The February report from the Job Openings and Labor Turnover Survey reported that the difference between job openings (11.3 million) and hires (6.7 million) creates the largest imbalance between employee demand and supply ever, at a whopping 4.8 million.
While the unemployment rate continues to fall and is the focal point of positive job outlooks, the sheer number of job openings is staying around 11 million with no sign of slowing down. In addition, the quit rate in February stood at 2.9% and has been hovering around 3% for quite some time- also with no sign of slowing down.
On the other hand, layoffs and discharges remained consistently low at 0.9%, showing businesses hesitation to get rid of employees.
But the huge imbalance of employee supply and demand is more than just statistics showing that disgruntled workers continue to be in the drivers seat of where and when to work. According to two surveys of finance executives in organizations of all different sizes, one from the American Institute of Public Accountants (AICPA) and one from Duke University, employee shortages have started affecting operations and cutting into their revenue.
This effect is being felt more and more as reality sets in among companies that employee shortages are not going away any time soon. After exhausting solutions such as raising salaries well above normal rates, or better than usual benefits, organizations are starting to see negative economic effects directly from employee shortages- independent of other challenges such as inflation and supply chain issues.
The AICPA conducted a survey for the first quarter economic outlook in which CEOs, CFOs, and other executives with CPAs highlighted the difficulties of recruiting and retaining talent and its implications on output:
82% of respondents said their companies had some difficulty recruiting and retaining employees.
57% said they had too few employees.
24% indicated that they restructured staff in order to protect core operations.
23% were forced to limit new projects or bids due to shortages
16% delayed service expansions
9% slowed customer or client acquisition
7% reduced hours of operations or work shifts
3% closed some work locations
After all of the economic instability of the past few years, it’s a shame that employee shortages are causing companies to lose output- in some cases more than any other catalyst.
Economic optimism is bleak
The AICPA survey and the 2nd survey from Duke, found that finance executives are even less optimistic about the US economy in the first quarter of 2022 in comparison to the fourth quarter of 2021.
For the AICPA survey, only 36% of executives were optimistic about the US economy and its performance over the past year, down a full 5% from last quarter. In the Duke survey, the optimism index fell 5.5 points from last quarter- with the least optimistic leaders being finance executives at companies with less than 500 employees.
While CFOs and leaders didn’t directly link unfilled job openings to low optimism, there is no doubt that it plays a role in the bigger picture of economic difficulties and bleak outlooks for those directly involved.
Combatting Unfilled Positions
The AICPA survey showed what businesses are forced to do as a result of job openings, but the Duke CFO survey gives an idea of what CFOs are attempting to do in order to limit the damage.
The 2 most popular solutions, “Increasing wages” and “Extending hours for existing employees”, are automatic reactions that come with mixed success. As a big part of the Great Resignation, employees are searching for greater benefits, opportunities, and family time, and oftentimes simply increasing salaries isn’t enough to keep them.
“Extending hours for existing employees” is also a dangerous solution as one of the biggest reasons for employees leaving is due to being overworked, and with all of the open positions available, the market allows for relatively easy job switches.
Rather, the other options that are slightly less popular among CFOs and executives can produce better and longer lasting results:
Implementing tech to reduce labor- More than 50% of large firms and one-third of small firms said they implement tech in order to reduce the effects of labor shortages. While there are endless possibilities for automation and technologies that help with this, many CFOs are searching for financial planning solutions that automate work from the finance team in order to reduce manual input and free up more time for analyzing.
Hiring less experienced/ Skilled Workers- Just over 50 and 45% of large and small firms respectively reported that they hire less experienced or skilled employees in order to deal with shortages. While this goes against the mainstream hiring processes, many companies are finding success in looking for potential talent that can be trained, as opposed to someone with the traditional skill level. As a bonus, these employees tend to require lower pay and come with plenty of motivation, potentially developing into even better employees than expected in a short period of time.
Training existing employees- Slightly more than 40% of all survey participants reported using this to cover employee shortages. Other than doing it out of necessity, training current employees comes with many benefits. Building company loyalty, providing opportunities for growth (those who don’t feel like they’re provided growth opportunities are fueling the Great Resignation), and saving time and money on hiring processes are just a few of the benefits of upskilling existing employees.
Conclusion
Unfilled positions and skilled employee shortages are not just a passing trend- they are here to stay. This reality is setting in among CFOs and executives, and is affecting not only economic optimism, but also revenue and operations. There are many different ways to combat this, but adopting new technologies, hiring for talent, and upskilling are some of the most effective and sustainable ways to reduce the damage.
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