Workforce Trends to Watch in 2022

Transcript:

Welcome to Subject to Talent, brought to you by Allegis Global Solutions. Similar to you, we're always trying to learn more. On this podcast, we speak to workforce and talent experts from around the world, covering market trends, technology, and our ever-evolving, dynamic industry.

Bruce Morton: Hi, I'm Bruce Morton, the host of Allegis Global Solutions' Subject to Talent Podcast. Today I've asked Kaitlyn Canarr, a Senior Analyst on the AGS Market Analytics Team, who specializes in talent intelligence and labor market economics to join me. We're going to have a discussion on the workforce trends to track in 2022. So, Kaitlyn, welcome and first, Happy New Year.
Kaitlyn Canarr: Thanks, Bruce. Thank you so much for having me. Happy New Year to you, too.

Bruce: Great. Well, we always ask our guests the same first question; and that is, how did you get into the workforce industry? And if you can add that as well, just to tell us about the Market Analytics function at AGS, and how your team works with clients and program stakeholders, that'd be great.

Kaitlyn: Well, I stumbled into the workforce industry kind of by accident. Right out of college, I was... Well, I was an Economics major, and right out of college, I started working for a financial services company; and quickly realized that that was not the path that I wanted to take. And I had some connections with some people that had worked for Allegis Global Solutions; and I was connected to the Market Analytics Director, and they said I was the quickest hire that they had had. And I'm very happy on the team. I think it's a really exciting team to be a part of.
And we have a really unique function at AGS; we're a part of the Global Business Services Team, and our primary purpose is to help our clients make data-driven decisions around their acquisition of talent. This can come in a few different forms. One aspect of our team's function is to advise our clients on their max bill rates, and really what they should expect to be paying for their contingent workers.

And then the second part of what our team supports with, really is advising on emerging workforce trends, and using market intelligence to help form strategic decisions in their acquisition of labor.

Bruce: Great. Wow. Excellent. So, just before we kick off our conversation about the trends we should be looking for in 2022, let's just look back for a second. If you can give us a summary of the state of the labor market that we had, as we closed out 2021.

Kaitlyn: Yeah. So we will just do a little bit of a walkthrough history. So, prior to the COVID pandemic, if we look at the data from 2019 and early 2020, we were in historically tight conditions. There was an all-out war for talent. Unemployment was at historic lows, and jobs were just being added at a pace that the labor force was not able to keep up with. So competition was very, very intense.
And then, of course, COVID hit in early 2020, and the US lost 22 million jobs. In the 20 months following, we've recovered 83% of jobs, and the unemployment rate has returned back to the very low single digits. In the early months of COVID, in April and May, the unemployment rate had skyrocketed up to almost 15%. It currently sits at 4.2%, which is still very, very low. Again, pre-pandemic, the unemployment rate was around 3.5%.

So we've had a very strong recovery following COVID. We've seen a lot of industries continue to grow throughout the months following those initial losses. A lot of industries have fully recovered their losses that they suffered, that were attributed to COVID-19, and there are more jobs left to fill. So, currently, the difficulty is the labor force; because we've lost workers in the labor force, and there was kind of a mass exodus of workers. COVID really ignited the trend of retirement, so we're seeing Baby Boomers are retiring in mass quantities.

So the labor force is getting smaller, as jobs continue to be added to the market. And it's really what is driving the decline in the unemployment rate, and really a lot of our programs. And I think a lot of us have seen on the news, even ourselves, widespread labor shortages. It just is really, really challenging to find workers to fill any job in the current state.

Bruce: Wow. So these Baby Boomers retired. Being a Baby Boomer myself, that's way out on the horizon; but with multiple children in college, it's probably causing that. Anyway, so you mentioned now that the participation rate dropping. Is that, and obviously time, it is one of those factors. Are there other factors that stick out, in terms of why some of these people have yet to come back, or are they going to come back into the workforce at some point?

