Is It Time for These Industries to Increase Compensation?
While businesses in financial activities, healthcare, transportation and warehousing, and manufacturing are leading the economic recovery, some employers have put off their annual or quarterly pay increases. During the height of the COVID pandemic, many companies reduced their overall compensation budgets and froze raises. While this was necessary then, times are changing.
Losing top talent can cripple a business’s ability to maintain production and achieve financial goals. In these specific industries, demand for services or goods is severely high, while unemployment is extremely low. This creates a talent shortage, making it difficult to fill open positions when turnover occurs. This can result in a long time to fill or recruiting cycle for in-demand roles.
So, what can businesses do? One place to look is compensation. While compensation is not the only thing that leads to a job change, it can be a deciding factor. A 2020 study by Achievers found that 52% of respondents cited compensation as their reason for leaving a job. Other reasons given were a lack of career growth (43%) and a lack of recognition (19%).
Finding Enough Workers Will Be Challenging
The circumstances leading to a dwindling talent supply may differ across industries, but the result is the same. Many talent acquisition professionals may find that their best candidates are those currently employed. For hiring managers, try to avoid unnecessary turnover by focusing on retention strategies with your current team, especially if you are in one of these industries.
Finance and insurance
Lending has been the force behind the high employment levels in the finance and insurance sector. The housing boom led to significant growth in mortgage credit. The continued trend is evident, as sales jobs in the industry jumped 4.8% year over year in March. Even during the pandemic’s peak, this industry has been able to retain an unemployment rate below 3.8% since April 2020.
The challenge for filling roles will be finding enough talent and curbing turnover from other employers willing to pay higher wages. High-skilled workers will be sought after by recruiters. In addition to reviewing the current compensation structure, companies may need to target entry-level workers and quickly upskill them to maintain their productivity levels.
Education and health services
Unemployment rates in healthcare and social assistance have seen a steep decline since mid-2020 and have hovered around 4.0% since December 2020. Social assistance includes organizations that offer social, rehabilitation, or childcare services. Since December 2020, hiring has increased for business and financial operations positions, along with admin roles, as more schools and medical offices reopen.
In 2020, women made up 74.6% of this industry’s employment base, so growth will be fueled by women returning to work. So far in 2021, some progress has been made, with over 600,000 women having rejoined the labor force and the female unemployment rate ticking downward.
Workers in these roles and industry may feel exhausted from bearing the brunt of the pandemic restrictions and public health crisis. From an employee retention standpoint, companies may want to consider shoring up compensation structure and benefits, company culture, and support for mental health in the workplace.
The rise in consumer demand for goods has put manufacturers in a strong position for growth. Even with supply chain issues, manufacturers can pass on higher costs to their customers. With demand for goods high, businesses will have larger margins because customers are willing to pay more. LaborIQ® by ThinkWhy expects this demand to continue throughout the year based on the strong performance of specific manufacturing subsectors. Unemployment rates in March are much lower than the U.S. national average of 6.0%: computer and electronic product manufacturing (2.1%), wood product manufacturing (2.6%) and electrical equipment and appliance manufacturing (3.1%). Consumers continue to spend on new homes, remodeling and new appliances.
To keep up with the demand from consumers and maintain business growth, employers need to focus on retention strategies. The cost of turnover can stall businesses’ ability to quickly ramp up production. With a very limited talent supply and the price of goods increasing, this is an industry that could see compensation rise quickly. Keeping up with the market’s pay will be important for employee retention.
Transportation and warehousing
With businesses restocking inventory and consumers buying goods, transportation and warehousing will need lots of workers. Though many of the roles being hired don’t require specialized skills, workers will be able to demand higher compensation because competition will be fierce to attract and retain workers. LaborIQ expects this trend to continue throughout the year.
Hiring Expected to Spike
LaborIQ forecasts the U.S. economy will reach 73 million hires in 2021 and we're already seeing the spike. Currently, the nation has 7.4 million job openings, which is the highest level since 2019. Workers who currently employed, with established training and experience, will be in higher demand for skilled roles. Companies will need to frequently review compensation bands and plan for regular merit increases to retain talent and prevent employees from being lured away by competitors.
When recruiting, companies will want to focus on the value offer to job candidates – compensation, benefits, flexible hours, continued education, tuition reimbursement, etc. If the talent shortage is severe, recruiting entry-level workers and upskilling them is another way to increase talent supply.
LaborIQ by ThinkWhy reports, forecasts and advises on employment conditions and the impact to jobs, industries and businesses across all U.S. cities.