As labor market heats up, the best employer incentive is investing in employees’ futures
As the US continues to roll out vaccinations and recover from the pandemic, the economy and the job market are expected to heat up. Despite the reportedly high number of available positions, however, not many people are returning to the workforce as quickly or as eagerly as predicted.
In April, the country only added 266,000 jobs and the unemployment rate actually rose from the month prior to 6.1%. It’s a level “well above their levels prior to the coronavirus pandemic” according to the US Bureau of Labor Statistics, and it’s a far cry from the one million new jobs that economists previously estimated.
American factories and restaurants in particular are having a difficult time. US manufacturing activity hit its highest levels in more than 37 years according to the Institute for Supply Management, yet Deloitte predicts that 2.1 million jobs in the sector will be unfulfilled through 2030. As for restaurants, though employment increases each month, the National Restaurant Association reported that “employment remains [at] 1.8 million jobs – or 15% – below pre-pandemic levels.”
To entice more people to apply, businesses have been offering incentives ranging from free zipline rides and appetizers, to money in the form of bitcoin or cold hard cash. While this might get some people through the door, there are many others who are warier and have been burned by the pandemic and the resulting economic downturn. These prospective workers are taking the opportunity to reevaluate their job-related goals and look towards new options and industries. As such, the ultimate incentive an employer can offer to win these candidates over is a strong investment in the education and career mobility of their own employees.
Returning to the workforce with caution
Those who haven’t returned to work have a variety of reasons to hold off. Unemployment payments, for example, can be equivalent to or exceed the wages a worker would earn, and some workers don’t feel financial pressure to return to work as a result. Others may be afraid of spreading or getting exposed to COVID-19, can’t find a solution for childcare needs (an industry that the pandemic has decimated and has forced many parents to stay home), or the jobs they left behind require new skills post-pandemic.
Regardless of what one might believe about the merits of unemployment insurance (UI) as a policy mechanism, the reality is that it gives workers time to reconsider their career goals. And the disruption caused by COVID-19 has exacerbated this desire to deeply examine the best available employment option as well as consider new careers.
This reexamination often leads to better matches between people’s skills and expertise and the jobs they take up. During 2008’s Great Recession, for example, a longer duration “of UI benefits… increase[d] the quality of employer-employee matches,” reported the National Bureau of Economic Research in a working paper. This effect was “greater for women than men, for minorities than white workers, for less educated than more educated workers and for older than younger workers, all of whom are more likely to be credit-constrained.”
Due to the pandemic specifically, 66% of the unemployed are “seriously considering changing their field of work,” which is a higher percentage compared to the Great Recession, according to The Washington Post. Citing a February Pew Research Center survey, people are seeking higher-paying jobs, jobs that are more stable, or jobs that are “less likely to be exposed to the coronavirus — or any other deadly virus down the road.”
More than just a paycheck
As frontline workers have time to “shop around” for their next job move, there will be many things they’ll consider now that weren’t a factor in previous job searches before the pandemic. The way many workers were unceremoniously laid off or treated poorly during the peak of the COVID-19 crisis have led some workers to be mistrustful of employers who do not seem to care about their mental and physical health. With this disillusionment, it’s reasonable that workers are seeking more than a transactional relationship with their employers. Workers want to know they are working for a place that will invest in them, not just pay them.
One thing employers can do is provide meaningful benefits in their employee’s well-being, including upskilling and education programs. By motivating and empowering workers with these types of benefits, companies can avoid low engagement, low performance, absenteeism, and turnover.
Offering robust education programs will also allow companies to compete for strong workers that they normally would not have had a chance to attract. Several companies have already seen this changing dynamic and rolled out new offerings that demonstrate their commitment to seeing employees thrive.
Waste Management, for example, enables employees to earn college degrees on company dime, and will expand this benefit to employee spouses and children. “We knew we had to do something radically different to make Waste Management attractive when you have other companies looking for the same type of worker,” said Tamla Oates-Forney, chief people officer at Waste Management in a New York Times interview. “There is such a war for talent that compensation isn’t a differentiator.”
Companies who haven’t made these investments may struggle to compete for new talent and retain the talent they already have. The U.S. Labor Department reported that the number of people voluntarily quitting their jobs reached a record high in April — a sign that many feel confident enough in the labor market to shop around for new jobs.
The pandemic has had an extraordinary impact on changing the mindset and expectations of the American workforce. Many are eager to work, but they are understandably more cautious about their next steps. Lives have been disrupted and damaged, and it’s important to workers that when the next crisis comes, their employers will give them the tools they need not only to survive, but thrive. While free appetizers and a small cash bonus may convince some, a comprehensive and robust investment in the well-being and education of workers will truly separate the top-tier employers from the rest.