Kaitlyn: That's a great question. So we've seen the, what we refer to as, the labor force participation rate; and what that tells us is, it's kind of self-explanatory, but it tells us the rate of the workers that are available to work in the labor force, how many of them are actively participating. That is currently the lowest that it's been in almost 50 years. Workers know that kind of the ball is in their court. They feel empowered, knowing that there are just a surplus of available jobs out there. And that they've kind of won, in the war on talent. So I think there are a lot of workers that are choosing not to come back of their own volition. They're waiting for the right job, or the right opportunity; or if they're close to that retirement age, they're choosing to leave the labor force early, and retire early if they can.

Bruce: Yeah. I guess anybody listening, you just walk down your local High Street, and you see all the "help wanted" signs.
Who'd have predicted that a couple years ago? I think it's crazy. But it sounds like the data is pointing to the fact that those sourcing challenges you talked about in 2021, they're not going anywhere soon. So with that in mind, let's get into the next 12 months; and what are some of those key workforce trends that anybody from hiring managers, all the way up to the C-suite execs need to be really taking notice of and be aware of, as they plan the most efficient, effective way to get work done in the next 12 months?

Kaitlyn: Exactly. So, the sourcing challenges that we felt throughout 2021, and even prior to the pandemic, those are expected to continue into 2022. And we're going to see that continue to impact workforce trends. I think we have all heard the term, the Great Resignation. I think that's something that is getting a lot of attention these days. And if anything, I think sourcing in competition is only going to continue to become more competitive; because we're seeing historic numbers of job openings, historic numbers of quit rates.

People are really enticed to different offers that have maybe better benefits, or that offer more flexibility. Compensation is not the only factor that is at the top of mind these days. The younger workforce is taking up more of the labor force, and the priorities are different; and flexibility is a big one for the younger generation. So I think that's really going to impact the trends that we see next year. 

COVID really accelerated the trend of remote work. I think a lot of companies were kind of backed into a corner, and they had to adopt that strategy, just because of the nature of COVID. And I think that's something that is definitely going to continue to be a strategy that's used throughout 2022, just to attract workers to fill current positions, but also retain the workers that they currently have.

Bruce: Yeah. And you touched on this slightly, the concept of remote working. Obviously, many, many people have opinions on that. It's hard to read news feed without some mention of that. So, from the data, purely looking at the data for that perspective, is it remote working here to stay?

Kaitlyn: I think it's safe to say that remote working is here to stay, at least in some capacity. Even prior to COVID, we had remote work, right? And I think we've seen a lot of companies have kind of been shown by their workforce that, "We can work remote. Our production and our productivity and our performance doesn't have to suffer as a result of that."

We have seen in, particularly the highly technical industries, so finance and professional and technical services, which is an industry that includes temp labor, and IT workers; those industries have continued to adopt the remote work strategy. So when we look at remote work across all industries, there's about a 14% average across all workers, that work remote.

But when we look at professional and technical services and finance, those industries that really employ that highly, highly skilled talent, they're more than double the national average. So I think that's certainly going to be a trend that is here to stay in those highly technical industries. Even in some lower-end skill sets, so call center, or those lower-end professional skill sets; that's definitely a strategy now that employers are embracing more, because it's even harder to find that lower-end talent.

Bruce: So as organizations are thinking about that, and other alternative ways getting work done, you mentioned at the outset that what other work you do is advising on bill rates for non-employees, the extended workforce. Are organizations genuinely embracing that as a necessity, or as an opportunity, the concept of work anywhere? Sort of releasing the shackles of "must be based in this location," for those that are working at home. Are you seeing organizations taking advantage of that, or realizing that that may be part of the solution?

Kaitlyn: Yeah. Absolutely. I think even prior to the pandemic and throughout the pandemic, a lot of our programs and employers just in general, continued to experience sourcing difficulties. I remember very early on in the pandemic, presenting to a lot of our clients, and prefacing what was going on in the labor market, with, "Just because there have been a significant number of jobs lost, that does not equate to an influx of available talent." The labor shortages that were present prior to the pandemic, are still present today, and they've gotten even worse.

