Published: Apr 13, 2018 12:51 p.m. ET
Power to shift from bosses to rank and file, study contends
By Jeffry Bartash
Is the future likely to be a worker’s paradise? Chances are it will be a lot better for most everyone.
Is the future going to be a workers’ paradise? Maybe not, but leverage in the workplace may finally be shifting from bosses to the rank and file after a lost decade for labor.
The stage is set, according to a new survey of the U.S. and global labor markets. The world economy is stronger than it’s been in years, good talent is increasingly hard to find and an aging population suggests labor shortages are only going to get worse in developed countries.
Read: Job openings fall slightly in February from a near record high
The result: Companies will have do more to recruit or retain employees with higher pay, better benefits and improved working conditions.
“The past 30 to 40 years were difficult for the average U.S. worker, characterized by weak earnings growth, declining job security, rising income inequality and an increase in work pressure,” wrote Gad Levanon, chief North American economist at the Conference Board and lead author of the report. “The new normal will be a tight labor market and workers are likely to get a bigger slice of the pie.”
The biggest advantage for employees is a slowly growing supply of labor coupled with massive retirements among the baby boom generation in the U.S., Europe and Japan. In the U.S., for example, the unemployment rate already sits at a 17-year low of 4.1%, and many economists predict it could drop to 3.5% or even lower in the next year or so. The last time the jobless rate was that low was in 1969.
“By 2019, labor market tightness could reach levels not seen for decades,’” the Conference Board report says.
In the past countries would have opened the spigots for immigrants, but political resistance has grown and it’s unlikely to be a safety valve for businesses like it has been before.
The shortage of labor is being exacerbated by a global economy that’s growing at the fastest pace since the Great Recession, but it’s had the salutary effect of reducing pressure on companies to focus on cutting costs. And in the U.S. the biggest corporate tax cuts since 1986 has given companies more leeway to spend and invest.
“Fears of global recession have receded in the minds of CEOs across the globe and C-suite executives have become less defensive in their strategies,” the Conference Board said.
What does that mean for workers? Higher pay, for one thing. Wages in the U.S. are now rising at a 2.7% yearly rate, up from less than 2% annually early in the recovery. And wage growth could top 3% in the near future.
Even more likely are better benefits such as child-care help or improvements in working conditions, part of which will include more workers teleworking or working from home.
“Companies holding back on raising compensation will increasingly experience higher labor turnover, lower success in recruiting and less worker satisfaction,” the board said.
What else can companies do?
Some are already lowering requirements for education or experience to fill open jobs, spending more on training to bring new employees up to speed. Firms are also trying to keep older workers from retiring and hiring more women. And decisions on where to locate a business are likely to be influenced by the local supply of labor.
Although robots aren’t going to put everyone out of a job — a popular theme these days — companies are already investing more money in automation to help get around rising labor shortages. That’s likely to accelerate, but it’s no panacea.
Companies will need bodies — and lots of them.
“The much larger risk in the next 10 to 15 years is not enough workers,” Levanon said in an interview. “As long as baby boomers are retiring in large numbers, that’s the biggest problem.”
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