3 Things Everyone Should Know About the Changing Workforce
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The workforce has changed. Office layouts have been redesigned from cubicles to open offices. Job security seems to have disappeared. You can’t look at the news without seeing something about the increase in remote and part-time work, advances in artificial intelligence (and its older sibling, automation), and the rise of part-time work and the gig economy. The most frequent comment about schools is that the students are being prepared for jobs that don’t yet exist.
The rate of change has increased with improving technology and economic recovery. Recent grads absolutely feel it – automation and the “experience inflation” caused by the Great Recession have gutted the entry-level job market. In fact, a 2018 study showed that more than 60 percent of “entry-level” jobs require three or more years of experience.
Not all changes in the workplace have been for the worse though. The internet has shifted knowledge into the hands of the employee. For example, if you have a question about pay range, you can go to PayScale instead of HR. Most companies have realized that there is a strong business case for diversity and inclusion. Additionally, many states have passed laws giving more protections and benefits to workers, especially women, such as Oregon’s Equal Pay Act of 2017 and Paid Family and Medical Leave Act of 2019.
Although the freelance and gig economy places many workers outside of the social safety net of workplace protections, it also gives employees more leverage to affect change in the workplace. Instead of Company X competing against Company Z for talent, the companies must now make the case to employees that working for them is better than working for themselves.
The changing workforce is impacting employee retention, salary and job benefits, candidate expectations, and hiring. Here are three major shifts all employees and employers should be aware of in this rapidly evolving new world.
The career ladder has broken.
There was a time, in the not-so-distant past, when the workplace operated under the implicit agreement that employees who worked hard at their jobs and stayed loyal to a company were rewarded with job security, health benefits, and other serious perks like pension. There were literally gold watches upon retirement. People stayed with the same company, sometimes for their entire careers.
That’s not the case today. The new norms are portable HSAs and 401(k)s, job-hopping, and at-will employment. Wages have stagnated for the last 40 years; although paychecks are bigger and the stock market has grown 545 percent, purchasing power has barely budged, rising only 11.2 percent. In contrast, CEO pay has risen to around 936 percent. Also, without defined benefit pension plans, which almost half of companies offered in 1983, more and more people are struggling to save for retirement. In fact, a 2018 report found that 66 percent of millennials have nothing saved for retirement. With mass layoffs during the Recession and shrinking benefits since then, the implicit agreement between employer and employee has been broken.
So, instead of staying at one company for their entire career and climbing the corporate ladder, many employees will make career moves and get promotions by changing jobs. In fact, the average tenure for employees age 25 to 34 is 3.2 years.
Employees who switch jobs can often end up with higher compensation and a broader base of skills than they would acquire by working for only one or two companies during their career. Some experts argue that staying in a job for more than a few years can hurt your earning potential. They compare an employee’s annual 1-3 percent raise, eaten away by inflation, to what an employee could earn by moving companies if they received a salary offer that was 10-20 percent higher. Not every move results in more money, but at many companies, there are limits on increases managers can give their existing employees. Consequently, employees can often earn more money and gain more varied experience faster if they spend less time in one job.
The traditional career ladder has broken; only 19 percent of companies still have them. A career has become less about a steady progression upwards and more about developing skillsets that can translate into many different opportunities. Companies looking to retain their employees should focus on developing them through stretch projects, lateral moves, continuing education, rewards, rehiring alums, or other avenues that allow employees to grow.
Generational changes ripple the labor pool.
Demographics have changed. Currently, Millennials make up 35 percent of the U.S. labor force. By 2030, they will make up 75 percent. And remember, the youngest of this generation (b. 1996) are 23 and mostly in the workforce already. The changing demographics are less about the number of Millennials entering the workforce and more about the number of Baby Boomers and Gen X workers retiring.
While the global population of Gen Z outnumbers Millennials, the U.S. Gen Z populations of 61 million is about two-thirds the size of the Boomer and Millennial populations. In the next decades, instead of having the larger Boomer and Millennial populations buoying up the workforce around a smaller Gen X population, we’ll have two relatively smaller generations (Gen X and their kids, Gen Z) and one larger one (Millennials).
If you think that the shortage of workers is going to improve, think again. The supply of available workers is going to keep unemployment at record lows for the foreseeable future and provide employees with increasing leverage. Also, immigration, a traditional source of population growth, has been down in the last few years. Companies will need to find ways to grow without expanding their workforce, or get really good at recruiting and retention.
It’s a candidate’s market.
You’ve definitely already heard that the unemployment rate is at a historic low – you might have even heard that we’ve almost hit full employment. This can lead to increasing wages and more full-time job offers for positions that might have been part-time or temporary in labor markets with higher unemployment. In other words, it’s a candidate’s market.
To attract and retain stellar employees, companies will need to do a better job highlighting the benefits of their company and the roles they’re looking to fill. This means focusing on their culture, total compensation, and developing existing employees.
Three great ways employers can improve their recruiting and retention:
1. Sell the opportunity.
Everyone involved in the hiring process should understand what makes a company and position attractive and do their best to convey that to candidates. It’s not enough to tell them about the day-to-day job duties. Companies need to paint a clear and compelling picture about the perks, the benefits, the culture, and the fun at the company. If a company can’t identify positive aspects to the role or company, they’ll need to reevaluate or settle for less qualified candidates, because at full employment, great employees can be picky about where they land.
2. Focus on the candidate experience.
Don’t assume that a candidate who had a negative experience with your company won’t spread the word to other potential candidates. Over 80 percent of candidates won’t apply to your company again if they had a bad experience during any point of the process – and they’ll tell others not to apply too.
What makes a bad experience? If your process takes 6+ weeks, requires multiple forms of testing, or asks a candidate to fill out an application that takes an hour to complete before a preliminary interview, you’re likely asking too much and giving too little. With unemployment edging near 50-year lows, candidates have more choices and access to information than ever. If candidates aren’t excited throughout the application process by your culture and employer brand, you could be losing out on talent.
Also, make sure you’re communicating with candidates at every step of the process! Even a “no” can make a positive impression when the majority of employers don’t reply at all.
One strong rule of thumb is to treat all candidates well, especially the ones who don’t get a job offer. If they interviewed, take the time to call and tell a candidate why they didn’t get the job (and don’t tell them it wasn’t a culture fit).
3. Pre-close other offers and counteroffers.
Companies cannot assume that they are the only fish in the sea, or that they will be able to find another candidate easily. The market has changed too much for that. Therefore, it’s important for companies to understand a candidate – especially their motivations. This means asking about their salary expectations, their ideas about future career moves, why they’re looking to leave their current job, and what they like about their work.
Instead of assuming a candidate will be grateful for an offer and a paycheck, a company should have asked the right questions and wooed them with the truth about their culture and organization. It’s not enough to assume what a candidate wants – and it helps to remind them of the highlights of the role and how that relates to their answers when you make them an offer.
Companies might have had an easy time finding qualified employees in the wake of the Great Recession. However, those days are long over. To be really competitive employers, companies will need to adapt to the new realities of a tight labor market.