As labor markets continue to tighten, companies are pursuing additional strategies for recruiting untapped talent and retaining workers. So finds a new report by The Conference Board, a global business membership and research association.
U.S. businesses in particular are lowering educational requirements for some cohorts of workers and increasing the use of teleworking. Beyond the United States, companies in other parts of the world are hiring more women and mature workers, along with increasing automation.
Factors Affecting Labor Markets
According to the report, in 2017, labor markets tightened in almost every country, spurred by two main factors: The acceleration in global economic activity, which led to strong hiring, and slow-to-negative growth in the labor supply. In the U.S., a third additional factor that has had an impact and continues to exacerbate tightness is low labor force participation. It has resulted, in part, from the ongoing opioid epidemic and a rising number of people not in the labor force due to disability.
Looking forward, the report forecasts that, by 2019, labor market tightness could reach levels not seen for decades, especially in the U.S., United Kingdom, Japan, and several countries in Central and Eastern Europe.
In the U.S., the unemployment rate looks likely to be at the lowest rate since the 1960s, with many industries and locations experiencing acute labor shortages.
“While recruiting and retaining talent poses a growing challenge for employers, the picture looks brighter for those on the other side of the equation–the employees,” said Gad Levanon, primary author of the report and chief economist for North America at The Conference Board. “As just one example, our latest Conference Board survey of U.S. workers found increased satisfaction with wages and growth opportunities. With more job opportunities available, employees can settle into jobs that suit them better.”
Takeaways for Employers
To help counteract labor shortages, the report includes several takeaways for employers. They include but are not limited to the following:
- Hiring workers with lower educational requirements is gaining momentum in the U.S. During the financial crisis and in the 2 to 3 years following it, the share of workers with a bachelor’s degree or some postsecondary education increased among new workers. But since 2012 and 2013, this trend of upskilling has mostly reversed. These results suggest that, in recent years, as the pool of available workers became depleted, employers have hired less qualified workers for a given job opening.
- The teleworking trend is gaining momentum in the U.S. In 2016, the U.S. labor market reached unprecedented growth in the share of people that work remotely full time, with teleworking reaching 3.1% of full-time employees. In 2001, the share of full-time employees who teleworked comprised just 1.2%.
- Especially in mature economies, companies holding back on raising compensation should do so with caution. Given today’s labor market, in many instances not increasing pay could lead to higher labor turnover, lower success in recruiting, and less worker satisfaction.
- Worldwide, employers are likely to increase their labor pools by hiring more women and senior workers. The share of these two population groups in the workforce is increasing in many countries, partly due to legislation and higher educational attainment. Alternative work arrangements offer additional opportunities to hire from these groups.
- Businesses are now more likely to invest in automation to relieve labor shortages and contain labor costs. When labor was abundant and cheap, it muted the incentive to harvest the benefits of technological progress. In a tight labor market, that story changes.