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The labor market has found a new normal again. After the dramatic swings of the Covid-19 pandemic and a multitude of buzzwords, the market has settled into a pattern unlike anything we have ever seen before. If this continues, companies will have to completely rethink their human resources.
First we had “The Great Resignation,” then “Quiet Quitting,” which was quickly followed by “Quiet Hiring.” And now we find ourselves in an unprecedented situation that some economists are calling “The Great Stay.” It’s an unusual time considering how workers are holding on to their jobs and companies are holding on to their workers.
In February, new hires were just 3.7% of existing payrolls and layoffs were just 2.2%. The last time the sum of these two percentages was this small was December 2017, when the unemployment rate was 4.1%. This low labor market outflow, with an even lower unemployment rate – just 3.9% – is unprecedented in the data we have, which goes back to 2001. Typically, emigration decreases when the unemployment rate increases. But right now we are still near the all-time low unemployment rate.
One reason for this lack of migration is the uncertainty that still plagues the economy. The evolution of interest rates, the upcoming elections, the wars in Gaza and Ukraine, and the possibility of corrections in asset markets preoccupy managers, workers and investors. Companies also worry that if they lay off workers in such a tight labor market, they will have a hard time hiring. Even expert opinions on the future of the economy no longer carry much weight, as many forecasters were wrong in their prediction of a recession last year.
So what can a business leader do? The best approach is to take the labor market at face value and adjust strategy accordingly. This means thinking about new hires and existing employees as long-term partners. Here are some ways to do this.
Related: Where will the economy go next? What to watch out for in 2024
1. Plan recruiting efforts to accommodate lower turnover
Employees stay in their jobs longer. In recent figures from the Bureau of Labor Statistics, the average job tenure for American workers has bottomed out at 4.1 years after a long decline. If fewer people leave the door, there won’t be as many people coming in. You can spend more time searching for candidates for a specific position, but that doesn’t mean you can be more selective – there’s still fierce competition for the best employees.
2. Invest more in training
The longer employees stay with you, the more benefits you receive as they acquire knowledge and skills. To reap these benefits over time, you need to start investing in training as early as possible.
You can also know about the type of training you offer; Improving employees’ ability to use devices, software, and processes unique to your company increases their value to you, but does not necessarily increase the likelihood that they will change jobs. However, if you are having difficulty attracting workers, you may want to offer training in skills that are in high demand in the job market. Then you can figure out how to make them stay—which might help you figure out why you had trouble attracting them in the first place.
3. Change the power mix
Training is not the only way to invest in workers. Helping them build their human capital through educational grants also makes them more valuable. Here, too, you can be clear about what type of training you support, such as part-time MBA courses for potential managers or skills-specific courses for individual employees.
Investing in workers also means keeping them healthy and happy. Comprehensive medical benefits, including exercise programs, mental health services and wellness care, can make a big difference, as can free, healthy meals and paid time off. Companies that support growing families, for example through paid parental leave, are also more likely to retain their employees longer.
4. Structure retention incentives differently
In recent years, retaining employees has been such a challenge that some companies have offered retention bonuses after just three months. Because employees are less likely to leave the company, these incentives may be pushed back. Laddering incentives can also encourage workers to stay longer. For example, if an employee’s bonus for staying for two years is 50% higher than the bonus for staying for one year, the employee is more likely to stay there rather than start at the bottom at another company.
Related: Don’t lose those talented team members. 3 ways to capture them.
5. Explore long-term options in all areas
Employees are increasingly viewing their labor supply as a portfolio of different types of jobs and flexible work, and business leaders can do the same – especially in this labor market. Just as there are ways to benefit from long-term relationships with permanent employees, commitment and consistency with temporary and flexible employees also offers great benefits. Reducing turnover and deepening experience in these groups can increase productivity. Our surveys of workers on the Instawork platform suggest that more than half can commit to staying full-time at the same company for at least three months.
Matching these workers with companies looking for long-term talent – in all forms – is a critical task in the current labor market. This will continue to be beneficial well into the future as workers deepen their skills and earn more stable income through closer relationships with companies.