New Studies Challenge Conventional Wisdom on Gig Economy, Skills Gap

New Studies Challenge Conventional Wisdom on Gig Economy, Skills Gap

Over the past decade, particularly in the US, there has been considerable debate over whether the labor market trends we were seeing represented fundamental shifts in the economy or business-cycle responses to the Great Recession that followed the 2008 financial crisis and the long, slow recovery. In new studies, two of these trends—the skills gap and the gig economy—are reconsidered in light of new data, with researchers finding that phenomena they once thought were secular may actually have just been products of the recession after all.

Economists Alan Krueger and Lawrence Katz made headlines in 2016 when they released the results of a survey they had conducted the year before, which found a major jump in the number of Americans making a living in “alternative work” arrangements (i.e., not in regular, full-time employment), though gig economy platforms like Uber made up a small fraction of this contingent labor market. At the time, Krueger and Katz found that around 16 percent of the American workforce were engaged in this type of work, compared to 10 percent in 2005. Follow-up work indicated that alternative work accounted for almost all of the jobs created since 2005.

Now, the leading economists of the gig economy say their initial study overestimated its impact, the Wall Street Journal reported this week. In a new paper, Krueger and Katz look at new evidence and conclude that their 2015 survey overstated the size of the contingent workforce because of a weak labor market and the impact of the recession. Many of the alternative jobs they counted were stopgap jobs people took to make ends meet while they were unable to find full-time work. Once the economy and their job prospects improved, these gig workers returned to more traditional employment. The vast difference in the health of the US economy between 2005 and 2015 skewed the data.

Accordingly, the economists now revise their estimate of the growth of alternative work during that period to a 1 or 2 percentage-point increase, not 5. This brings their findings more in line with other recent studies that have painted more modest pictures of the gig economy—including the Bureau of Labor Statistics’ 2017 Contingent Worker Supplement survey, which claimed the alternative workforce had actually shrunk since the last time the survey was conducted in 2005. At the same time, Krueger and Katz argue in their new paper that the surveys used to measure alternative work arrangements, including those conducted by the Labor Department, are seriously flawed (the huge gap in the BLS data due to the dozen years when the survey wasn’t conducted is part of the problem).

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US Job Market Finishes 2018 Strong, but Talent Challenges Remain

US Job Market Finishes 2018 Strong, but Talent Challenges Remain

The US jobs numbers for December, released by the Bureau of Labor Statistics on Friday, exceeded expectations by a wide margin with the economy adding 312,000 jobs last month, while figures from October and November were revised upward by a combined total of 58,000. It was the best month of job growth since February 2018, when 324,000 jobs were created. Economists surveyed by Dow Jones had forecast just around 176,000 new jobs, according to CNBC.

The unemployment rate increased slightly from 3.7 to 3.9 percent in December, but for a good reason: not because workers lost their jobs, but rather because 419,000 new job seekers entered the labor force. The unemployment rate has fallen from 4.1 percent since December 2017, while the workforce expanded by nearly 2.6 million people. With the final report for the year, the US added an average of 220,000 jobs a month in 2018. Wages also grew in December by 0.4 percent over the previous month and 3.2 percent over the previous year, tying with October for the best year-over-year increase since April 2009 and indicating that the tight labor market is finally leading to higher pay for US employees.

“It appears that higher wages are the reason why people are returning to the active labor force in large numbers,” Paul Ashworth, chief US Economist with Capital Economics, commented to CNN, adding that wage growth might spook investors by suggesting that the Federal Reserve would proceed with its planned schedule of interest rate hikes this year. Ashworth added in a note reported by CNBC that the big jump in jobs “would seem to make a mockery of market fears of an impending recession,” while Jim Baird, chief investment officer for Plante Moran Financial Advisors, told the network: “Employers, it would seem, didn’t get the memo from Mr. Market that it’s time to tighten their belts.”

Nonetheless, the robust jobs report comes amid market jitters over the possibility of an overheated economy, missed earnings projections from some major US companies, and concerns about the domestic impact of President Donald Trump’s trade policies toward China. In remarks after the report was released on Friday, Fed Chairman Jerome Powell said the central bank was prepared to adjust monetary policy in response to changing economic conditions, meaning it could ease up on raising interest rates if the economy shows signs of trouble. Powell described the jobs report as encouraging, saying the rise in wages “does not raise concerns about too-high inflation” and would not prompt the Fed to accelerate rate increases, the New York Times reported.

