The job market has grown more competitive, and companies are raising wages to attract and retain their talent. The Bureau of Labor Statistics reported that average hourly earnings were up over 5 percent in February 2022. This is great in theory – but when you compare that to the 8 percent year-over-year inflation rate currently standing, employees may feel like they’re getting the short end of the stick.
The Horton Group held a seminar on this topic hosted by Alex Chausovsky, Director of Analytics and Consulting at Miller Resource Group, who works with companies to help strengthen their recruitment and retainment strategies. In this article, we’ll discuss his insights on how the surging inflation rates will impact companies’ talent strategies.
What’s Going on With Inflation?
Various exports have increased in price due to the war in Ukraine and the disruptive supply chains during the pandemic. We are particularly seeing a rise in the cost of food exports, such as wheat, barley and agricultural products. According to Chausovsky, companies are struggling because wage increases have now reached unsustainable levels. In some cases, growth is 10 to 15 percent year-over-year. This is not maintainable for companies long-term because they cannot consistently raise their own prices that much. There will be market erosion and issues with profitability, which will eventually lead to a lack of investment, growth initiatives, etc. This is a real issue of concern from a personal finance perspective and a company’s ability to invest for its own future growth perspective.
Inflation is a tricky concept to understand. The fact that we have such a high inflation rate now means that the number will likely come down throughout 2023. The expectations are that when we make year-over-year comparisons from the second half of 2022 to the second half of 2023, the year-over-year growth will be diminished. So, we’ll see it trend down from three to six percent by the end of the year. But that doesn’t mean prices are going down – that means the increase of prices is happening at a slightly slower pace over time. The tightness in the labor market will persist until 2024 or 2025, and events could throw us into a recession sooner rather than later.
Chausovsky encourages companies to prepare for this increase by working a pricing escalator into future contracts (The Producer Pricing Index, put out by the Federal Reserve Board, is a great reference). A pricing escalator can help companies avoid difficult conversations with their client every time the rate rises for commodities subject to a big inflation rate. Having that as an automated part of the contract automatically ensures this is addressed in a fair, impartial way.
How Will Inflation Impact Talent Strategies?
As mentioned above, it’s difficult for companies to keep up with inflation, and unfortunately, employee wage increases aren’t high enough to match the rising rate. Many companies are finding themselves understaffed, and employees are feeling the effects of burnout. Not being able to increase their pay to keep up with inflation makes them even more stressed.
Money is clearly a big driver in the marketplace right now. But if you work with the assumption that companies are offering a competitive wage to attract talent, benefits packages are equally as important. According to Chausovsky, on a scale of 1-10 based on importance, many job candidates rank benefits packages a nine or 10. Offering great benefits makes up for offering lower wages.
Here are a few benefits to consider more thoroughly, depending on your target employee demographic:
- Health Insurance: While this is important to everyone, younger employees typically don’t think about that because they’re single and their out-of-pocket premiums are typically lower. However, an older employee who has a spouse and multiple kids is more mindful of the options available, as they may be responsible for providing coverage for their entire family.
- Childcare: There has been a significant uptick in companies that offer a back-up plan for their employees in case their normal childcare situation gets disrupted by COVID-19. This is particularly common for nurses because they don’t have the option to work remotely. If their kids can’t go to school and they don’t have a back-up plan in place, they can’t go to work.
- Remote Working: Hybrid and remote work is very much part of today’s workplace landscape. According to Chausovsky, only three to four percent of positions advertised on job sites (such as Monster, Indeed, etc.) offered remote working prior to the pandemic. Now, the number has increased to 16 to 20 percent – quintuple the number of opportunities!
Reevaluate Your Strategy
Leaders who focus on their employees and the future of their company will ultimately attract top talent. Have you given much thought to your talent strategy? The Horton Group can help. Call one of our risk management specialists or employee benefits consultants at (800) 383-8283 to start your path.
Material posted on this website is for informational purposes only and does not constitute a legal opinion or medical advice. Contact your legal representative or medical professional for information specific to your legal or medical needs.