Things are heating up again in the labor market. The Next Job Boom is this month´s lead article in Business 2.0. The number of stories dealing with, or touching upon, the state of employment relationships is increasing. Hot topics again are employee engagement, the attract and retain agenda, burnout, employer branding, and so on. In many ways, it´s like 1999 all over again.
Although it has always been a good thing to nurture positive employment relationships, the interest that organizations have in doing so is really driven by the tightness of the labor market.
In the last few years, we had been experiencing the jobless recovery-corporate profits were up but there didn´t seem to be any more jobs available. But then recently a convergence of economic factors has turned things around in the labor market. According to the Business 2.0 article, the tight labor market is due to the collision of two forces: low unemployment and collapsing productivity.
As HR practitioners, there are two sides to this tightening labor market. We are increasingly concerned with the challenge of retaining our most productive employees. But also, many HR practitioners are also thinking "hey, I should start looking too." Indeed, a recent survey by Salary.com found that 65% of workers planned to be hunting for a new job in early 2006.
The interesting point here is how much these macroeconomic circumstances drive the HR agenda. An interesting book here is The New Deal at Work by Peter Cappelli (Harvard Business School Press, 1999). The essential story of the book is that a number of pressures in the 1980s and 1990s have led to the demise of the ´traditional´ employment relationship, and how these changes have given organizations the flexibility to restructure and adapt more quickly.
So in times of slack labor markets, companies have the upper hand and the HR agenda turns to getting more out of employees. In tight labor markets, workers have the upper hand and the HR agenda turns to doing what needs to be done to attract and retain workers.
A year or so ago it was all about outsourcing and workforce agility. The HR metrics we were most interested in were cost and efficiency metrics. Now, it´s about employee engagement and energy.
How long will it last?
Cappelli noted that the ´80s and ´90s were a period when the labor markets were relatively slack. The tight labor market of the late ´90s was the first time in a generation when this occurred. So is the current tight labor market a blip or is this the start of a longer period of relatively tight labor markets?
Interestingly, the Business 2.0 article suggests that the window may only be open for another year or so by which time other macroeconomic factors will change the picture. This also brings into play the concerns about labor shortages as driven by demographic factors. In another article, Cappelli makes a cogent argument that the level of economic activity is much more important than demographics in determining whether labor markets will be tight or slack. Therefore, the status of labor markets in the future is difficult to predict.
It would appear, however, that the underlying psychological contract between workers and employers doesn´t change as fast as the labor market conditions can. Where we are now is the result of a protracted period of relatively slack labor markets-with the exception of the tight labor markets of the late ´90s.
Employee satisfaction with various aspects of employment and commitment to the organization were stable until the early ´80s when they began a sharp decline. There has been a long-term trend of decline in employee commitment. It is not likely that the present interest in the attract and retain agenda can turn around fundamental employee attitudes very quickly.
We may be in for interesting times.
