November 7, 2022, 0 Comments
How Will the Economic Downturn Affect Hiring?
Are you laying off or hoarding employees? Implementing hiring freezes? Considering salary transparency practices to fill critical positions?
Consider salary transparency as a recruiting strategy? Are we nuts? There’s a method to our madness and we’ll explain more below.
As we continue to watch the economy and inflation, we’re also noticing the labor market slowing down – employers are adding fewer jobs, hesitant about hiring if we fall into a recession. On the other hand, employers are also hesitant to lay off employees as would traditionally happen with an economic downturn. Why? Because it continues to be difficult to fill already open positions. Employers are concerned that if they let people go, it may be twice as hard to fill the positions again. Confusing? That’s an understatement.
Overall, the job market is still strong. HR and staffing industry leaders will tell you that this has been the weirdest time in recruiting, and it doesn’t appear to be ending any time soon.
With inflation still climbing, there are signs that companies may be “hoarding” employees. A recent report from Employ, Inc. suggested that some companies may be “labor hoarding” – choosing to keep workers rather than laying them off, hoping to save time and money overall. The report states that 52% of recruiters surveyed said their organizations were retaining employees, even those who might be underperforming or lacked a fit with the company culture.
John G. Fernald, a senior research adviser at the Federal Reserve Bank of San Francisco, said that employers would be especially hesitant to lay off workers who would be difficult to rehire once the economy recovers from a downturn, such as those with specialized skills or higher levels of education.
In an article published by Vox, economists say there are several reasons employers may be less likely to lay off workers if it is short-lived:
- Dealing with labor shortages and finding it difficult to hire people.
- It’s costly to offboard employees.
- It’s costly to onboard and train workers.
According to Aaron Sojourner, a labor economist and senior researcher at W.E. Upjohn Institute for Employment Research, “You can’t count on a long line of job applicants to just show up whenever you post an opening. I think employers hadn’t felt that so acutely in a long time.”
Diane Swonk, the chief economist at KPMG notes that companies are still understaffed. “Even as you scale back, you’re still understaffed, so you’re not going to be firing as many as you would have. There’s also a sense that, if you work so hard to get workers, you want to retain the workers you have.”
Fernald also suggests that employers should be especially hesitant to let workers go who would be difficult to rehire. “If you lay off people with valuable skills, well, you’re not going to be able to recover production when demand picks up again,” he said.
While layoffs will still happen, Allie Kelly, the chief marketing officer of Employ, said there has been a “clear, growing trend of more companies implementing hiring freezes, although they still largely aren’t laying off workers yet.”
Is There Hope to Fill Critical Open Positions?
Yes, there is. There has been plenty of talk about re-examining hiring processes, modernizing benefits to include things like mental health resources and caregiving leave, and more flexibility in work hours, to name a few.
Would salary transparency help? More recently, we’re seeing articles about salary transparency in job postings. Once a taboo subject, research done by Adzuna, a search engine provider, reveals that an increasing number of job seekers want to know the salary attached to the job before they apply for it. 54% of jobseekers turned down a job offer when they finally learned the salary.
So, what’s the big deal? Only 3% of U.S. job ads include a salary. And why wouldn’t you want to reveal salary? With more than half of jobseekers turning down job offers, Adzuna calculates that represents about 480 million hours of wasted time on vetting candidates, interviews, and negotiations. All for naught. Positions go unfilled, and the process of recruiting and interviewing starts all over again.
Adzuna’s survey respondents also delivered this information:
- 28% of people feel no salary or a lack of salary clarity on job ads is their biggest frustration when looking for a job.
- 33% of job seekers would not attend a job interview before knowing the salary the employer is willing to offer.
- 86% of U.S. employees would be open for their colleagues to know how much they earn
- 73% think employers making salaries more transparent would make the workplace more fair.
So, is there a downside? Again, yes there is. But only if you ignore current employees’ salaries and needs. According to Harvard Business Review (HBR), there are consequences of salary transparency – fallout with disgruntled employees whose pay is not equal to a new colleague. But eventually, the consequences go away after pay equities are established therefore establishing more employer/employee trust, fairness, job satisfaction, and found to boost individual task performance by taking a more holistic approach to reward-related human resource practices. More information can be found here: https://hbr.org/2022/08/research-the-unintended-consequences-of-pay-transparency
How can we help? Arlington Resources is here for all your sourcing and outsourcing needs. If you’re struggling with your recruiting strategies, call us today!