How America’s Talent Wars Are Reshaping Business

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DCL LOGISTICS, like so many American companies, had a problem last year. Its business, the fulfillment of orders for goods sold online, has faced increasing demand. But competition for warehouse workers was fierce, wages were rising, and employee turnover was high. So CDL made two changes. He bought robots to pick up items from shelves and place them in boxes. And it has reduced its reliance on part-time workers by hiring more full-time staff. “What we save by having temporary workers, we lose in productivity”, explains Dave Tu, CDLPresident. Full-time payroll has doubled over the past year to 280.

As corporate America enters another year of uncertainty, labor has become the top concern for bosses. Business leaders cite labor shortages as the biggest threat to their businesses in 2022, according to a survey by the Conference Board, a research organization. On Jan. 28, the Labor Department reported that companies spent 4% more on wages and benefits in the fourth quarter year-over-year, an increase not seen in 20 years. The paychecks of everyone from McDonald’s burger pinball machines to Citi Group bankers are getting bigger. This partly explains why profit margins in the S&P The 500 index of large companies, which have defied the severity of the pandemic, begins to decline. On Feb. 2, Meta spooked investors by reporting declining profits, due in part to rising employee costs as it transitions from Facebook and its sister social networks to the virtual reality Metaverse.

At the same time, companies of all sizes and in all sectors are testing new ways to recruit, train and deploy staff. Some of these strategies will be temporary. Others can reshape American business.

Today’s job market looks extraordinary by historical standards. December saw 10.9 million job openings, up more than 60% from December 2019. Only six workers were available for ten open jobs (see chart 1). Predictably, many seem comfortable giving up old positions to seek better ones. This is evident in those who clean sheets and stock shelves, as well as those who build spreadsheets and sell inventory. In November, 4.5 million workers left their jobs, a record. Even if rising wages and a waning pandemic lure some of them back to work, the fight for staff may continue.

For decades, American companies have tapped into a growing pool of labor as more women entered the workforce and globalization dramatically widened the ranks of potential hires. . That expansion has now almost run its course, says Andrew Schwedel of Bain, a consultancy. Simultaneously, other trends have combined to make the labor pool shallower than it might have been. Men continue to disappear from the labor market: the share of men aged 25 to 54 working or looking for work was 88% at the end of last year, compared to 97% in the 1950s. Immigration, which plunged during Donald Trump’s nativist presidency, has fallen further, to less than a quarter of the 2016 level. And covid-19 may have spurred more than 2.4 million baby boomers into early retirement, according to the Federal Reserve Bank of St Louis.

These trends will not reverse quickly. Baby boomers won’t be returning to work en masse. With Republicans hostile to foreigners and Democrats vying for visas for qualified people, an increase in immigration seems unlikely. Some men have returned to the workforce from the depths of the covid recession in 2020, but male participation rates have plateaued below pre-pandemic levels. A tight labor market could persist.

Workers and employers are adapting. For the most part, they do so outside of the concept of collective bargaining. Despite a flurry of activity — Starbucks baristas in Buffalo and Amazon workers in Alabama will hold union votes in February — unions remain weak. Last year, 10.3% of American workers were unionized, which corresponds to the lowest record of 2019. In the private sector, the rate of unionization is only 6.1%. Strikes and pickets will be a headache for some bosses. But these are the stops that could cause them sleepless nights.

Pay as you go

The simplest tactic for companies to deal with labor shortages is to raise wages. If companies have to part with cash, they prefer incentives to be one-time rather than recurring and persistent, as with higher wages. This explains a multiplication of fatty bonuses. Before the Christmas rush, Amazon began offering workers a $3,000 sweetener. Compensation for lawyers at the 50 largest U.S. firms rose 16.5% last year, in part due to bonuses, according to a survey by Citigroup and Hildebrandt, a consulting firm. In January, Bank of America announced it would give staff $1 billion in restricted stock, which vests over time.

