With a national unemployment rate expected to reach 4.25% by August 2016, we need to get ready for another war for talent4. As a result, over the next two to three years, we will see the fight for talent strongly intensify.
Because the number of individuals with current, relevant experience (supply side of the candidate pool) is quickly falling below employers’ needs (demand side of the candidate pool) — thus leading to a talent shortage.
As the available supply of labor with current, relevant experience diminishes, employers will need to use pay, benefits, fringes and other working incentives to woo candidates from competitors as well as implement programs to increase the supply side of the labor market.
Recruiting and Talent Acquisition professionals are already feeling the heat to hire experienced hourly employees and staff-level professionals. We are seeing a big push to attract experienced candidates for positions such as technical support, customer service, inbound and outbound sales, banking and financial services, and software engineers.
In Low Unemployment Rate Sparks New Tactics for Recruiters, we described how entry level and experienced, hourly hires have been the largest driver of new job creation. As a result, this demand has thankfully and dramatically driven down the unemployment rate both nationally and locally across states. As early as 2014, we began seeing employers offering many kinds of incentives to experienced, hourly hires including sign-on bonuses and relocation assistance — benefits often reserved for management only positions.
Based on the data being released by the Bureau of Labor Statistics (BLS), we have not seen this kind of labor market since 2006. But this impending talent shortage is nothing new for those of us who have been in the space for longer than we would like to admit. Remember the Y2K IT Talent Shortage? How about the dot com or the pharmaceutical talent shortage in the early 2000s?
Employers have been in the driver seat since 2008, when the number of unemployed individuals per job opening rose from a prior low of 2 to 1 to almost 7 to 1 by mid-2009; meaning there were almost 7 unemployed individuals for each job opening. As Chart 1 shows8, as of July 2015 there is clearly a talent shortage. There are now only 1.4 unemployed individuals for each job opening. No wonder the average time to hire has increased by 10.3 days and will continue to do so (New Labor Market Realities: Recruiting Friend or Foe?).
Very few employers will be able to pay employees at the top of the pay scale as a strategy for attracting all the talent they need to address the talent shortage. Even the few who can and do, will not be able to do so for every new hire. Let’s also keep in mind that what has mostly driven our low employment rate has been cheap labor, with job gains going disproportionately to the least educated, and lowest-paid workers5.
Addressing the Supply Side of the Talent Shortage
There are other ways to increase the supply side of the candidate pool for employers without outsourcing or importing talent from other countries. But to do this, employers will need to broaden their talent acquisition strategy to address the impending talent shortage.
There is a big opportunity to do so.
If you combine the (a) recent unemployed and (b) long term unemployed (i.e, those looking for work for 27 weeks or longer) with (c) the marginally attached workers (i.e., those who are on the verge of giving up or stopped looking for work), the unemployment rate increases twofold from 5.2% to 10.4%6. This 10.4% does not include the almost 6.5 million workers who are working part-time (some working as little as an hour a week) but who would prefer full-time work7. With all these individuals sitting on the sidelines this is an enormous supply side – candidate pool – to tap into.
So why are we seeing the emergence of a “Talent War” for tech support, customer service, inbound & outbound sales, billing, collections, order processing, loan processing, software engineers and similar?
Answer: The demand for “Current, Relevant Work Experience” exceeds supply.
A talent shortage is partly the result of employers’ unwillingness to step outside of their comfort zone. There is comfort in hiring those who currently do the same job as the one you want to hire them to do for you. Candidates with current, relevant work experience are able to articulate and describe how they perform the job you need them to do and have recent examples to describe how they carry out their work. In contrast, an individual who has not worked in many months or lacks experience in your particular line of work requires a much stronger leap of faith that they will be successful within your company.
With over 5 million job openings, unless we hire everyone who has been unemployed for less than 6 months, we have to address the talent shortage with a strategy beyond passive, direct candidate sourcing and recruiting of individuals doing the same or similar job for a competitor. For entry level and hourly positions, employers should start building talent acquisition strategies to source, recruit, and screen candidates from the long-term unemployed and part-time workers with transferable skills, as well as retirees and parents who want to return to the workforce.
To address the supply side of the talent shortage many employers will need to add Return to Work and Apprenticeship programs for some portion of their talent needs. Many entry level & hourly positions already begin with structured training programs. Thus, adding content to training to bring individuals’ knowledge and skills up-to-date can pay big dividends. Partnering with local workforce development offices and other workskills development providers is a great way to give candidates the opportunity to ready themselves for your work requirements.
To source, recruit and screen candidates who do not have current work experience, employers need to use recruitment and screening methodologies that focus on aptitudes and competencies. Rather than focusing on recent work experiences, address the talent shortage by recruiting and selecting candidates who have the core work ethics, competencies and aptitude to successfully perform the job given a reasonable amount of upfront training. For insights on competencies for contact centers please review Call Center Agent Recruiting & Selection: Is a single competency profile enough? For specific recommendations on How To Find Great Talent Among the Underemployed Workers see Identifying Underemployed Workers: How to Find Great Talent.
1Schwartz, N. & Applebaum, B. (Sep. 4, 2015). Jobs Report Gives Ammunition to Both Sides of Fed Rate Debate, NY Times.
2Jackie Odum & Michael Madowitz (Aug. 6, 2015). The State of the U.S. Labor Market: Pre-August 2015 Jobs Release, Center for American Progress.
3 Hilsenrath, J. (May 22, 2014). More Gloom for the Long-Term Unemployed from Alan Krueger, Wall Street Journal.
4 Jakab, S. (Sep. 5 – 6, 2015). Jobs Report: What’s Not to Hate? Wall Street Journal, B12.
5 Achutan, L. (Sep. 10, 2015). Glimmers of Hope or Growth Slowdown for U.S. Economy. Bloomberg Business.
6 Republic 3.0 (March 2015). Jobless Rates Fall, But the Long-term Unemployed Still Struggle.
7 Innovate+Educate (2014). Skills Based Hiring.
8 BLS charts are from http://www.bls.gov/web/jolts/jlt_labstatgraphs.pdf