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For Retailers, Attracting Holiday Staff Means More than Just Raising Pay

For Retailers, Attracting Holiday Staff Means More than Just Raising Pay

Facing one of the tightest labor markets in living memory, US retailers and other companies staffing up for the holiday season have had to get creative about finding and attracting the extra workers they need for the seasonal rush. Some retail chains started hiring for the winter holidays all the way back in the early summer, raised entry-level wages for store employees, and offered a variety of bonuses and perks like store discounts.

The retail sector was already feeling pressure to bump up pay, the Star-Tribune reported this week, citing a survey by the hiring platform Snag that found retailers expected wages to rise by 54 percent this year. That’s partly a product of a labor shortage, but also reflects the growth of online shopping:

As more shoppers order online and opt to have items shipped to the store or their front door, retailers’ backroom operations are changing. Mass merchants still need cashiers, salespeople and shelf stockers. But they need more people to package orders for store pickup and to work in warehouses and distribution centers, which increasingly requires more technology skills.

Target is doubling the number of staff it needs to handle digital orders. Macy’s, which is hiring about the same number as last year, will shift its mix and add 5,500 more people for its fulfillment centers. Best Buy says it, too, will bulk up on workers to package up online orders.

Labor market competition, the need to attract and retain more skilled employees, and “HR-as-PR” considerations are all coming to bear on retailers’ decisions to raise pay for their hourly employees. They are also courting hires with new benefits, including intangible benefits like flexibility, Steve Bates notes at SHRM:

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Will Amazon’s Minimum Wage Hike Shake up the Labor Market?

Will Amazon’s Minimum Wage Hike Shake up the Labor Market?

On Tuesday, October 2, Amazon announced that it would raise its internal minimum hourly wage for US employees, including part-time workers and those hired through temporary agencies, to $15 an hour. This includes workers at the company’s warehouses or “fulfillment centers,” as it calls them, in addition to store employees at Whole Foods, which Amazon acquired last year. The e-commerce giant also said it planned to lobby the US government to raise the federal minimum wage from its current hourly rate of $7.25, last updated in 2009, the New York Times reported:

The new wages will apply to more than 250,000 Amazon employees, including those at the grocery chain Whole Foods, as well as the more than 100,000 seasonal employees it plans to hire for the holiday season. The change will not apply to contract workers. It goes into effect on Nov. 1. “We listened to our critics, thought hard about what we wanted to do, and decided we want to lead,” Amazon’s chief executive, Jeff Bezos, said in a statement. “We’re excited about this change and encourage our competitors and other large employers to join us.”

The move came amid growing pressure on Amazon from the media and politicians regarding its pay practices and the work conditions of its lowest-paid employees, particularly those at its warehouses or “fulfillment centers.” Vermont Senator and former presidential candidate Bernie Sanders has been an outspoken critic of Amazon’s CEO Jeff Bezos, who is currently estimated to be the wealthiest individual in the world, citing news reports that large numbers of Amazon’s low-wage employees were dependent on public assistance. Sanders and California congressman Ro Khanna have been pushing legislation that would require companies to compensate the federal government for the cost of public assistance benefits received by their employees, including food stamps, Medicaid, and public housing.

The next day, however, Bloomberg reported that Amazon was cutting monthly bonuses and stock awards for hourly employees to help offset the costs of the minimum wage hike. Still, the company insists that these workers’ total compensation is rising:

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US Employees’ Bonuses and Benefits Growing Faster than Wages

US Employees’ Bonuses and Benefits Growing Faster than Wages

The latest compensation data from the US Labor Department’s Bureau of Labor Statistics show that total compensation for US employees has increased modestly over the past year, from $35.28 per hour worked in June 2017 to $36.22 per hour worked in June 2018. Wages and salaries averaged $24.72 per hour worked and accounted for 68.3 percent of these costs, while benefits averaged $11.50 and accounted for 31.7 percent. For private sector employees, compensation has increased from $33.26 per hour worked to $34.19. Wages made up $23.78 or 69.6 percent of that figure, while the remaining $10.41 (30.4 percent) consisted of benefit costs, in which the BLS includes supplemental pay.

