As the pandemic has convulsed America’s real economy, middle market businesses have had to contend with profound changes to their workforces, said Joseph Brusuelas, chief economist of RSM US, and Neil Bradley, chief policy officer of the U.S. Chamber of Commerce.
The comments were part of a wide-ranging discussion about today’s labor market and the American economy in a recent quarterly webcast sponsored by RSM and the Chamber.
The changes in the labor force have left many businesses scrambling just to retain the workers they have, let alone find new ones. In many cases, those workers have left the labor force, Brusuelas and Bradley said.
As a result, executives will need to reimagine their workplaces, rethink their benefits and reconsider their recruitment if they want to compete in the emerging digital economy.
The labor shortage
Bradley noted that the economy is still around 4.5 million workers short of where it was before the pandemic, even after the January jobs data showed a healthy increase in the number of people returning to the labor force.
He cited a host of factors behind this shortage:
- Workers retiring: 2.4 million more workers have retired during the pandemic than otherwise would have been expected—a significant loss of experienced and knowledgeable employees.
- Mothers staying home: 1.4 million fewer mothers are working as they have picked up the burden of child care in the face of closed schools and day care centers.
- Immigration declining: About 1 million fewer college-educated immigrants have entered the country legally in what amounts to a talent drain on America’s digital economy.
The result of these trends has been a slowing in the growth of the American labor force. What used to be a 1% annual increase in the size of the workforce has now slowed to a tepid 0.2% during the pandemic.
One factor behind this trend has been a significant shift in attitudes toward work, embodied in what has become known as the Great Resignation.
“There is a regime switch of the willingness and availability of workers to participate,” Brusuelas said. Without a growing, dynamic labor force, the American economy stagnates, he added.
Rethinking the workplace
This decline poses a challenge to employers that was hard to imagine before the pandemic. As a result, businesses will have to go beyond offering higher compensation and better retirement benefits to recruit workers. It requires more flexibility—and businesses will have to adjust, Brusuelas said.
The days of showing up at a job at 8 a.m. after a 45-minute commute and leaving at 7 p.m., only to have another 45 minutes of staring at brake lights are, for many workers, no longer acceptable.
“Firms are going to have to be quite nimble,” Brusuelas said. And this need for flexibility only becomes more acute as older workers leave the labor force. Younger workers, Brusuelas added, are insisting on a different work-life balance.
To find these workers, particularly younger ones, Bradley said that employers must rethink their benefits packages and get past the long-gone era when mothers stayed at home.
For example, employers should consider offering on-site day care for those families pulled between competing obligations of family and work, or be more willing to offer part-time employment options. This is particularly true for women.
And for younger workers, employers should consider expanding benefits to address the often crushing burden of student loans.
“Smart employers are thinking about employees’ needs like student debt payments, providing a flexible work schedule and helping children in need of care,” Bradley said.
Revising the nation’s tax policy—like offering a tax credit for providing on-site day care or offering incentives for employers to help workers with student debt payments—would help to these ends, Bradley added.
Employers also need to cast a wider net for job candidates. The workers are out there—but employers need to find them.
One way to find more candidates is to rethink the recruiting process by adjusting something as simple as a job description.
Younger candidates, for example, fluent in the lexicon of the digital age, describe their skills in ways that are concise and to the point—which is often at odds with the sometimes long-winded prose of employers’ job descriptions.
“There is a mismatch in the way employers and employees describe their skills,” Bradley said.
Brusuelas even saw it as an opportunity. “There is a cottage industry out there waiting to be jump-started” to better match employers’ job needs and workers’ skills, he said.
If the recruitment is not expanded, employers are left poaching from their competitors, and from other industries—all of which hinders economic growth, Bradley said.
The inflation question
Brusuelas and Bradley also discussed rising prices and their impact on middle market businesses. As the pandemic has evolved, businesses have faced rising costs for a variety of reasons including shortages of raw materials, delays in shipments from supply chain bottlenecks as well as rising labor costs.
At the same time, businesses have made investments in productivity that have outweighed the increasing labor costs. Those investments—some of which were accelerated by the pandemic and are starting to pay off— are one reason corporate profits have remained healthy.
Any notion that businesses are taking advantage of an inflationary environment and gouging their customers is mistaken, Brusuelas said.
“I don’t see any evidence at all of price gouging—what you are seeing is rising productivity,” Brusuelas said. “There is no need to demonize American business.”
Employers who adapt to a rapidly evolving work environment and the changing demands of younger workers will be the businesses that thrive, Brusuelas and Bradley said. To resist the change, they said, only invites a stagnating business, and economy.