Blog PostFrom Recession to Progression – A Wild Ride to 2017 for Employers
Posted on: January 13, 2017
By Melissa McGuire, Managing Director
To quote Isaac Newton, what goes up must come down. Although Newton wasn’t referring to unemployment, in this case, we can make the analogy work since our local unemployment rate, as of August, finally dipped down to 4.6 percent for the first time since the Great Recession of ‘07.
To understand the true gravity of this, consider that at its peak (March 2010), the unemployment rate was a staggering 11.3 percent. (For reference, the Federal Reserve puts a healthy unemployment rate at 4.5 to 6 percent – so even though the rate has tipped up a bit to 5 percent as of Dec. 2016, we’re still in a good place). This drop, coupled with a look at the many cranes in Charlotte, shows that labor is in demand. And that’s good news for workers, as increased demand typically brings with it rising wages (which we’ll get to later).
So business is booming at the pre-Recession pace, but that doesn’t mean things are the same as they were before 2007. Employers today are faced with a new economic landscape. The Skills Gap, technology, healthcare reform – all of these are items employers must consider when attracting, hiring and compensating talent.
The Skills Gap has widened
Before the recession, employers struggled to address the Skills Gap. This mismatch between skills in demand and skills available has been well documented over the last decade. Now that we’ve returned to our prior unemployment rate, the Skills Gap is once again a topic of concern, both locally and nationally. This shortfall of labor in high-demand areas like healthcare, engineering, technology and advanced manufacturing is widening instead of improving.
For areas like human resources, IT and finance, dramatic changes in technology and data have resulted in new demand areas and affected the labor pool. For example, many HR departments now employ an HRIS for compliance, payroll, benefits and other activities. These systems require extensive training and have changed the skills needed by top HR talent. In the IT world, look at the demand for talent with mobile and cloud development skills, cyber security, risk and audit. In finance, the rise of big data and how it is used in the marketplace have brought about increased demand for those with the skills to access, analyze and report findings to the C-suite.
In a nutshell, it’s safe to say that the Skills Gap has been exacerbated by increased technology in the business world and its components. This reality puts pressure on local companies to hire qualified candidates who can fill open jobs. Even with the steady stream of recent graduates from nearby universities, post-recession demand for employees is expanding, and Charlotte must look outward for hiring.
Bridging the Gap: Contract Workers
Throughout the economic recovery, many employers have taken a gradual approach to adding permanent workers in an effort to manage fixed costs. By relying on contract workers, companies can seek out talent to manage their workload. Contractors represent variable expenses that allow companies to nimbly adjust to any market fluctuations, such as a seasonal shift or downturn. As wages rise and healthcare costs soar, profitable companies should continue to utilize a mix of permanent and contract workers to foster continuity, expertise and flexibility.
In times of low unemployment, the pool of contract labor can be negatively affected. This makes sense; as more companies utilize contract workers, the number of available resources shrinks. But that doesn’t mean employers should stop looking to hire contract employees to meet their increased demands; they just need to know where to look.
The Allure of Charlotte
As a progressive, growing city with the presence of many Fortune 500 companies, North Carolina – and Charlotte in particular – have had the benefit of being a net importer of talent. Historically, our region has been fortunate to have large numbers of people move to our area from the Northeast and Midwest regions. This is a major plus for the area, as our colleges and universities, though outstanding, aren’t able to graduate enough students to fill all of the open opportunities in the Charlotte area. If something were to affect our ability to attract and retain talent, employers would be negatively impacted.
It’s clear that our local economy depends heavily on imported talent, and these professionals have helped the area weather the recession and return to prosperity.
Wages: One Size Does Not Fit All
It doesn’t take an apple falling on your head to know that the productivity and prosperity we’re presently experiencing is affecting wages. At the dawn of 2017, it’s clear that demand for skilled workers in our region is rising. With that comes higher pay expectations from candidates who know the value of their skills. Specifically, Mecklenburg County is ranked in the top 40 counties nationwide for wage growth. This, along with increased healthcare costs, can add up to a hefty expense for employers.
To navigate costs, including wages, progressive companies use market knowledge to strategize. Companies who embrace a one-size fits all approach to salary increases do so at their own peril. While it is easier to give an across the board wage increase, this approach often results in paying under market for some positions, risking turnover, and overpaying for others, resulting in a much higher overall price tag. Instead, gather local market information about wages that consider variations in education, geography and tenure to ensure that compensation levels for key positions are at or above market.
Analyze Your Peers, and Look Local
One of the best things to do when determining wage increases and choosing position candidates is to look around you. What are other employers doing? How are they addressing industry changes? How did they successfully weather the recession? Understanding how the best companies operate is always a good business strategy.
In Charlotte, there are numerous resources you can use to learn about the markets, from wages to in-demand skills to hiring best practices. Local agencies often have the most insight. With deep roots in the community, Sherpa is ideally situated to help your company figure out its next staffing move. As a locally headquartered staffing and recruiting company, we know the strategies that area companies are deploying to hire and retain the talent they need to achieve their goals.
On paper, it might look like we’re right back in 2007, but the economy and markets are more complex than ever before. Don’t tackle them alone. Sherpa can help you navigate today’s complex employment market terrain. Contact us today to get started.