Much higher wages alone would probably not clear churning and distorted global labour markets at the moment — and for many workers, they may not even be the primary demand. If future pay growth dictates whether this year’s headline inflation spikes persist and booming demand for scarce skills is a central determinant, then workers, companies, policymakers and investors need to fasten their seat belts for the year ahead.
Yet, it’s not always that clean. Incoming corporate hiring surveys reveal outsize demand for more workers as post-pandemic economies reboot — but they also show the ability to attract and keep staff is not solely based on compensation.
An HSBC survey polled more than 2,000 business leaders in 10 countries and concluded that stiff competition for talent means companies are having to think laterally about how they attract and retain workers. The survey showed firms expect staff numbers to increase by a whopping 13% over 12 months to meet 20% revenue growth targets, with companies in the United States, Mexico and India leading the way.
More than 40% expect to lift workforces by more than 20% and over two-thirds are already in hiring or re-training mode. But while nearly half of the firms still see salary and financial benefits as the main factor in securing talent, almost as many now see as much emphasis on flexible working, location and ‘wellbeing’ policies as key deciders in both a post-pandemic hiring spree and the scramble to keep existing workers.
The survey’s not an outlier. In a report entitled the “Great Attrition,” management consultancy McKinsey & Co points out that a record number of employees are quitting or thinking about doing so, and more than 15 million U.S. workers have walked away since April this year.
McKinsey reckoned companies were struggling to understand the reasons, and financial incentives alone did not seem to make a difference to workforces now seeking flexibility as well as a greater sense of purpose, belonging and recognition. It included a survey of employees in five countries — Australia, Britain, Canada, Singapore and the United States — that found 40% were at least somewhat likely to quit over the next 6 months in sectors ranging from health and education to leisure and hospitality and white collar jobs at large. Strikingly, more than a third had voluntarily left jobs over the past 6 months without having another one to go to.
The extent of wage pressure going forward is perhaps the biggest investor conundrum of the moment — not least with steep energy price rises likely to kick in during the Northern winter. For many, central banks’ insistence that this summer’s 3%-5% inflation rates in Europe and the United States are transient and solely down to pandemic-related bottlenecks will be sorely tested by whether pay awards and settlements over the next 12 months assume those higher inflation rates are here to stay. The true health of the global labour market may not be known until well into 2022.
Canadians are finding it difficult to match up current unemployed workers with available jobs
The “mismatch” between Canada’s labour demand and supply is hitting the most pandemic-impacted sectors particularly hard, a phenomenon that TD Bank Group experts say is likely to push wage growth higher in those sectors. Even as the domestic unemployment rate remains well above its pre-pandemic level, Canadian employers’ demand for workers has risen faster than their ability to hire them, leading to a 4.8% vacancy rate in July, when the most recent Statistics Canada data was available.
That job vacancy number is significant, TD economists Sri Thanabalasingam, Uthman Adepoju and James Marple wrote in a note. “Based on the relationship between job vacancies and unemployment that existed prior to the pandemic, the job vacancy rate in July would be consistent with an unemployment rate roughly half of what it is today.”
It’s become more difficult to match up current unemployed workers with available jobs, the authors wrote, due to factors including health concerns, the reliability of childcare, occupation-switching — particularly among workers in pandemic-affected sectors — and an increase in the long-term unemployed.
Wage growth has stayed “relatively subdued” even as concerns of labour shortages have reached a fever pitch, but “faced with staffing shortages, firms may be left with little choice but to increase pay to attract new workers,” they said.
The accommodation and food services sector is making an “outsized contribution” to market imbalances, the TD economists wrote. That’s followed by the business, building and other supports sector and the finance and insurance industry, which has seen significant labour demand growth thanks to real estate and financial market activity in the pandemic, but may be suffering from a shortage of available workers with the right skillsets.
Thirteen of the 18 sectors Statistics Canada measures — representing 75% of total employment in Canada — had a gap between labour demand and supply of only around one percentage point, the TD economists wrote. Despite this, 10 sectors saw labour demand grow faster than supply between May and July this year, amid provincial economic reopening.
Unemployed workers, particularly the long-term unemployed, filling available postings could ease labour shortages in the near-term, the authors wrote, but career changes, skill deterioration or mismatch with market demands could prolong the tight labour market, adding to wage growth pressures.