LinkedIn’s latest Workforce Report for the US spotlights a phenomenon that’s shaking up the labor market in and around Texas, the nerve center of the American oil industry, where hiring has spiked in tandem with oil prices. Energy industry hiring rose 5.2 percent in the year to May 2018, compared to an average of 4.5 percent across all industries nationwide, LinkedIn found. Job growth has closely tracked the price of oil, with a dip in 2015-2016 followed by a boom as prices have risen steadily over the past two years. Hiring in Houston, the energy industry’s home base, grew 12.4 percent year-over-year, contributing to a reduction in the surplus of petroleum engineering, energy, and geology skills.
The energy industry is particularly sensitive to boom-bust cycles, and, so are cities like Odessa and Midland in west Texas, where the local economy is dominated by a single industry (in this case, oil), the report notes. In the current boom cycle, the migration of workers to the Odessa-Midland area is further tightening labor markets in Houston and other Texas cities:
With oil prices on the rise, talent inflows to this oil boom-town have picked up, particularly from the three largest Texas cities—Houston, Dallas, and Austin. Net movements to Odessa-Midland from these cities have grown significantly since September 2017, to 0.34 per 10,000 from Dallas (750%), 1.05 per 10,000 from Houston (44%), and 1.03 from Austin (255%). This impact can also be felt in the housing market—a recent report found that Odessa-Midland had the highest national rent increase in 2017, up 35.7% year-over-year.
Driving this boom is the rapid expansion of shale oil extraction in the Permian Basin, west Texas’s oil and natural gas producing region. High oil prices combined with advances in extraction technology have made shale extraction increasingly profitable, meaning oil companies have the incentive and the resources to lure talent with high pay. That’s great news for anyone working on an oil rig, but ancillary workers like truck drivers are also seeing huge signing bonuses and pay hikes, the Wall Street Journal reports, with some truckers in the Permian Basin earning over $100,000 a year, double the national average for long-haul truckers.
In a recent column at BloombergView, Michael Strain, an economist at the American Enterprise Institute, asserted that US businesses, particularly manufacturers, protest too much about the skills gap. Their inability to source skilled employees could be solved, he argued, if they were simply willing to pay higher wages for the talent they need:
Wage growth is picking up, but it is lower than what many economists expect in light of overall economic conditions, and it is not soaring for specific industries.
Simply put, if businesses can’t find workers — or can’t find workers with the right skills — they should raise their wage offers. Basic supply-and-demand logic suggests that doing so will broaden the pool of workers interested in the job, and will make the job more desirable to applicants. In addition, raising wage offerings would likely draw in some of the millions of Americans who report they want a job but are out of the labor force. So unless wage growth picks up, the warnings about labor shortages will fall flat.
Strain is not the first economist to argue that the skills gap is a simple supply-and-demand problem that could be solved by raising the price of labor, or that the problem is on the demand side (not enough attractive jobs) as well as the supply side (not enough skilled workers). Stagnant wage growth may be a factor in US employers’ labor market woes, but in focusing exclusively on wages rather than training and hiring barriers, Strain’s claim oversimplifies the challenge employers are facing. Years of research consistently tell us that while competitive compensation is a large component of what attracts candidates to jobs, there’s no simple formula by which you can convince any given candidate to take a job simply by offering a high enough salary.
It’s easy to point to “basic supply-and-demand logic” to criticize manufacturing companies when you don’t actually understand their experiences in local labor markets, but who says manufacturers aren’t trying to raise wages already anyway? A 2015 study by the Manufacturing Institute and Deloitte showed that 80 percent of manufacturing companies were already willing to pay more than market rates to reduce the skills gap—especially for more skilled labor, such as machinists, craft workers, and industrial engineers. Yet according to our own research at CEB, now Gartner, only 23 percent of heads of HR in the manufacturing industry believe they can close critical skills gaps over the next 12 months.
