Does Inflation Give Candidates More Power?

How recruiters need to respond in such a scenario

Inflation will present a challenge to recruiters that many are ill-equipped to handle. In addition to the difficulties presented by The Great Resignation and the ongoing adjustments to Brexit in the UK, inflation will motivate in-demand candidates and employees to seek increased remuneration. For many sectors, this is another hindrance that could have critical consequences.  

Recruiters, who are unprepared for the impact of inflation on their ability to recruit and keep employees, are at a serious disadvantage. 
 
Recruitment processes have barely changed in decades, but modern workforces have. Employees want to be flexible, with a better work-life balance and more fulfilling work. 
 

The World Economic Forum reports that these changes have been compounded by health concerns, life reassessments born of the pandemic, and a simple desire for better pay in harder times.  
 
These workplace shifts are framed by a changing world, in which a myriad of economic fluctuations have resulted in shrinking talent pools – 70% of worldwide businesses leaders surveyed have expressed deep concerns around diminishing talent, whilst vacancies have been hovering at record highs for months.  
 
And then there’s inflation. The impact this will have on recruitment and employee retention was addressed by Frank Wagner, Google’s Vice President of Compensation. Last December in an all-hands Google meeting, Wanger said: 
 
“Inflation does seem to be atop of mind for a lot of folks, and I think one of the reasons is that people are eager to get their compensation awards …  when we see price inflation increasing, we also see increases in the cost of labor or market pay rate. Those have been higher than in the recent past and our compensation budgets have reflected that.” 
 
Here, Wagner is responding to whether Google would adjust wage rises to inflation after the question received ‘400 upvotes’ ahead of the meeting from Google staff. He acknowledges that some concessions will be made, however, companywide adjustment is out of the question. This is a question that will be put forward by many anxious employees to their bosses and concerned candidates will be asking of their interviewer in the coming months. 
 
Employers and recruiters need to be asking: how exactly can we meet the challenges of inflation – and what exactly are those challenges? Before we discuss that, we need to look at some economic fundamentals.  

Why Is Inflation Soaring?  

There is not a single cause. But the single widest-reaching consequence for employers is workforce anxiety that has been left behind after months of inevitable economic pressure. 

When economies began to open after national (and international) restrictions, it followed that people began to buy goods and services at higher volumes again. The rise in demand caused supply chain blocks, leading to a general spike in the price of goods.  

Somewhat improbably, several unexpected events occurred over a condensed eight-month period. From flooding in the UK to once-in-a-generation storms and, perhaps most uncannily of all, a container ship blocking the Suez Canal.  

Each of these incidents has added to unforeseen levels of inflation. On top of this, any goods production that relied heavily on the price of oil and gas was doubly affected, since a significant price rise in energy and gas coincided with these blocks. Not to mention the impact that increases in those energy prices are set to have on domestic bills and a basic ‘cost of living’.  

As economists have observed, the cause of inflation is visible, tangible, and related to the workforce in a way that abstract financial or banking reasons are not. Hence, workforce anxiety. 

What Does it Mean for Employees and Candidates? 

Cost of living, rises in the prices of essential goods and a new preference for work from home (WFH) naturally fuel a desire for employees and candidates to seek the increased compensation that Frank Wagner was referring to. 

The demand for employees exceeds that of employers, putting candidates in a position of much greater power. For example, The Guardian report that senior professionals can expect a salary increase of 25%. 

Candidates, naturally, will follow suit, pursuing the best possible pay and seeking the most rewarding opportunities. In response, recruiters will need to change their hiring practices.   

What Does it Mean for Recruiters?  

In addition to qualifications and direct experience, recruiters should be hiring based on behavior to retain and attract talent - and importantly, talent that is proven likely to be successful. In-house and external recruitment will not be able to compete competitively by simply sourcing CVs; they should be applying a data-driven approach to candidate experience and hiring.  

Soft skills and behavior-led recruitment will match candidates to companies where they feel they can best progress, flourish and, subsequently, remain. Money – whilst undeniably important for candidates – is not everything after all. 

This is not a war on employee power or an attempt to curtail fair compensation. When we built our behavioral assessment recruitment platform at AssessFirst, we recognized that matching company culture with a candidate profile was something traditional hiring hoped to do. Our algorithmic approach means that ‘hope’ is replaced with ‘assurance’.  

Without modernizing the hiring process, recruiters will be at the mercy of the sorts of difficult questions that were put to Google by employees looking for higher wages. Google may have been caught temporarily off guard on this issue. Your company doesn’t have to be.  

David Bernard is an entrepreneur specializing in the prediction of human behavior. In 2002, he founded the innovative AI recruitment platform AssessFirst, just 30 days after obtaining his master's degree in quantitative psychology. A firm believer that traditional CV-based hiring is both broken and biased, David is passionate about the performance and correct placement of talented people.    Visit AssessFirst    Connect David Bernard