Some numbers to set the stage:
US Economic Output has risen 19%
Nonfinancial corporate Profits are up 85%
The US workforce is up by 10.1 million workers
Private sector jobs are DOWN by 2 million workers
The percentage of American adults with jobs is at 58% – the lowest level since 1983
So, what’s going on? Revenue and profits are rising but jobs aren’t. I believe that while the economy is recovering too slowly, construction remains weak, and uncertainty felt by small and large companies is playing a part, that there is something else going on. And a recent article in the Wall Street Journal verified much of what we’re seeing as well, and got me thinking (again).
Employers have a much different view of labor as they did 20 or 30 years ago. Employers are viewing labor as much more of a variable than fixed cost. Also – the US is less of an assembly line economy than it was 20-30 years ago. In previous recessions lay-offs were temporary. When sales rebounded workers were recalled. Today, when workers are laid off – it’s for good. Look at the most recent announcement from RIM – those 10,000 employees are not going to be called back.
Employers are continuing a trend of developing more flexible workforces. They are hiring only the core staff they need to run their business, and then using part time, temporary or outsourced labor to perform those jobs that are more demand dependent or cyclical. For example, if a manufacturer needs 5 people in their customer service department every day – but runs a special promotion every 6 weeks that requires a total of 15 CSR’s for two weeks, why hire ten people and under work them for four weeks, and then pay overtime for two weeks during the promotion? Employers have learned that contractors (temps) or outsourcing the additional work is a better and more cost effective solution. Overtime is 1.5 times regular salary – usually similar to the cost of a contractor (well – a good one).
This is a structural change in how employers view their workforce. But what does it mean? It means that low skilled workers will have to accept the fact that they may have to move often from employer to employer. More educated and skilled workers will comprise the core of an employer’s workforce, while those that are less educated will comprise the contingent or flexible workforce. Here’s where I digress to my soap-box – message alert – go to school and learn a skill that employers need (hint – reading, writing, arithmetic)
Employers will continue to look to increase efficiency and drive costs out of their processes. A flexible, agile workforce will be increasingly important to the success of companies in the future. We will continue to provide updates, and new ideas to help make you aware of new workforce trends to help your business compete in future.
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