So I think as employers continue to kind of feel that pressure throughout the pandemic, and they experience success in sourcing outside of wherever they may have a footprint, they are able to tap into different markets where there's a more favorable candidate pool of workers that may have the skill set that they're looking for. Or maybe competition isn't as intense in certain locations, or maybe it's a little bit of a cheaper market to source talent in; those are all things that companies and programs really embraced during COVID, and are continuing to implement post-COVID as a new sourcing strategy. 

Bruce: Right. And as we think about the workers themselves, obviously, organizations can have a strategy of how they want to get work done, and the types of people they want to attract, and how they want to attract them and retain them. But through the workers' lens, there's obviously been a massive growth in the contingent labor category, and therefore, more people working as non-employees and nontraditional employees. And those folks, at least those that I've seen, tend to put top of the list, is it gives them the flexibility to work on more projects, as opposed to the same old, same old every day. So, are you seeing any evidence of that, from organizations “projectizing” the work, to continue to motivate or increase the motivation of particularly, the younger generation?

Kaitlyn: Yeah. That's a good question, Bruce. I think we are certainly seeing that strategy pop up a little bit more frequently. There are a few different things that employers are using to kind of keep their workforce engaged, so to speak; that can be boot camps or training programs, or investing in up-skilling or re-skilling. Those are all things that are becoming more and more popular; because employees, whether they're temporary or permanent, they want to feel invested it in, and they want to feel that their work is engaging. And employers are starting to hear that; and the way that they're responding to that is whether it be through different types of technology, or different learning programs. 

We have a bunch of platforms here at AGS that continue to help us grow and learn and achieve different goals. So I think that's definitely going to be a focus for employers throughout the next year, as they focus not only on attracting new talent, but retaining their permanent workers and their temporary workers.

Bruce: Right. And as you look at the hard data here, and I come back to the "help wanted" signs. You're seeing these crazy sign-on bonus numbers that are thrown about, so you've got to be thinking that the hourly rate is going up as well. Is the data backing up that theory?

Kaitlyn: Yes, it is. We are seeing a lot of pressure on wages over the last couple of quarters. And the way that we look at that is through the Employment Cost Index, which measures compensation cost. So, a typical quarterly increase is about .5%. And through the last three quarters, we've seen that Employment Cost Index change quarter-over-quarter three times, two times the typical quarterly average of .5%. So it's present now, more than ever, I would say, are the wage pressures; because there's a lot of pressure on employers to fill their roles quickly.

Bruce: Right. So in your role, then the typical cycle of how often an organization needs to be looking at their bill rates and benchmarking, state by state of what they're paying, or zip code by zip code, the need is obviously more frequent now.

Kaitlyn: Yeah. It's very necessary. We, of course, recommend reviewing rates on an annual basis; but a lot of it's not always realistic to keep your rate card up-to-date annually, and approve increases across the board every 12 months. So I think in 2022, that certainly should be a priority, if it isn't, because that's going to really give employers a little bit more of a competitive edge, if they're out there advertising a competitive wage.

Bruce: Right. And I guess it's not one size fits all, as well. That I guess, is different by skill set, by location.

Kaitlyn: Yep, of course.

Bruce: Yeah. I know your team looks at metrics across the whole kind of life cycle, from sourcing and attracting, and then hiring of course; but also, the onboarding, retention and management. So what is the data telling us is happening post-hire now?

Kaitlyn: So post-hire, we're seeing a few different things happen. First, we're seeing time to fill increase across the board, because everyone is experiencing those widespread labor shortages. So it's getting harder and harder to source workers to begin with. On top of that, we have a historical number of job openings. According to the Bureau of Labor Statistics, that's the entity that collects the employment data here in the US, there were 67 unemployed workers for every 100 job openings in October. So with such a gap, in such a labor deficit, that is becoming increasingly challenging to kind of combat. And we're seeing that in post-hiring, too.

