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Why talent shortages persist: Moving beyond the great resignation and quiet quitting

February 7, 2023

Leaders who create distinctive cultures and meet employee needs will be better positioned to attract and retain talent while keeping costs in check.
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Talent shortages persist in 2023 despite labor markets showing greater stability. Effective leaders have moved beyond what many called the great resignation and quiet quitting to address deeper challenges.

First the good news for employers:

  • Pandemic-related job shifts have slowed, and labor participation rates have partially crawled back from their historic lows.
  • Immigration channels have reopened in many countries.
  • Industries that over-hired in recent years reduced their staffs, helping to lower competition for talent.
  • Inflation is slowly diminishing in many economies around the world.

But there’s also bad news:

  • Turnover rates and inflation remain high.
  • Large percentages of employees remain disengaged and interested in making a move.
  • Millions of job openings remain unfilled, and productivity rates linger below previous years.
  • Significant underlying causes of the great resignation and quiet quitting remain.

Underlying causes of the great resignation and quiet quitting remain

It’s all about demographic shifts: In many developed economies, large numbers of employees from the outsized Baby Boomer generation have retired in recent years, while members of the Millennial generation have moved past entry-level roles. These shifts have created talent shortages in the comparatively smaller Generation X and Generation Z cadres at the leadership and entry-levels, respectively. Labor economists predict such shortages will represent a permanent market condition, persisting well into the late 2030s or beyond.

Using the U.S. as an example, WTW’s analysis of U.S. Census and Bureau of Labor Statistics data shows the problem: Despite overall population and labor force growth, the labor force actually shrank from 2010 to 2020 in age groups 16 – 24 (the historical entry-level talent pool), and 45 – 54 (the historical leadership talent pool). The data show the same result when analyzed from 2010 – 2019, demonstrating this problem originated before the pandemic.

While labor force participation rates (the proportion of the working-age population either working or actively looking for work) have made up previously lost ground as economies emerge from the pandemic downturn, labor economists anticipate even lower levels of participation in 2030 for workers under the age of 45 and a smaller 2030 labor force for age groups 16 – 34 and 55 – 64.

Effective leaders use real workforce demographic data to inform decisions, instead of being reactionary or speculative, and take the following actions:

  1. Use flexibility to attract and retain broader employee groups. In the U.S., the highest growth age group in the labor force from 2010 to 2020 was 65 and older (58%), followed by 55 – 64 (17.2%) and then 25 – 34 (8.6%). Effective leaders tap late-career workers for roles they previously may not have considered and offer “post-leadership” roles that leverage deep expertise and provide opportunities to mentor earlier career workers in a more flexible work environment. For those in the 25 – 34 age group, flexibility often entails dynamic work arrangements, support for employees who are starting families, as well as upskilling and continued education.
  2. Use culture to counteract wage inflation and skill shortages. Rather than over-using salary increases and adding to wage inflation, effective leaders know that employees often join and stay in organizations with differentiated culture, values and purpose. They create diverse and inclusive environments where employee voices are heard and respected with dignity. These efforts help attract a broader employee base while balancing cost increases.
  3. Take an expansive view of organizational resilience and employee wellbeing. Effective leaders connect employee wellbeing and the support of healthy, resilient employees to healthy, resilient organizations. They meet workers’ unique physical, emotional, financial and social wellbeing needs by creating a common sense of purpose and culture, and by fostering physical and psychological safety. This enables employees and organizations to thrive under the most trying conditions.
  4. Accelerate robotics and AI. Effective leaders know that advances in robotics and AI (such as Open AI’s ChatGPT) are not about replacing jobs, but rather creating a world of collaboration between humans and machines. While robotics and AI require greater technology skills, they produce scale in routine tasks and processing functions that reduce stress on labor markets.
  5. Provide nontraditional skill development. Effective leaders offer an array of professional development opportunities, including partnerships with educational institutions and governmental bodies, expanding the skilled labor pool. They understand employees value learning opportunities and work experiences that allow them to build new skills and remain relevant.
  6. Understand that quiet quitting put a new label on an old problem. The phenomenon of quiet quitting is not new: Low employee engagement and reduced discretionary effort have existed for decades. Effective leaders confront the causes, creating compelling employee experiences.
  7. Focus on employee experience. In 2023, employees continue to desire remote and hybrid work arrangements while acknowledging the benefits of in-person interaction. Effective leaders increase efforts to balance these often conflicting needs. They also understand that research shows employees who say their benefits meet their needs are far more likely to stay at their organizations for another two years than employees who say their benefits do not.

Though challenges of smaller labor pools are likely to continue for the foreseeable future, leaders who are able to create distinctive cultures and meet employee needs will be better positioned to attract and retain employees while keeping costs in check.

A version of this article originally appeared on Forbes.com on January 30, 2023.

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