SoloPoint Insights

Unveiling the Role of Wages in 2023’s Shrinking Job Market

As the job market in 2023 experiences a slowdown, workers are making bold moves despite fewer job openings and rising layoffs. The quit rate remains high as employees are taking control of their careers, demanding better opportunities, and are unwilling to settle for less. With this, companies face the challenge of retaining skilled talent and avoiding operational stoppages.

Workers are Walking Away

The job market slowdown shows 11.6% fewer job openings than six months ago, however, the labor force’s quit rate is still elevated with 3.48 million workers reported voluntarily leaving their positions last February.

Over half of the workforce (56%) is likely to actively pursue new employment within the next year. One in three prioritize wages as a critical factor in job transitions, highlighting the increased ambition for better compensation.

With persistent inflation and higher living costs, employees prioritize their paychecks over other job aspects. This pushes employers to boost raises to retain top talent, generating 1.2% higher compensation costs for civilian workers this April 2023 than last year.

Companies Can Cope

Recruiting, onboarding, and training new workers is costly and time-consuming. Retaining top talent becomes a critical race against time to avoid the financial pitfalls of limited talent and constant turnover.

Here are some alternative cost-saving measures companies can look into:

  1. In-house retention and development: Companies retain engineering talents by providing in-house training and creating an inclusive work environment. Employer-sponsored training allows engineers to continuously learn and upskill, making them more likely to stay with the company to advance their careers and boost their income potential.
    • Apple: To adjust for the 2023 fluctuating economic conditions, Apple is changing how it offers employee bonuses and retention incentives by transitioning some divisions to an annual bonus plan, providing a single lump sum bonus instead of twice-a-year payments. This change is part of Apple’s cost-cutting measures along with hiring freezes and leaving positions open.
    • Cisco: Cisco increased costs by $1 billion over the past year to retain employees. The company aims to boost employee pay and address dissatisfaction by restructuring its compensation structure to offer higher base pay and lower bonuses. This change is due to Cisco’s increased turnover, with employees leaving for other tech companies.
  2. Labor hoarding: Labor hoarding involves hiring extra people in different roles to account for possible workforce attrition. This helps employers smoothly handle changes in workload while ensuring ongoing operations in a tight economic period.
  3. Contingent Hiring: Contingent hiring effectively addresses skill gaps by recruiting temporary or contract workers with similar abilities to employees who resigned. These workers can fill positions requiring specific skills, especially during peak seasons or when qualified candidates are scarce. This also allows the company to test-drive workers before making a permanent offer.

While it can be challenging to compete with higher salaries in slower economic periods, organizations with a well-defined attrition strategy can mitigate the impact of such departures. Utilizing the services of a specialized staffing firm, such as SoloPoint Solutions, can be a proactive approach to addressing possible attrition with flexible workforce solutions.

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