While the percentage ratio of wages to benefits was unchanged from June 2017, benefit costs grew at a slightly higher rate than wages year-over-year, nearly 3 percent compared to 2.7 percent. This reflects a nearly 12 percent increase in bonuses and other forms of supplemental pay, from $1.18 per hour to $1.32; supplemental pay made up 3.8 percent of the total compensation mix in June 2018, compared to 3.5 percent a year earlier. Paid leave, including vacation time, also increased slightly.

Taking a longer-term view, over the past five years, benefit costs for private-sector employees have increased by over 20 percent, from $8.64 per hour worked in June 2013; whereas wages and salaries have increased 16 percent, from $20.47 that month. Supplemental pay, by comparison, has increased 65 percent from 80¢ per hour worked in June 2013. This trajectory reflects the increasing tendency we’ve observed among employers in recent years toward variable pay schemes that reward employees for high performance with one-time bonuses rather than standard annual raises.

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US Retailers Anticipate Needing Even More Workers This Holiday Season

US Retailers Anticipate Needing Even More Workers This Holiday Season

The holiday hiring season is already in full swing in the US and the number of seasonal workers hired this year is expected to grow, according to a new forecast from Challenger, Gray & Christmas, citing year-to-year trends and announcements retailers have already made this year:

Last year, seasonal retail employment increased by 668,400 during the final three months of the year, 4.3 percent higher than the 641,000 jobs added in 2016, according to employment data from the Bureau of Labor Statistics (BLS). … Last year, BLS data showed that transportation and warehousing employment increased by a non-seasonally adjusted 279,700, up 13.4 percent from the 246,700 workers in the final quarter of 2016 and 6.6 percent higher than the 262,300 workers hired in this sector in the final three months of 2015.

Companies in this sector are averaging 5.2 million workers this year, compared to 4.9 million in 2015 and 4.2 million in 2008, according to non-seasonally adjusted BLS data.

Challenger points to several companies that have announced they will hire as many holiday season employees as last year or more: Macy’s announced this week that it planned to hire 80,000 seasonal workers, as many as it planned to at the start of the 2017 season (it ultimately hired 87,000 last year). FedEx announced plans for 55,000 holiday hires, a 10 percent increase over last year’s number, and said it would also increase hours for some current employees. The big-box retailer Target, meanwhile, said on Thursday that it would hire around 120,000 seasonal workers for the holidays, 20 percent more than last year, while also raising starting pay by $1 per hour, the Star-Tribune reported:

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Global Talent Monitor: Discretionary Effort Continues to Fall in US as Employee Confidence Dips

Global Talent Monitor: Discretionary Effort Continues to Fall in US as Employee Confidence Dips

In the past three years, the number of US employees willing to go above and beyond their employers’ expectations at work has fallen by 10 percent, from 27 percent in the second quarter of 2015 to 17.8 percent in Q2 of 2018, the latest data from Gartner’s Global Talent Monitor shows. Globally, employees’ confidence in business conditions has fallen for the first time since Q1 of 2016.

One possible driver of employees’ declining levels of discretionary effort is a lack of satisfaction with opportunities to grow and develop in their careers. Nearly 40 percent of employees in the US and globally ranked a lack of future career opportunities as their main source of dissatisfaction in a previous job, displacing compensation as the number-one driver of attrition both in the US and around the world. Over the past few years, we have seen development opportunity grow to be an increasingly critical element of the employee value proposition, both as a driver of attraction for new employees and, in its absence, as a reason for quitting.

“With recent U.S. reports showing little growth year over year in real earnings, workers hope to achieve more satisfaction in their jobs through better titles and opportunities to advance and grow in their current careers,” Brian Kropp, group vice president of Gartner’s HR practice, said in a statement. “To prevent further reduction in workplace effort and to retain top talent, employers should pay closer attention to employee dissatisfaction about the lack of career opportunities, particularly if wage growth remains stagnant.”

“Leading organizations are able to use their employment brand to illustrate why their career opportunities are better than their competitors,” he added. “A company’s EVP directly correlates to employee engagement levels, as workers are more likely to work harder and stay in their current positions if they are highly satisfied with their company’s EVP offerings. Gartner data shows that organizations with high levels of employee engagement report financial outcomes three times higher than firms with lower engagement levels.”

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