For many companies around the globe, attracting and retaining high-quality talent has become increasingly challenging over the past year. Across multiple industries, unfilled job vacancies have left employers with no choice but to raise wages and benefits in order to fill their talent needs. Exacerbated by the pandemic and secular demographic shifts, the scarcity of qualified candidates has ignited intense competition among employers and taken a bite out of many companies’ profits.
According to a report by the International Monetary Fund1, labor markets in many advanced economies are tighter today than before the pandemic, even though employment has yet to recover to pre-COVID levels fully. In countries like the United States, there are too many jobs without enough people to fill them, as seen below. Recent reports have painted a similar landscape in other parts of the world, including the United Kingdom and Canada.
U.S. National Job Openings vs. Number of Unemployed Workers (in millions)
Source: Bloomberg. U.S. Chamber of Commerce Analysis. BLS Data. As of 5/31/2022.
The unprecedented imbalance between jobs and workers left many businesses incapable of raising wages with no option but to operate below capacity. In contrast, others have been unable to maintain their service and quality standards due to the labor shortage. Yet, not all businesses have been equally impacted by this dynamic.
Forward-looking companies seem to have been able to stay ahead of competitors in the race for talent by tapping into innovative ways to bridge the gap. For example, certain firms have made long-term investments to increase automation across their operations, reducing the need for human supervision. Other companies have turned to professional development to meet demand, including upskilling and redeploying workers.
Businesses have also been investing in improving their employee value propositions and cultivating cultures that people want to be a part of. According to a LinkedIn report2, candidates increasingly gravitate toward companies that showcase people-focused and mission-driven cultures. In response, more firms are offering flexible work arrangements, focusing on engagement, and prioritizing employee well-being.
Going forward, we expect that the global workforce emerging from the pandemic will be materially different from the one that entered it. Investing in the growth of employees, fostering an inclusive culture, and meeting the growing expectations of a diverse workforce will be essential for businesses navigating the tight labor market. In our view, companies that do not adapt to these conditions will face an uphill battle not only attracting top talent but also retaining it.
1 Duval, R. A., Ji, Y., Li, L., Oikonomou, M., Pizzinelli, C., Shibata, I., Sozzi, A., & Tavares, M. M. (2022, March 22). Labor Market Tightness in Advanced Economies. IMF. Retrieved June 29, 2022, from https://www.imf.org/en/Publications/Staff-Discussion-Notes/Issues/2022/03/30/Labor-Market-Tightness-in-Advanced-Economies-515270
2 2022 Global Talent Trends the Reinvention of Company Culture. Retrieved June 29, 2022, from https://business.linkedin.com/content/dam/me/business/en-us/talent-solutions-lodestone/body/pdf/global_talent_trends_emea_2022.pdf
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