Hourly workers represent more than half the U.S workforce and their pay is at an all-time high. Yet leaders continue to struggle attracting, retaining, and engaging frontline workers amid severe talent shortages, frequent resignations, and the “quiet quitting” phenomenon.
With thanks to WTW’s Lori Wisper, several factors explain why:
Despite overall population and labor force growth from 2010 to 2020, the U.S. labor force actually shrank among age groups 16-24 (the historical entry-level talent pool), and 45-54 (the historical talent pool for both highly skilled workers and leaders) due to generation-based demographic shifts. The data show the same result when analyzed from 2010 to 2019, indicating that this issue originated before the pandemic.
In 2018, Amazon changed the landscape for frontline workers when it raised its average minimum wage to $15 per hour. As one of the largest U.S. employers of hourly workers, Amazon added more jobs that year than any other American company and reported the pay change would impact more than 350,000 employees and seasonal workers (in addition to the 500,000 new employees hired during the pandemic). In September 2022, Amazon again raised its average minimum hourly rate to $19 per hour for U.S. employees in customer fulfillment and transportation, motivating other large employers to do the same.
The pandemic drove down labor-force participation rates (i.e., the proportion of the working-age population that is either working or actively looking for work) and immigration levels, exacerbating talent shortages. The resulting low supply of workers gave employees greater choice and increased ability to negotiate higher wages and more favorable benefits.
Unemployment rose from 3.5% to 14.8% in March 2020 driven by pandemic lockdowns, and then leveled out near 7% by the end of 2020. Data analysis shows industries on the “losing” side of the pandemic (e.g., airlines, hotels, restaurants) laid off workers, while businesses on the “gaining” side (e.g., transportation/fulfillment, food manufacturers, grocery store chains) aggressively hired workers. This caused not only job changes among frontline workers, but also career and lifestyle changes. Workers were attracted to jobs, employers, or life choices they may never have considered in the past (including caring for their own dependents).
Research shows 30% of U.S. workers struggling financially, 43% having difficulty meeting basic needs, and 62% feeling burned out from work. While inflation remains high, surveys of U.S. companies report employers are budgeting salary increases that are lower than inflation despite being higher than they have been in decades. Leaders may understand that inflation and salary increases are not the same. However, workers are focused on their reduced buying power and ability to afford necessities such as food, rent/mortgage, and energy, and understand the need to change jobs for higher pay and benefits.
Frontline worker shortages and high inflation have driven workers to expect more from employers. Leaders who address concerns in a thoughtful way can differentiate their organizations through the following actions:
Attracting and retaining frontline hourly workers has never been more challenging. Effective leaders understand that they need to shift both their programs and mindsets to attract and retain these essential employees.
A version of this article originally appeared on Forbes.com on October 13, 2022.
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