description and deciding what skills and competencies the role will require] as a single-unit point," Bayireddi said. "But you have to look at what employees are growing and which employees are really making a difference, and then combine that, and eliminate biases."
He sees the future of work calling for a meaningful experience for all stakeholders in the talent lifecycle, as well as for leaders to step up and dynamically change processes so that the business — and HR — can be successful.
Learn more about navigating the tight labor market by putting candidates first!
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