NY Times
By Neil Irwin
June 5, 2021
The relationship between American businesses and their employees is undergoing a profound shift: For the first time in a generation, workers are gaining the upper hand.
The change is broader than the pandemic-related signing bonuses at fast-food places. Up and down the wage scale, companies are becoming more willing to pay a little more, to train workers, to take chances on people without traditional qualifications, and to show greater flexibility in where and how people work.
The erosion of employer power began during the low-unemployment years leading up to the pandemic and, given demographic trends, could persist for years.
March had a record number of open positions, according to federal data that goes back to 2000, and workers were voluntarily leaving their jobs at a rate that matches its historical high. People are demanding more money to take a new job.
“Companies are going to have to work harder to attract and retain talent,” said Karen Fichuk, who as chief executive of the giant staffing company Randstad North America closely tracks supply and demand for labor. “We think it’s a bit of a historic moment for the American labor force.”
This recalibration between worker and employer partly reflects a strange moment in the economy. It’s reopening, but many would-be workers are not ready to return to the job.
Yet in key respects, the shift builds on changes already underway in the tight labor market preceding the pandemic, when the unemployment rate was 4 percent or lower for two straight years.
That follows decades in which union power declined, unemployment was frequently high and employers made an art out of shifting work toward contract and gig arrangements that favored their interests over those of their employees. It would take years of change to undo those cumulative effects.
But the demographic picture is not becoming any more favorable for employers eager to fill positions. Population growth for Americans between ages 20 and 64 turned negative last year for the first time in the nation’s history. The Congressional Budget Office projects that the potential labor force will grow a mere 0.3 to 0.4 percent annually for the remainder of the 2020s; the size of the work force rose an average of 0.8 percent a year from 2000 to 2020.
An important question for the overall economy is whether employers will be able to create conditions attractive enough to coax back in some of the millions of working-age adults not currently part of the labor force. Depending on your view of the causes, the end of expanded pandemic-era jobless benefits might have an effect too. Some businesses may need to raise prices or retool how they operate; others may be forced to close entirely.
Higher wages are part of the story. But wages alone aren’t enough, and firms seem to be finding it in their own best interest to seek out workers across all strata of society, to the benefit of people who have missed out on opportunity in the last few decades.
“I’ve been doing this a long time and have never felt more excited and more optimistic about the level of creative investment on this issue,” said Bertina Ceccarelli, chief executive of NPower, a nonprofit aimed at helping military veterans and disadvantaged young adults start tech industry careers. “It’s an explosive moment right now.”
In effect, an entire generation of managers that came of age in an era of abundant workers is being forced to learn how to operate amid labor scarcity. That means different things for different companies and workers — and often involves strategies more elaborate than simply paying a signing bonus or a higher hourly wage.
At the high end of the labor market, that can mean workers are more emboldened to leave a job if employers are insufficiently flexible on issues like working from home.
Efforts like one at I.B.M. are, to some degree, a rediscovery in the value of investing in workers.
“I do think companies need to relearn some things,” said Byron Auguste, chief executive of Opportunity at Work, an organization devoted to encouraging job opportunities for people from all backgrounds. “A lot of companies, after the recessions in 2001 and 2008, dismantled their onboarding and training infrastructure and said that’s a cost we can’t afford.
“But it turns out, you actually do need to develop your own workers and can’t just depend on hiring.”
Any job involves much more than a paycheck. Some good jobs don’t pay much, and some bad jobs pay a lot. Ultimately, every position is a bundle of things: a salary, yes, but also a benefits package; a work environment that may or may not be pleasant; opportunities to advance (or not); flexible hours (or not).
Statistics agencies collect pretty good data on the aspects of jobs that are quantifiable, especially salary and benefits, and not such great data on other dimensions of what makes a job good or bad. But it is clear, as the labor market tightens, that people routinely favor those less quantifiable advantages.
That has become vividly apparent in the restaurant industry, which is facing extreme labor shortages.
“Traditionally in restaurants, it was: ‘Hey, this is the job. If you want these hours, great; if not, we’ll find somebody else,’” said Christopher Floyd, owner of the hospitality industry recruitment firm Capital Restaurant Resources in Washington. “Now employers have to say, ‘You have the qualities we’re looking for; maybe we can work out a more flexible schedule that works for you.’ Employers are becoming much more cognizant that yes, it’s about money, but also about quality of life.”
Whether it’s a bigger paycheck, more manageable hours, or a training opportunity offered to a person with few formal credentials, the benefits of a tight labor market and shifting leverage can take many forms.
What they have in common — no matter how long this shift toward workers lasts, or how powerful a force it turns out to be — is that it puts the employee in the position that matters most: the driver’s seat.