Despite our best attempts to suppress the memory, we all remember it well. Just over two years ago, the pandemic triggered state-ordered shutdowns. Our economy obviously slowed to a crawl, and employers everywhere immediately found themselves with surplus workers. The result was mass layoffs, flooding the labor market with available employees. To get employees back to work, Congress passed the CARES Act to assist employers with wages and to encourage the rehiring of America’s workforce. The ARPA followed in an attempt to stimulate a static economy. The injection of this cash into the economy – along with our adjustment to living with the pandemic and the availability of vaccines – created high demand for goods and services.
The only problem was that during employees’ time in unemployed isolation, something happened. People reevaluated their lives – particularly their work lives. For myriad reasons (and reasons we have yet to fully understand), many chose to temporarily remain outside of the workforce or to exit the workforce permanently. As a result, despite the propellant applied to the economy, there remained a hole where the American workforce once was, and employers found themselves in need of labor, fast.
And so, the war for talent was born. Employers have been competing with each other to secure the limited pool of available workers with ever-increasing and creative incentives. They have tried everything from increases in pay, signing bonuses, remote work, increases in time off, tuition assistance, free food, and many, many other employer-specific perks. For a great number of employers, the war for talent has been long, frustrating, and fruitless. Just ask any entity looking for drivers with a commercial driver’s license. Or a healthcare facility looking for registered nurses. Or a manufacturer looking for a factory worker. (All to say nothing of the skilled trades; they are in a league all of their own).
As employers are fully engaged on the battlefield for talent, they are also starting to notice a[nother] storm cloud on the horizon. In November 2021, and again in January this year, investment strategist Jeremy Grantham was the first to sound the alarm that the economy was likely in a super bubble (three to be exact), and the economy was starting to show all the signs that the bubbles were about to pop (or at least deflate). All that was unknown was the catalyst. In February, Russia invaded Ukraine. Last week, the first bank (Deutsche) warned that a major recession is coming. Netflix’s share price dropped by a third. Amazon reported a $4 billion loss. On Friday, we learned that the economy shrank in Q1.
It certainly remains to be seen whether we will see a recession, and if so, how bad. But it begs the question: could it be that employers are in a war to secure talent they will ultimately be unable to keep if the predictions of recession come true? Should employers really be evaluating the affordability of the hiring incentives they are offering based on today’s demand? Should employers be engaging in the war for talent at all? The answer for each employer will be different. At a minimum, employers should reevaluate how they wage the battle. They should reevaluate their plan, including the long-term sustainability of the incentives offered to prospective employees (i.e., are they recession proof). My colleagues Adam Santucci and Bill Boak will be speaking about the war on talent at our upcoming seminar on May 13. You can register here.