April 25, 2018 – With unemployment hovering at 4.1 percent, many companies face the recurring question of how to attract and retain top talent in a candidate-driven landscape. In order to remain competitive, it is essential for companies to focus on trying to boost wages or reevaluate their benefits packages, according to a new survey from Adecco USA.
Nearly 25 percent of employees said they are paid below their industry average and nearly one third (29 percent) of temporary employees quit their last job due to poor wages, said Adecco’s “2018 U.S. Workforce Report.” What’s more, most employed adults (70 percent) believe minimum wage should be raised (39 percent believe “minimally” and 31 percent said it should be raise “significantly”).
“While unemployment rates have continued to steadily decline, we have yet to see that same kind of positive and progressive movement on wages, which could be why we are seeing an uptick in workers having more than one job to pay the bills,” said Federico Vione, CEO of Adecco, North America, UK and Ireland. “There is much evidence to suggest that companies need to start paying more attention to the benefits packages they are offering, including wages, if they want to be deemed a desirable place to work and remain competitive in this tight labor market.”
The study surveyed more than 1,000 employed American adults in an effort to determine what companies must do to be considered “an ideal employer.”
Apart from monetary compensation, alternative benefits like growth opportunities and flexible work arrangements also proved to be important to employees. Nearly 25 percent of employees said they are paid below industry average and nearly one third (29 percent) of temporary employees reported that they quit their last job because of poor wages, said the report.
Seventy 70 percent of the respondents said they believe the minimum wage should be raised (39 percent believe “minimally” and 31 percent feel it should be raise “significantly”). Apart from monetary compensation, alternative benefits like growth opportunities and flexible work arrangements also prove to be important to employees.
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“While your organization does not have control over state or federal minimum wage rates, it’s important to know your workforce’s opinion on these and whether or not they feel you could be doing more for them,” said the report. “With nearly 25 percent stating they feel they are paid below market average, it’s important for your organization to pay competitively to keep turnover and negative company culture at a minimum.”
Fifty-eight percent of those surveyed said a pay raise would encourage them to stay at a job they were considering leaving. Forty-five percent of those between the ages of 18 to 44 ranked professional development as “extremely important” in determining their happiness. Close to one fifth (16 percent) said they left their job last year because of a lack of growth opportunities. Work-life balance (20 percent) and positive workplace culture and working relationships with coworkers (a combined 24 percent) were also ranked as important to workers.
Companies are also lagging when it comes to keeping their current employees happy, said the Adecco study. Twenty-four percent of both male and female employees said they do not believe their current employer takes active steps to improve their happiness on the job.
What Workers Want May Surprise You
Contrary to what is generally thought, the traditional way of working – meaning, at the office during open hours – is still preferred among respondents of the Randstad Workmonitor report. Globally, 68% shared this sentiment, with India (85%) at the highest end and the Netherlands (47%) at the lowest end.
“With waves of hiring surges bringing competition back to the job market, we continue to see employees change jobs for better benefits, career satisfaction and happiness,” said Joyce Russell, president, Adecco USA. “Employers must regularly take a hard look at their hiring process and what their current employees and future candidates are looking for in a job.”
One in three employees have second jobs, apart from their regular job, said the report. Those workers may more money on top of their base salary or pay to make up for the current wage push inflation.
Dan Ryan, principal with Ryan Search & Consulting in Franklin, TN, said that improved wages will come about when employees can show how they are adding value in their role. “Those in roles that are hardest to fill will see even greater (wage) increases as they are able to show their value when compared to their peers in the market,” he said. “We have seen a number instances where external equity has caused firms to shift their internal compensation strategy in order to retain their current key leaders.”
Failing to increase wages when necessary, however, poses risks for businesses. “Companies that do not adjust for key roles will see their incumbents test the waters on the outside market,” said Mr. Ryan. “We have found many candidates who want to weigh their value outside the company with their current compensation. This provides substantial pressure for businesses working to retain key contributors.”
Keeping employees happy matters, said Mr. Ryan, but adopting a “one-size-fits-all” strategy for retention is not the best answer. “Some key staffers are more interested in workplace flexibility, such as working from home, while others seek additional PTO,” he said. “There will always be those who are just seeking more take home pay, but making that the only area you address can be a big mistake.”
Non-traditional employees, Mr. Ryan agreed, can be a great answer to the hiring needs of many businesses. “I have this conversation with clients often,” he said. “The company that is willing and capable to adapt their needs to the location and availability of key talent will reap great benefits. I have one client who continues to try and move talent to a certain southeastern city while they could find the same talent not far away if they were willing to allow this group to work remotely and travel to client locations. This will continue to be a significant issue in the consulting and professional services area.”
