With the Federal Reserve hiking interest rates faster this year than any time since the early 1980s, it feels like an inflation-driven recession will be inevitable. Typically, this would result in layoffs, higher unemployment, and ultimately a shift in power back to employers. However, the 3.5% unemployment rate remains at its lowest in five decades and there are still 1.7 jobs available for every unemployed worker.
The record-high ratio of job openings to potential applicants means that some companies may choose to hold on to their current workforce rather than laying people off. This practice is known as labor hoarding, an economic term for when a company keeps employees rather than letting them go during a recession and finds other ways to cut costs instead.
For many workers, it’s a sign that they still have the upper hand in the job market, and they may not need to worry about layoffs as much as they thought they would. Employers, on the other hand, will need to reconsider their workforce retention strategies or they could find themselves facing an even worse talent shortage than they’re already dealing with.
In fact, forward-thinking companies know that for every action, there’s a reaction — and right now, it’s their competitors who are doing the reacting. New research from economists at the Federal Reserve Banks of Dallas and St. Louis discovered that there was an enormous increase in poaching — companies hiring people away from other jobs — during the recent hiring boom.
This practice is happening across geographies and industries, and it’s something that organizations should keep in mind, even with a recession looming. Let’s take a look at three examples of how companies are benefitting from the tight labor market to snap up talent from their competitors.
Example #1: Companies are stealing talent from Big Tech amidst hiring freezes and layoffs
Amid the economic downturn, tech giants like Microsoft, Snap and Oracle have all cut staff. Others such as Meta and Apple are slowing or freezing hiring. But their losses are quickly converting to gains for other companies, including late-stage U.S. startups and financial services firms. That’s because as one journalist noted, no matter how turbulent the economy (or intense the fears of a potential recession), companies need technologists with the right mix of skills and experience.
Stack Overflow, a coding platform, is one company that’s benefited from the layoffs in Big Tech. Chief Executive Prashanth Chandrasekar says that their headcount had more than doubled this year, with some new hires coming from firms like Google and Apple. "When competitors downsize, other talented people who are employed there may consider looking elsewhere, as they may not see their company as being stable,” he notes.
Financial services companies are also benefitting from the rare opportunity to hire on talented technologists. For years they’ve struggled to entice workers from Big Tech, but the financial sector’s stability is becoming more and more appealing. Now, firms like Goldman Sachs are seizing on this moment and offering higher-than-average compensation to draw tech talent away from Google and other companies.
Example #2: Companies are offering remote work benefits to poach talent from office-based competitors
While financial firms may be enjoying some success in recruiting talent from Big Tech, their decisions around remote working may cause them to fall behind in other ways. These companies have been notoriously aggressive about their return-to-office plans, citing their in-person culture and the need for young workers to interact with their colleagues. Just last week, Goldman Sachs CEO David Solomon said that 65% of the company’s workers are back in the office five days a week.
However, study after study has found that many employees would quit if forced to give up remote working. In a survey from September, two-thirds of workers said they would quit if required to return to the office full time. Forty percent said they’d consider quitting even if they were asked to come into the office only one day per week.
Businesses who’ve pushed forward with their return-to-work plans are already losing some of their best talent as a result. And in the financial sector, companies may soon face a new source of competition: European banks. In fact, the 12 top European banks are all continuing to allow employees to work remotely for part of the week, with some overtly stating that this is part of their strategy to steal talent from U.S. competitors. This is bad news for an industry that’s already struggling with high turnover due to its high-stress, performance-driven culture.
Example #3: Companies are eliminating degree requirements to attract talent from “lazy” competitors
For companies struggling to fill vacant roles, there could be an unlikely obstacle: 4-year degree requirements. Having a degree has long been considered to be a minimum prerequisite for most mid-level or high-level jobs. A recent study found that 62% of employers require a college degree even for entry-level positions, with many saying they do so simply because “that’s the way it’s always been done.”
Increasingly, however, companies are taking a much more thoughtful approach to their job descriptions and requirements in a bid to widen their talent pool. Google, EY, Microsoft, and Apple all have started offering high-level roles to candidates without degrees as a way to attract talent in a tight labor market. General Motors also recently joined that list — and notably, it was the company’s diversity chief who pushed for this change.
In fact, an important outcome of eliminating degree requirements is that is opens up job opportunities for minority populations, who are much less likely to have attained advanced degrees. In the U.S., 42% of white adults hold a bachelor’s degree or higher, compared to just 28% of blacks and 21% of Hispanics. For employers, therefore, there’s a real opportunity to gain more diverse talent by taking a skills- or experience-based approach to hiring versus solely focusing on educational attainment.
Economic uncertainty calls for careful decision-making
Smart companies recognize that during a tight labor market, workers are going to move to wherever the best opportunity is. And despite the impending recession, it appears that for now the power is going to remain squarely in the hands of employees. So think carefully about how your support your workforce, what your job requirements look like, and whether layoffs or a hiring freeze could affect staff morale — the future of your business could depend on it!
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