With Workers Coming In From the Sidelines, Hiring Could Get a Little Easier

If there’s one thing you can count on in a conversation with talent acquisition leaders, it’s hearing how hard it is to hire people. Last week, at the spring ERE Recruiting Conference, anytime two people would get together, the talent shortage was sure to come up. We’ve been hearing about this for so long now that its become an article of faith.

Yet as much as recruiters and hiring managers bemoan the paucity of skilled workers, it seems that in employment, the law of supply and demand doesn’t apply. Economists have been predicting that the shortage of workers and the growing number of jobs will force employers to hike wages above 2% that’s been the norm since the Great Depression. And while we’ve seen some increase, it hasn’t been much. Hourly wages for all private sector employees have crept up since 2015, Last year the average was 2.7%. Between 2010 and 2015 the average was a little under 2.1%.

When you factor in inflation and the rising share of medical coverage employees have to bear, a 2.7% raise doesn’t yield much in the take home pay.

Let’s look at one more data point: the wage change for just production and nonsupervisory workers. Last year, their hourly pay rose 2.4%. In 2007, before the full effect of the recession hit, the average pay increased 4%.

Averages don’t tell the whole story of course. Drill down into specific sectors and occupations and you’ll find above average increases, some quite substantial. In the data processing, hosting and related services sector, the Bureau of Labor Statistics (the source of all these data points) reports the average weekly pay increase last year was 6.7%. The average weekly increase for all employees in accounting and bookkeeping services was 3.1%; the five year average is 3.9%.

Overall, though, employers aren’t feeling the need to raise pay to attract workers. That raises the question of why.

For awhile, employers were able to draw from the vast pool of the unemployed and the underemployed. At one point in 2010, this group accounted for 18% of the U.S. labor force. Last month, the percentage was 8.1%. Still almost twice the national unemployment rate, but right about where it was in the years before the recession. Many in this group are working part-time because they can find full-time jobs with the skills they have.

However, there is a group of people out there who do have the skills and the experience hiring managers want. Until recently, though, they haven’t wanted those jobs. This group of 22.5 million people in their prime working years — 25-54 — are not in the labor force. This ocean of untapped potential started growing 20 years ago; the recession only accelerated the rate. Economists and social scientists have a number of theories why including the rise of the gig economy, which has been nearly impossible for anyone to quantify with any sense of accuracy.

Nevertheless, in 2015 — the year the unemployment rate fell below 5% — the trend reversed. Beginning in September 2015, when the national labor force participation rate hit bottom at 62.3%, it reversed course and has since climbed to 63% in February. That equates to about 720,000 workers. Of those 25-54, however, the number of sidelined workers reentering the workforce was 1.53 million. The difference between those two numbers reflects those over 54 years of age leaving the workforce, primarily by retiring.

At least two factors are coming into play to lure these workers back:

  1. Wages are creeping up; significantly for some occupations and industries
  2. Unemployment is at a 17 year low of 4.1%, making it easier to find a job.

Let’s look at another age cohort; those who are 55-64. These are your most senior and most experienced people. Between 1998 and 2008 they were leaving the labor force at an average of 2.9% per year. Ten years later, the annual average fell to 2.3%. Using 2015 again as our turnaround year, the average for the last three years is 1.3%. In terms of people, what these percentages mean is that on average fewer than 51,000 workers in this age group are leaving the workforce. Between 1998 and 2008 the annual average was 270,000.

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What’s the point of all these numbers? To put it simply, the war for talent is still on, but fresh troops are entering the field. Those who have not been in the labor force are coming back in and at the prevailing wage.

The data also suggests that if you are serious about filling those jobs with workers who have the skills and experience, then mine the large numbers of older workers who are ready to be lured back. Focusing your recruiting efforts only on millennials dramatically limits your talent pool. There just aren’t enough of them to fill all the openings. By reaching out to older workers via your alumni network, your retirees and marketing campaigns targeted to this group, not only can you find the talent you need, but it’s a way to train up your younger, new workers.

There’s long been resistance to hiring people who have been out of work and though age is not legally supposed to be considered, we know it has been. However, we may be seeing here the beginning of a change in attitude; one forced upon employers by the challenge of finding the kind of workers hiring managers say they are looking for at a price they are willing to pay. As long as these workers continue to reenter the labor force — and get hired — employers will benefit both from their experience and by limiting the amount they have to pay to fill jobs.

John Zappe

John Zappe is the editor of TLNT.com and a contributing editor of ERE.net. John was a newspaper reporter and editor until his geek gene lead him to launch his first website in 1994. He developed and managed online newspaper employment sites and sold advertising services to recruiters and employers. Before joining ERE Media in 2006, John was a senior consultant and analyst with Advanced Interactive Media and previously was Vice President of Digital Media for the Los Angeles Newspaper Group.

Besides writing for ERE, John consults with staffing firms and employment agencies, providing content and managing their social media programs. He also works with organizations and businesses to assist with audience development and marketing. In his spare time  he can be found hiking in the California mountains or competing in canine agility and obedience competitions.

You can contact him here.