A Bygone Era
William D. Rowe II, chairman and CEO of search firm Rowe Global in Dallas, said the underlying economy continues to show strength and growth, but the economy is failing to aggressively expand for the middle income demographic. “As we have evolved as a nation over the past 40-plus years, moving away from an industrial base to a services and technology based market, the average American, who used to be able to be a long term employee and move up the organizational chart within the manufacturing sector has been greatly reduced. No one likes to admit it, but the days of millions of jobs with GE, GM, General Mills, etc. appear to be long gone.”
For wages to rise and aid the growth of middle America, he said, two primary factors must continue. “One, a renewed effort and commitment to manufacturing here in America” is needed, said Mr. Rowe. “If you look at the last three to five years, more and more of our manufacturing base can compete on cost and labor against the world markets as international labor markets age into more global competition. This needs to continue.”
“Second, the commitment to education/re-education must be committed to at all levels,” he said. “Our education system needs to be geared to turning out young people with the skills needed for a technology-based economy. The more our workforce advances their skills, evolving from working a punch press in a plant to writing code, writing CAD software and serving the on-line and app driven marketplace of the future, the better our wages will increase and our labor force will better match the demands of the marketplace.”
When wages stagnate, said Mr. Rowe, workers lose incentive to even want to work. Productivity falls and a reliance of alternative workforce solutions only grows. “The robots of the future are here and the labor market needs to advance their skills to match this change and employers must advance their commitment to training the next generation to compete,” said Mr. Rowe. “The net impact of stalled wages trickles down to less money in people’s hands for housing, entertainment, education and every element of life and our economy. A labor force that is not paid enough to grow beyond entry level compensation can not support the overall economy.”
Gary Erickson, managing partner for Executive Search Partners in Sarasota, FL, said that in regard to IT professionals, his firm is already seeing improved wages in the companies that recognize the need to accelerate digitization to remain competitive.
“We are amazed at the differences we see in companies and their understanding of the value of IT to their success,” said Mr. Erickson. “In the same industry wages often vary significantly. We did two searches in the last year for the top IT person in similar companies of around $1 billion in sales. One only wanted to pay $140,000 for their new CIO while the other was offering $200,000. Guess which one got the more experienced candidates and which one will probably lose their CIO within the next year?”
Both businesses and the economy will suffer if wages fail to rise, he said. “If wages don’t keep pace, companies will lose their best people to other companies and their ability to compete will slow,” he said.
Jacob Navon, a partner with Westwood Partners in New York, said that one should be careful of some of the context behind the perceived stagnation of wage growth. “We have been buffeted by a long-standing technologically-induced set of deflationary forces,” he said. “Think of your current iPhone, for example, and compare it to the original one from a decade ago. Clearly the latest version is so much more powerful and does a lot more for you. And yet in nominal dollars it costs about the same. So while everyone is wringing their hands at the fact that wages haven’t grown by much, they neglect to mention that what a dollar of wages will buy you today is so much more than yesterday. In the process, your well-being has improved.”
Adecco’s report makes it clear that in a tight labor market, retention is critical, said Mr. Navon. “The cost of replacing an employee who has left is so much greater than the cost of keeping them happy and retained,” he said. “Multiplied across a workforce, and adding the additional costs of downtime/less efficiency as you train new hires to be fully productive, can be very detrimental to any organization.”
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David Preng, president and CEO of Preng & Associates in Houston, said that better wages for employees will depend on time-tested economic realities. “Improved wages will arise from supply/demand competition for skills this will drive wages up and force employers to keep pace to retain talent,” he said.
Better pay, in turn, greases the wheels of the overall economy. “Rising wages will allow workers/consumers to have more dollars to spend,” said Mr. Preng. “Therefore it will increase demand and grow the economy.”
Real Wage Growth
John Hoagland, a Boston-based partner with executive search firm Vardis in New York, said that he believes that wages are already showing improvement in terms of minimum wage legislation, bonuses for hourly employees and more, which mirror the gains seen at executive levels.
Wages are important, said Mr. Hoagland, but like the Adecco report concludes, he points to other benefits as also playing a critical role if companies want to retain their best talent. “In a full-employment economy, employee turnover will increase as longer tenured employees maximize their earnings by taking advantage of signing bonuses at new roles,” said Mr. Hoagland. “Wages are part of the issue but employers will need to provide long-term growth in benefits, training and non-cash compensation to keep their most productive employees.”
Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; Stephen Sawicki, Managing Editor; and Will Schatz, Managing Editor – Hunt Scanlon Media