With more than 4 million Americans leaving their jobs in August, September and November 2021, the “Great Quit” 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 portrayed this issue as a matter of “lazy and allowed” workers. Likewise, since most people wouldn’t drive twice as far to pay twice as much for the same product, today’s worker behavior is not caused by laziness but by rational decision-making.
While employers are used to having more influence than they do today, the reality is that the same market forces that make a company’s product or service successful are now impacting their ability to retain talent.
Many companies that are experiencing 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 geographic area, which means employers have more competition than ever.
Just as e-commerce has benefited the most adaptable businesses and decommissioned those that relied solely on a geographic footprint, the changing labor market has the same power. Even companies without remote positions must consider that a job seeker with the skills to work remotely can do so, reducing the supply of local talent. Just as consumers will not pay more for a less good product, job seekers will not be paid less for lower quality and less flexible work.
It’s also complicated because the labor market has a backward-bending supply curve, which is a fancy way of saying that above a certain level of pay, most workers will favor increased leisure time rather than increased income. This effect also extends to the quality of the job in terms of flexibility and culture, where individuals may accept pay cuts to go to companies that offer a better environment or living environment above a certain level. of remuneration.
Although this is an overly simplistic analysis, it is a good illustration of today’s labor market. The reality is that the labor shortage does not affect employers who offer quality jobs; it affects employers without quality jobs. These can be employers who pay low wages, have poor working conditions, a toxic company culture, or all of the above.
Many employers have been quick to raise salaries, but still fail to find talent because they neglect other parts of the equation. Workers now have more options, especially with the growing gig economy, and attracting and retaining talent is about more than pay and location.
Our recent talent survey of over 200 local people found that while salary was important, an opportunity for career advancement was even more critical. Even if you’re full today, 58% of currently employed people we surveyed were actively looking to leave their jobs.
Many see the labor shortage as an opportunity to move into new markets, leaving behind lower-paying local jobs for higher-paying global careers. This means that even talented companies can face high turnover if they have a poor work environment, low wages, or few opportunities for advancement.
What does this mean for employers struggling to attract or retain talent? Although there is no silver bullet, we can learn from history. In 1914, a time of labor unrest, Henry Ford announced that he would pay his workers $5 a day, twice the industry standard. In 1926, he would standardize the 40-hour work week with no reduction in pay, halving the industry standard of 80 hours per week or more.
At the time, Ford said, “It’s high time we got rid of the idea that leisure for working people is either ‘wasted 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 equals more than $100,000 a year today.
Of course, not all companies are 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 falling ever since. Moreover, if the minimum wage had kept pace with worker productivity, it would be over $26 an hour today.
As in 1926, many are again wondering if we can also increase productivity by reducing working hours and increasing wages. The four-day workweek is slowly being adopted around the world by companies looking to attract talent, including Kickstarter. After adopting the four-day work week, Wanderlust saw 136% year-over-year growth in gross merchandise volume.
Rethinking and reimagining wages and work hours based on empirical evidence like Henry Ford did rather than simply copying his $5 a day, 40 hour a week practices is essential for employers to attract and retain talent today.
What about employers who are still struggling to hire after increasing wages and flexibility? Instead of competing in today’s red ocean of talent poaching, maybe it’s time to find a blue ocean of talent.
A recent Harvard study revealed that there are 27 million latent workers nationwide. This is a pool of talent that wants to work more, but is currently unable to do so. This includes part-time workers who want to work full-time and workers who have been so discouraged that they have stopped looking for work, even though they want to work.
If they want to work or work more, why don’t these latent workers apply? In the study, 84% found the application process too difficult, and many of these people had to submit between 20 and 40 job applications to get a single offer. Employers who are willing to redesign job descriptions, streamline their applicant tracking system, and remove excessive experience and education requirements will have a competitive advantage in attracting an untapped pool of talent. Removing unnecessary barriers also helps employers tap into talent at Charlotte Works and Goodwill to enhance their skills and prepare for careers.
Another key finding from our talent survey is that job seekers value an opportunity for career advancement more than the salary of a position. This highlights the importance of continually investing in employee training and development to attract talent. Although often prohibitively expensive for small and medium-sized businesses, Charlotte Works and Goodwill have funding and services specifically designed to help companies train and develop their workers.
With recent quit rates, how do you retain talent? The top reasons for our talent survey were flexibility, company culture, and workload balance. Embracing remote work where possible, seeking to prevent burnout, and keeping workers safe are all essential parts of a multi-pronged talent retention strategy.
As an employer seeking engagement from job seekers, what are you willing to commit to delivering in return for loyalty and productivity? We invite you to examine your talent development efforts and recruiting efforts, but most importantly, examine your core values. These lived values will bring job seekers to you and make them stay.
Money is key, but equally important is company culture and commitment to your workers. Before renewing your employee-focused efforts, take the time to analyze how many quality jobs you currently offer, consider evaluating and updating your staffing plan, but most importantly, don’t to be a “lazy and allowed” employer in the eyes of job seekers.