But the base salary also increases. Bank of America says it will raise its minimum wage to $25 by 2025. In September, Walmart, America’s largest private employer, set its minimum wage at $12 an hour, below the requirement $13-14 from many states, but well above the federal minimum wage of $7.25. Amazon raised the average wage in its warehouses to $18. The average hourly wage of production and non-management employees in December was 5.8% higher than a year earlier; compared to a jump of 4.7% for all workers in the private sector. Companies face pressure to raise them even higher. High inflation meant that only leisure and hospitality workers saw a real increase in their hourly wages last year (see chart 2).

However, raising wages alone may not be enough for companies to overcome labor shortages. This is where the other strategies come in, starting with the evolution of recruitment. To deal with the fact that, for certain types of jobs, there simply aren’t enough qualified candidates to fill vacancies, many companies are relaxing hiring criteria that were previously considered a prerequisite.

The share of job postings stating “no experience required” more than doubled from January 2020 to September 2021, estimates Burning Glass, an analytics firm. It may make sense to relax rigid prerequisites, even without a labor shortage. A four-year degree, argues Joseph Fuller of Harvard Business School, is not a reliable guarantor of a worker’s worth. The Business Roundtable and the we The Chamber of Commerce, two business groups, have urged companies to relax requirements that job applicants must have a four-year university degree, advising them instead to value the skills of workers.

Another way to deal with a shortage of qualified personnel is for companies to pass on the qualifications themselves. In September, the most recent month for which Burning Glass has data, the share of job postings offering training was more than 30% higher than in January 2020. New training providers proliferate, “bootcamps” run by universities to short term programs by specialists such as the General Assembly and the big employers themselves. Buffalo employers have hired General Assembly to run data training programs for local workers who are broadly capable but lack specific technical skills. Google, a tech giant, says it will consider workers who earn its online certificate in data analytics, for example, as equivalent to a worker with a four-year degree.

Along with overhauling recruitment and training, companies are changing the way their workers work. Some positions are objectively bad, with low pay, unpredictable hours, and little opportunity for growth. Zeynep Ton du MIT The Sloan School of Management argues that making low-wage jobs more attractive improves retention and productivity, which supports long-term profits. As interesting as Walmart’s pay raises, she argues, are the retail giant’s management changes. Last year, it said two-thirds of the more than 565,000 hourly workers at its stores would work full-time, up from about half in 2016. They would have predictable week-to-week schedules and mentoring more structured. Other companies may take note. Many of the complaints raised by labor organizers at Starbucks and Amazon have as much to do with workplace safety and stress as they do with wages or benefits.

Companies that cannot find enough workers try to make do with fewer of them. Sometimes that means cutting services. Many hotel chains, including Hilton, have made daily housekeeping optional. “We’ve been very thoughtful and careful about the positions we fill,” ExxonMobil boss Darren Woods told investors in the oil giant on Feb. 1.

Increasingly, this also involves investments in automation. Robot orders last year surpassed the pre-pandemic peak in volume and value, according to the Association for Advancing Automation. UPS, a transportation company, increases productivity with more automated bagging and labeling; the new electronic tags will eliminate millions of manual scans every day.

New business models are pushing things forward. Consider McEntire Produce in Columbia, SC. Each year, more than 45,000 tonnes of sliced ​​lettuce, tomatoes and onions pass through its plant. Workers pack them in bags, place the bags in cartons and stack the cartons on pallets destined for fast food outlets. McEntire has increased salaries, but turnover remains high. Even as labor costs have soared, up-front automation expenses have plummeted. The firm therefore plans to install new robots for packing and stacking. He will hire them from a new company called Formic, which offers robots at an hourly rate of less than half the cost of a McEntire worker performing the same job. By 2025, McEntire wants to automate 60% of its volume, with robots handling the backbreaking labor and workers performing tasks that require more skill. A new position, introduced last year, seems permanent: a manager whose only job is to listen and support staff so that they do not quit.

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This article appeared in the Business section of the print edition under the headline “Talent wars”

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