As the labor market continues to tighten, companies are pursuing additional strategies for recruiting untapped talent and retaining workers, says a new report by The Conference Board.
U.S. businesses in particular are lowering educational requirements for some cohorts of workers and increasing the use of teleworking.
Beyond the U.S., companies in some or all corners of the globe are hiring more women and mature workers, along with increasing automation.
The report—the Global Labor Market Outlook 2018—points out that 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 and continues to exacerbate the tight labor market is low labor force participation, resulting, in part, from the ongoing opioid epidemic and a rising number of people not in the labor force due to disability.
Lowest Unemployment Since the ‘60s
Looking forward, the report forecasts that, by 2019, labor market tightness could reach levels not seen for decades, especially in the U.S., UK, Japan, and several countries in Central and Eastern Europe.
The unemployment rate looks likely to be at its lowest 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," says Gad Levanon, the primary author of the report and the 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."
What Employers Need to Know
To help counteract labor shortages, the report includes several takeaways for employers. They include the following:
- Hiring workers with lower educational requirements is gaining momentum in the U.S. During the financial crisis and in the two to three 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 talent 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.