In the post-pandemic world, workers are in high demand and hold an advantage setting the terms of engagement. Staffing firms need to adapt to the increasing churn, especially with external contact workers.
Several systemic factors led to the recent shortfall in workers:
Workers quit to stay remote. When Covid-19 first started, most professional workers were able to work from home. In recent months, however, many companies began calling their workers back to the office on a full-time or hybrid basis. Meanwhile, many workers chose to quit rather than to come back into the office.
Women left the workforce permanently. Covid lockdowns were hard on parents when schools and daycares closed. Most frequently, it was mothers who stayed home to take care of their children and help them with remote or home schooling. Three years later, .
Workers commanded higher pay. GDP was running hot. When GDP is between 2% and 4%, there is a good balance of workers and organizations with money. However, when GDP rises above 4%, there are more organizations, large and small, with money to spend than there are workers available.
A GDP above 4% favors the worker as organizations start to outbid each other, wages rise and workers switch jobs more frequently.
Coming out of Covid, GDP hit 10.7% in 2021 and 9.2% in 2022. Meanwhile, interest rates were below 1%, money was easy to borrow, the stock market was up and capital budgets roared, creating a huge demand for talent as restrictions lifted. The rapid increase in volume of jobs created an imbalance in favor of the worker, and as a result, pay rates shot up 6.1% in 2022.
According to Pew research, the US quite rate reached a 20-year high in November 2021. Sixty-three percent of those who switched jobs in 2021 cited low pay as a contributing factor in their decision.
The Tide Is Changing
Nothing is ever permanent, and the worker churn is beginning to ease. Here are some factors:
Interest rates are rising. Interest rates rose to 5.25% from near zero in March 2022. As inflation started to rise out of control, many countries around the world raised interest rates to bring it back down. When interest rates rise, borrowed money becomes expensive and capital budgets and headcount start to decline. Many companies, led by the technology sector, are doing large-scale layoffs.
Wages are stabilizing; more workers are staying put. GDP is cooling off. When GDP is between zero and 2%, workers start to lose the wage benefit when switching jobs. GDP had a great run coming out of Covid; however, the latest GDP figures are 1.1% and declining. We are in the GDP range that favors employers who have jobs.
Work is going back to the office. Remote work is phasing out to either a hybrid model or returning to the office full time. Disney has moved to four days a week in the office, Starbucks to three days a week and Goldman Sachs to a full five days a week. Even tech giants like Google and Meta are back in the office three days a week.
Timeless Tactics to Stop Turnover
Regardless of where the balance of power is — with the worker or employer — there are two factors that are universal in keeping workers engaged.
Good managers keep good teams. An old rule of thumb says, “Employees don’t leave companies; they leave managers.” Workers want a boss who adds value to their thinking and success, but a weak manager will cause turnover. A recent Gallup survey showed that 50% of workers left their job “to get away from” their manager, noting that “the real reason people quite their jobs is because the managers charged with ensuring their employees’ success don’t care enough to meet their needs as valued employees and human beings.”
Social connections matter. Two-thirds of professionals would decline moving to a new job if they had work friends at their current company. Working 40 to 50 hours a week, we often spend more time with the people we work with than the people we live with. Working with people we care about and enjoy being with creates commitment to the company. Paid volunteer days together, a well-lit and well-used lunch room, and shared celebrations do a lot for improving retention.