It’s no day at the beach
It’s Complicated
And then some
Sometimes you read that about relationships. Right now it applies to the relationship all of us have with the economy.
This headline from The Washington Post seemed to sum it up: “Pick your economy: Booming labor market or fizzling growth”
Yes
It’s hard to wrap your head around economic conditions that are so seldom seen in tandem.
The backdrop for the recent wage increases is very complicated, which is frustrating because everyone would like a very simple answer, and even easier solutions.
A recent paper from The Hamilton Project examines where all the workers have gone. In the most simplistic of summaries:
- • The U.S. Labor Force is down between 3 to 3.5 million people from what was expected
- • Over 250,000 pandemic-related deaths were those aged between 18 and 64
- • Government policies have limited immigration
- • The child-care crisis worsened during Covid and has diminished women’s labor force participation
Before panic sets in about a recession, perhaps look for opportunity? If other companies are laying off, it could be for a host of reasons that has nothing to do with your organization. External economic pressures can expose internal flaws in firms. Maybe they’ve just laid off someone with that specific skill set that you haven’t been able to find?
Remember, there are still approximately two job openings for every available person, which gives people the confidence to leave jobs. As the Atlanta Fed’s chart shows us monthly, the job switchers make more than the job stayers.
Charting a Course
Recently, sitting on deck on a gloriously sunny day, gazing across the beautifully calm water, my mind wandered back to grade school math. Probably the grade school math we all dreaded the most: the story problem.
Why?
Because it dawned on me that the captain probably didn’t have to do much of that story problem math that day. You remember the problem: a boat must cross a river Y wide, the current is traveling at X, how does Timmy aim his boat to reach the dock on the other side?
Why did we all hate these sorts of problems so much? Perhaps because in the diagram, or in life, we were always so sure about where that dock was on the other side. Both sides were stationary, we were sure of where they were. But a moving body of water? A current that could change speed, or course, or pull you under without warning? And what if you did all the math, and then somewhere in the middle of the crossing, it all changed?
Upon reflection, those story problems were great preparation for life. They made us weed through the words for the pertinent facts. How often were we reminded to go back and use our solutions to check our work? These problems reinforced that things were not static; they would not remain in place. We needed to reassess, recalculate, and rethink.
Solution?
In today’s current labor markets – and yes there are many, even in one location – the currents are irregular indeed. Many skippers are scared to undertake a journey of understanding, to even test the waters, but test them you must. Maybe your Great Resignation won’t be because of compensation, maybe it will be because of limited career growth opportunities within your organization, or lack of flexible work arrangements. Maybe your compensation is just fine near the shore, but away from the shore, the currents have shifted suddenly, and you haven’t ventured out that way to investigate? Your organization needs to know which way the current is flowing.
It is time to solve for X.
Essentially Fair?
By Margaret Jungels
If we’ve learned anything the past few months, it’s that many of our lowest-paid workers are essential to keeping not only the overall economy, but also our individual households running. We rely on grocery store clerks, delivery drivers, caregivers, and cleaners in stores, hospitals, and nursing homes to keep our families fed and safe. And yet, in many states, these essential workers are paid at rates so low they could work full-time and still qualify for SNAP benefits. The federal minimum wage is $7.25 an hour and hasn’t increased since 2009. In our gut, most of us understand that the minimum wage should be increased for reasons of fairness.
But there are reasons beyond fairness to increase the pay of these essential workers. A review of nursing home data shows that higher minimum wages lead to better quality of care, and even reduced mortality rates. “It appears that with better pay, jobs in nursing homes became more attractive, so employee turnover decreased. Patients benefited from more continuity in their care.” Studies also indicate that, across industries, employee performance improves as wages rise. Increased quality, reduced turnover, and better performance? So, it seems that not only is increasing low wages the fair thing to do, it’s the right business decision as well. Read More Here
Essential Economics
For some time now, the compensation consultants at CHRC have been keeping an eye on the wages of those in the service sector. We watch the monthly JOLTS data aggregated by the Atlanta Fed and often have criticized news headlines that put an overemphasis on Manufacturing and Construction job gains and losses because they under-emphasize the large percentage of the U.S. economy that the service sector comprises.
We think Covid-19 has changed America’s understanding of how reliant the economy and all of us are on this service sector.
Given CHRC’s attention to this area of the labor market, and the recent wage pressure caused by over demand and under supply, this headline immediately caught our eye: Returning to Business Is Going to Take a Pay Raise. This sentence in particular caught our attention: “The coronavirus has laid bare that without workers to produce and consume their products, even the most formidable companies are just empty shells.” The author was not an HR consultant or a labor economist; he is an investment advisor who writes a column for Bloomberg.
We agree. If there was already a shortage of workers for the service sector, when we return to normal, whatever the new normal looks like, and whenever normal kinda sorta returns, we do think that some of these roles will see an increase in wages.
Two weeks later we came across the same sentiments, in a theological magazine. While this author’s vantage point was slightly different, his meaning was exactly the same: “Societal value is more subjective, and even higher-paid workers and executives are now recognizing that a well-functioning society really needs people to provide these services.” This author, like the Bloomberg columnist, referenced The Business Roundtable’s “Statement on the Purpose of a Corporation” that 181 executives signed in August 2019. In the statement, these leaders concede that in addition to shareholders, they also serve stakeholders, which includes employees and customers.
Nobody knows what the new normal will look like, but we all know what the world’s been like without haircuts and without meals out, exchanging banter with our favorite servers. We know that many people that do invisible but essential jobs—from garbage collection, to hospital laundry, to first responders—have died from Covid-19. The hope of this Human Resource consultancy is that if financial and theological magazines are publishing pieces that reach the same conclusion, perhaps business leaders are synthesizing similarly and the new normal will involve some evolved compensation conversations. Read More Here and Here