By Mike Dolan
LONDON (Reuters) – Much higher wages alone would probably not clear churning and distorted global labour markets at the moment – and for many workers, they may not even be the primary demand.
If future pay growth dictates whether this year’s headline inflation spikes persist and booming demand for scarce skills is a central determinant, then workers, companies, policymakers and investors need to fasten their seat belts for the year ahead.
Yet, it’s not always that clean. Incoming corporate hiring surveys reveal outsize demand for more workers as post-pandemic economies reboot – but they also show the ability to attract and keep staff is not solely based on compensation.
An HSBC survey released this week polled more than 2,000 business leaders in 10 countries and concluded that stiff competition for talent means companies are having to think laterally about how they attract and retain workers.
The survey showed firms expect staff numbers to increase by a whopping 13% over 12 months to meet sparky 20% revenue growth targets, with companies in the United States, Mexico and India leading the way.
More than 40% expect to lift workforces by more than 20% and over two-thirds are already in hiring or re-training mode.
But while nearly half of the firms still see salary and financial benefits as the main factor in securing talent, almost as many now see as much emphasis on flexible working, location and ‘wellbeing’ policies as key deciders in both a post-pandemic hiring spree and the scramble to keep existing workers.
The survey’s not an outlier.
In a report entitled the “Great Attrition”, management consultancy McKinsey & Co points out that a record number of employees are quitting or thinking about doing so, and more than 15 million U.S. workers have walked away since April this year.
McKinsey reckoned companies were struggling to understand the reasons, and financial incentives alone did not seem to make a difference to workforces now seeking flexibility as well as a greater sense of purpose, belonging and recognition.
It included a survey of employees in five countries – Australia, Britain, Canada, Singapore and the United States – that found 40% were at least somewhat likely to quit over the next 6 months in sectors ranging from health and education to leisure and hospitality and white collar jobs at large.
Strikingly, more than a third had voluntarily left jobs over the past 6 months without having another one to go to.
‘Inadequate compensation’ was clearly cited as a factor, but it was not even in the top four ‘most important’ reasons – the top spots were occupied by work-life balance, a better sense of belonging and being valued by managers or the organisation.
TRUCKERS AND PAYROLLS
While it may seem to some like a lame argument for companies to sidestep paying workers more right now, these labour market sensibilities – taken as read – could have profound macroeconomic implications.
It may be a far cry from this week’s U.S. employment report or the chaotic trucker shortages in Britain, but the extent of wage pressure going forward is perhaps the biggest investor conundrum of the moment – not least with steep energy price rises likely to kick in during the Northern winter.
For many, central banks’ insistence that this summer’s 3-5% inflation rates in Europe and the United States are transient and solely down to pandemic-related bottlenecks will be sorely tested by whether pay awards and settlements over the next 12 months assume those higher inflation rates are here to stay.
“A lasting upward move in inflation from the low rates observed before the pandemic is likely to occur only if wage inflation intensifies substantially,” the Organisation for Economic Cooperation and Development said last month.
While wage indexation and unionisation are not what they were during the last wage-price spirals of the 1970s and 1980s, the importance of year-end wage bargaining – or more opaque hiring or retention pay deals – remains super sensitive.
The OECD reckons aggregate wage pressures remain moderate. But it did spotlight sizeable increases in some recently re-opened “contact-intensive” sectors in the United States, such as leisure and hospitality, and also what appear to be temporary labour shortages for small businesses in Europe.
However, it emphasized distortions to the picture from ongoing or expiring job retention and furlough schemes and the net effects of broader corporate supports. The true health of the global labour market may not be known until well into next year.
And, for many wealthier workers at least, sizeable lockdown savings over the past 18 months may have encouraged early retirement, prolonged career breaks or more considered rethinks of purposeful work and where to live.
But the priority workers now put on pay rises compared to new-found flexibilities of working remotely, or even finer points on motivation and workplace inclusion, may well influence wage inflation considerably for the forseeable future.