So we've seen an increase in negative attrition, because workers are easily enticed to other opportunities. If there's a couple dollars more that are being offered, or if there's more flexibility, or if it allows them to work from home, it's really... I know I keep saying it, but the ball really is in the employee's court, because they have kind of the ability to pick and choose what's going to fit what they're looking for. So we're monitoring that post-hire, but I think it's really important to just really keep a pulse on evaluating the quality of the candidates, and if it's possible to maybe invest in re-skilling or up-skilling entry-level talent for some of those higher-end roles.

Bruce: Wow. That's really interesting stats. So, even if everybody came back to work, we were talking about that earlier, the drop off in the working population. If everybody came back, we still wouldn't fill all the jobs that are open right now.
Kaitlyn: No. So, if every single person in the US that lost their job due to COVID-19, if they were to come back to work today, we would still have a deficit of over 7 million people, to fill all of the jobs that are open. 

Bruce: Wow. So organizations truly do need to be thinking about different ways of getting work done. So, I know we focused a lot on North America, because obviously that's your personal area of focus for AGS. But if I could just put you on the spot, and we could just go around the world for a few minutes, how does this data shift slightly, region to region?

Kaitlyn: So, in EMEA, we're seeing pretty similar trends as here in the US; they also have a record high number of job openings. When we look at the unemployment rate in the UK, it's only 0.3 percentage points higher than pre-pandemic. So, they're also combating significant labor shortages there as well.

When we look at things on an industry level, we see a similar story that we see here in the US: finance, IT, professional, technical services; that high-end, highly technical, highly skilled talent. The industries that primarily source that talent did not suffer significant impacts from the pandemic; and they've actually continued to grow, even throughout the pandemic. So, sourcing that talent over in EMEA is going to continue to be challenging. I expect that that will probably become even more intense throughout the next year.

A little bit of a different story in APAC. That's a slightly different... The effects in that region have been different, just because there were a lot of the countries there had closed their borders throughout COVID. But the interest there of course, is in India, because outsourcing workers in India has really skyrocketed throughout COVID, and even post-COVID. That’s a strategy that employers are using now, to offer, or to entice workers that are looking for that flexibility. Or maybe there's a cost savings advantage there. So that has kind of trickled into the competition that's resulted today, because that labor was tapped into during COVID. Now the conditions are even more competitive there than to begin with. So we've seen a lot of rate inflation globally, just as we've seen here in the US. And I think the recovery really will depend a lot on how employers engage their workers now, and how they tap into different strategies to attract other workers.

Bruce: That's great. Thank you so much. And understatement, intense labor shortages; alongside that, we've this ever-changing market. Every organization, even their customer base is changing, literally daily. So you could say that data, as a data geek, I'll call you for a second, you could say that data is certainly finally getting its moment in the sun. I'm a massive data fan. So I'm in the same camp.

So organizations can... I don't use any excuse for them making workforce decisions now based on gut feelings. I think we're there. That ship has sailed. It's now all about data. But before we go out here, can you just share from your perspective, the "why" behind the data. Why do you think it's imperative for companies now to look at data, and not just use that phrase "data-based decision" or "data-informed decisions;" but really have data at the center of their strategy?

Kaitlyn: Well, Bruce, I love this question, because I am a data geek, as you said. And I think, in our world, data really is synonymous with visibility. You can always rely on your data. You can always come back to your data. It's something that's concrete, it's factual. When we look at the data, just labor market data, that's factual data that we use in a different way, to have more of a consultative approach, and form strategic decisions.

And we see a lot of our clients benefit from that. So I think data is something that should be embraced by organizations. It can really only benefit the decisions that you make. And it really allows you to have that insight into your own workforce, and what's going on with your own employees. And I think knowledge is power. Right? We always want to have as much knowledge as we can; and there's a surplus of data available out there. So, I encourage everyone to kind of be a sponge when it comes to data, and soak up as much as you can; because it can be powerful when it's used the right way.

Bruce: Well, thank you so much for joining me today, Kaitlyn. This has been fascinating. And I truly, truly appreciate all the work you do, and am excited to see the trends throughout 2022.

Kaitlyn: Yes. Thank you so much for having me, Bruce.

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