In the latest sign of the tight US labor market giving candidates the upper hand, many construction contractors in the US are now offering cash signing bonuses to skilled craft workers to sweeten the value proposition for joining their team, Jim Parsons reported at the Engineering News-Record this month:
“Signing bonuses are not new, but they are becoming more prevalent,” says Jeff Robinson, president of compensation consulting firm PAS Inc. Unlike the common practice of providing what he calls “mobilization pay” to compensate for relocation costs, contractors now are offering one-time bonuses ranging from a few hundred dollars to upwards of $1,500 per worker.
According to Robinson, a foreman might be offered as much as $3,000, although there may be an expectation that the person will bring other workers along to join the employer’s workforce. “The advantage of a bonus is that it’s a one-time payment that doesn’t affect base pay,” he says, adding that the incentives usually include a 60- to 90-day employment requirement before they can be collected.
The 2017 survey of workforce shortages by the Associated General Contractors of America reported that nearly a quarter of contractors used bonuses for craft personnel because of difficulty filling positions. The trend appears particularly strong in areas where labor demand is extremely high.
Construction is often thought of as a low-skill occupation where one’s qualifications depend more on strength and stamina than knowledge and experience, but in fact it employs a range of skills, while contractors, like most employers, prefer to hire experienced workers if they can, especially for delicate construction tasks that require high levels of skill and craftsmanship. Construction workers are in high demand as commercial and residential building is booming in many parts of the US, and so these workers are becoming harder to find and more expensive to hire.
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With less than a year to go before the March 2019 deadline for finalizing a deal for the UK’s withdrawal from the European Union, three separate reports have come out in the past week highlighting continued anxiety among employers in key sectors about their ability to meet their labor needs in a post-Brexit environment.
First, Tech Nation 2018, the UK’s annual government report on the country’s tech sector, identified access to talent, cost of living, and Brexit as the main challenges cited by the tech community in the country’s key tech hubs of London and Cambridge. Mike Butcher at TechCrunch criticizes what he sees as the government’s attempt to downplay the elephant in the room, arguing that the report “has been heavily spun to de-emphasise the effects of Brexit on the UK tech industry”—which he says will be severe when considering the impact Brexit will have on British tech companies’ other major concerns:
In the rest of the country, access to talent was cited as the most common challenge – affecting 83% of the UK’s regional tech clusters. Access a funding was a top 3 challenge in 49% of clusters and bad transport links were also cited. Funding is clearly also Brexit-related, given that funding from the European Investment Fund has collapsed since the Brexit vote. The European Investment Bank has slashed deals with UK VCs and private equity groups by more than two-thirds, with no equivalent funding from the UK government in sight. …
However, you probably won’t get that impression from the way the report is being pitched to the media … Instead, the report is filled with heady statistics about the UK’s booming tech industry. The report also makes absolutely no mention of the effect of the UK leaving the EU’s Digital Single Market.
Another report, released on Monday by TheCityUK, an organization that promotes the UK as a global financial center, warns that losing access to European talent will have a harsh impact on the finance industry. That report, prepared in partnership with EY, urges the government to reform immigration policies to allow the sector to maintain access to a pan-European talent pool, arguing that hiring European talent after Brexit through the existing mechanisms for non-European immigrants will increase the City’s costs for hiring international staff by 300 percent. “Simply applying the current immigration system for non-European citizens to European citizens after Brexit will not work,” TheCityUK’s Chief Executive Miles Celic said in a statement carried by Reuters. In response to uncertainty over the future of UK immigration law, banks have already begun preparing to shift staff from London to other European financial centers like Frankfurt to handle their continental business.
