The U.S. economy is beginning to rebound from the past years' pandemic and lockdowns. Gross domestic product, the broadest measure of goods and services made in the U.S., grew at a 6.4% seasonally adjusted annual rate in the first quarter of 2021. Vaccinations are increasing, and big federal stimulus payments are driving more consumer spending. Additionally, job postings were up 24% in April compared to February 2020, just before the pandemic hit.
This increase in job postings would normally mean that the workforce is booming. But that isn't the case. In April 2021, job openings in the U.S. reached an all-time record high number of 8.1 million. Sixteen million Americans are still receiving unemployment benefits. Businesses can't find enough people to hire. Why is it so hard to find workers?
The answer is complicated and is the result of multiple factors—one reason is that many adults simply don't want to go back to work for fear of getting, or spreading, COVID-19.
Secondarily, more than half of school-aged children are still learning remotely for at least part of the school week. Many parents find it challenging to go to a worksite when their children are at home.
Another factor is the unemployment benefits that unemployed workers are receiving. In some cases, the benefits are higher for hourly workers than the wages they could earn in available jobs. Let's take a closer look at this third factor using an example of a worker who makes $12.50 an hour and works 40 hours per week, bringing home a weekly wage of $500.
Under relief bills passed by Congress, Americans receiving jobless benefits get an additional $300 per week from the federal government. That is on top of their regular state unemployment benefits, which average $318 per week (U.S. Department of Labor). So, in this example, the worker is faced with working 40 hours per week and earning $500 or staying at home on unemployment and receiving $618 or 24% more (Figure 1). For some people, this makes not working an attractive option.
For part-time hourly workers, this gap is even greater. A person who is working 20 hours per week at $12.50/hr. stands to receive about $460 per week under unemployment, 84% more than the $250 per week wage they would receive. It's not surprising why businesses are struggling to find workers. The jobs are there, but the workers are not.
In an effort to attract more workers, some employers are offering to subsidize health insurance costs for their employees. However, the COVID-19 relief package signed on March 10, 2021, provides new health insurance premium subsidies. According to the Department of Health and Human Services, premiums will decrease an average of $50 a month per person, and some people could save hundreds of dollars each month. Millions of people are signing up for these benefits.
This unbalance requires states to try new tactics to get people back to work and businesses performing at pre-COVID levels. Eighteen states recently announced that they are making plans to discontinue the federal government's $300 per week supplemental unemployment benefits program early. The federal program is not set to expire until September 6, 2021. Some states are even offering a one-time bonus to workers who will return to work.
It's hard to predict whether most state governments will follow suit to reduce or eliminate the federal unemployment benefit before its scheduled expiration. Until then, how do employers in states who are not making changes overcome these challenges? There are three tactics employers can institute to move forward with hiring at a more accelerated speed.
Increasing wages to compete with the inflated unemployment payments can entice workers, especially those nervous about finding employment later when the additional benefits disappear, and more people are going back to work. This option requires employers to think long-term as they may encounter challenges in lowering wages again in the future or once the market returns to pre-COVID status.
Increasing hours will increase the employees' paycheck and, in turn, compensate for the lack of labor. This practice can work well to solve both challenges, at least in the short term. Still, employers must be careful about the length of increased hours to avoid burnout, which could ultimately lead to turnover.
Increasing a talent pool requires loosening job qualifications, educational requirements, and experience to allow a broader net of workers to apply. This tactic can work well for businesses as long as more extensive training practices are put in place. It also allows employers to expand on diversity and inclusion efforts in ways they have not done previously.
These are unprecedented times, and with multiple factors at play in workers determining if the time is right for them to return to work or not, employers don't have as much control as they've had traditionally. We could assume that once the federal unemployment benefits expire, the majority of unemployed workers will make the decision to go back to work and begin the process of looking for employment. With benefits running out in September, we will likely see the beginning of this stage in August of 2021 if Federal benefits are not extended. At this point, the applicant flow for most businesses will increase significantly, and application per-hire ratios will rise dramatically. The question is – are business owners preparing for this change?
The best way to prepare for a more business-friendly labor market is to develop an employee data model. An employee data model helps business owners identify and match the best candidates to the best open positions in the organization.
To begin this process, business owners should ask local managers the following questions:
Employee data models can contain 30 or more variables, but some data elements will be more critical than others.
Once the model is built, applicants can be evaluated against it. Depending on the size of the workforce and the amount of distributed hourly workers—building this model and the process of stacking it against applicants by hand is very challenging, if not impossible—especially when considering the number of data combinations and permutations. That's why machine learning is becoming an increasingly important piece of the talent acquisition selection process.
Machine learning algorithms can be developed to determine which variables and combinations of variables are most important in predicting which candidates will become quality hires. This becomes incredibly valuable in saving not only time, resources, and expenses in hiring but negating the loss of these same resources in high turnover.
Machine learning algorithms can denote which candidates are best for the job, which can be enormously beneficial when businesses have hundreds, or even thousands, of candidates applying to multiple job postings. This gives hiring managers the leverage to quickly identify top candidates to focus on as soon as they apply and negates spending wasted time and resources on candidates who don't fit, won't' perform well, or who will leave in a few months.
The workers will come back. Vaccines are reaching more people every day. Enhanced unemployment benefits will end. Schools will return to in-person learning. They will come. Let's be ready.
You may be interested in reading our article, "Using Data-Driven Decisions in Your Hiring Process." For more resources on high-volume hiring, check out our talent acquisition section.