What would you do with a $3,000 bonus? Take a trip to Walt Disney World? Well, if you’re working as a chef at the Florida resort this summer, that might be where you got the bonus in the first place. In its effort to fill 3,500 seasonal roles at its sprawling entertainment complex, Disney is offering outsized signing bonuses for some of these hires, including unskilled and part-time employees, Orlando Sentinel business writer Paul Brinkmann reported last week:
A housekeeper hired this year at Disney World’s resorts can get a hiring bonus of $1,250 for a job that pays $10.50 per hour. That’s up from last year’s $500 hiring bonus. And it’s for full-time or part-time hires. Full-time or part-time lifeguards this year can get a $1000 hiring bonus, double what the entertainment giant offered last year, and that is for full-time or part-time jobs, according to job postings. Seasonal lifeguards get a $500 bonus.
Bus drivers can get a $500 hiring bonus – the same as last year. Culinary chefs can get a $3,000 bonus. The bonuses are given after training periods and 30 days on the job.
Universal Orlando, the other major theme park in central Florida, is also hiring 3,000 seasonal workers this year, to whom it is offering “competitive salaries and comprehensive benefits packages.” Both parks are in the midst of holding job fairs to fill these thousands of positions. Disney World’s double bonuses are just the latest anecdotal indicator of the historically tight labor market in the US today. They also illustrate how the state of the labor market, combined with other trends, is affecting seasonal hiring specifically.
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US nonfarm payrolls rose by a seasonally adjusted 103,000 in March, while the more robust numbers from January and February were revised downward by a cumulative 50,000 in Friday’s monthly report from the Bureau of Labor Statistics, representing a marked decline from February, when the workforce grew at the strongest monthly rate since July 2016. The unemployment rate held steady at 4.1 percent for a sixth month, still the lowest since December 2000, while wages rose only slightly, by 8 cents an hour for a year-over-year increase of 2.7 percent.
Labor force participation fell incrementally from 63.0 percent in February to 62.9 percent in March. That’s better than the recent low of 62.3 percent in 2015, but the rate remains nearly the lowest the US has seen since the late 1970s, the Wall Street Journal’s Eric Morath observes. With the economy at approximately full employment, the government and employers alike are hoping to entice more non-working Americans off the sidelines, but have had limited success so far in that endeavor.
Friday’s numbers fell short of expectations. Economists surveyed by the Journal had predicted 178,000 new jobs and an unemployment rate of 4.0 percent. ADP’s independent monthly report, released on Wednesday, said companies had added 241,000 jobs last month. ADP’s numbers always tend to be higher those from the BLS, but this month’s divergence is unusually wide.
One possible factor in March’s sharp decline is the weather: The US was hit with a series of late winter storms this year, and as Washington Post economics correspondent Heather Long noted, there was major snowfall the week the BLS conducted its survey, which may have depressed its count and could mean these figures will be revised upward in future reports.
For Ben Casselman, economics reporter at the New York Times, the big-picture takeaways from the jobs numbers in early 2018 are that wage growth is still slower than economists would tend to expect and would like to see given the tightness of the labor market, and that while labor force participation isn’t falling off due to retirements in an aging workforce, Americans are not returning to the workforce in sufficient numbers to fill the shortages in the labor pool:
Personnel Today’s Jo Faragher flags some new data from Monster.co.uk showing that the total number of searches for jobs in the UK out of other EU countries has declined 11 percent since the June 2016 referendum in which UK citizens voted to exit the union:
[W]orkers of Romanian nationality are the least keen to come to Britain to work, with Romanian search traffic for UK jobs dropping by 52%. This was closely followed by Portuguese searches, which dropped by 42%, and Polish by 35%. Searches from UK jobseekers continue to make up 80% of traffic to the job site.
At the same time, however, job searches by Swedish candidates went up by a fifth, and Finnish jobseekers by 18%. Monster also reported a rise in searches from some countries outside the EU – including the US and the Philippines.
Romania and Portugal are believed to be among the most common nationalities of EU citizens living in the UK, along with Poland (the largest by far), Ireland, and Italy, according to data from the Office of National Statistics. While net migration from the EU to the UK remained positive last year, the net figure of 90,000 in the year to September 2017 was the lowest since 2012.