december2022january2023 - 18

THE LABOR LAW ADVISOR
Navigating New Workplace Headwinds
EMPLOYERS ARE CURRENTLY experiencing an unprecedented set of headwinds. First,
businesses are facing difficulties attracting and hiring a sufficient number of workers. As
businesses attempt to resume full operations on the other side of the COVID-19 pandemic,
consumers are likewise eager to return to their normal patterns of eating out, traveling,
and shopping for more than essentials.
But a lack of workers has remained
a thorn in the side of businesses and
businesses have been forced to adapt
to the extent possible. Restaurants
have struggled to serve their returning
customers. Grocery stores, fast-food
establishments, and retailers have
increased the use of self-checkout
and self-service kiosks. Airlines
have delayed or canceled thousands
of flights due to pilot and attendant
shortages. A lack of truck drivers has
continued to snarl supply chains.
Employers' hiring woes should
really come as no surprise upon
considering some critical facts. The
unemployment rate is near a multiyear
low, at 3.7% for August. Not
long ago an unemployment rate of
5.5% was generally considered full
employment. The labor participation
rate, the percentage of working-age
Americans currently employed, on
the other hand, is at its lowest level
since the late 1970s.
Additionally, in what has been
referred to as the Great Resignation,
in the first several months of 2022,
almost 4 million people per month
voluntarily left their jobs. In most
cases leaving one job was an attempt
to improve compensation by moving
to one of the 10 million or so open
jobs in the country. However, not
all departing employees moved to a
new job. A good number left for other
reasons, such as burnout due to the
pressures of the pandemic, to address
childcare issues, or to seek more formal
education to improve employment
opportunities.
There has been a slight glimmer of
hope recently for employers trying to
manage employee turnover. As many
as 4% of the employees who left their
employment during the Great Resignation
have boomeranged back to their
former employers. In addition, the
deteriorating economy is forcing some
baby boomers who retired early due to
pandemic-related fallout to return to
the workforce.
A second major headwind facing
employers is a largely disengaged
workforce. Currently, millennials
comprise the largest segment of the
workforce and millennials generally
prioritize work/life balance. Employers'
current shortage of employees and
inability to expeditiously recruit and
hire new employees undoubtedly is
fueling millennials' perception that
employers are not meeting their work/
life needs and causing them to jump to
jobs that address those needs. In the
case of millennials, there is the added
problem that they were already among
the least engaged with their jobs.
Often, the primary reason employees
stay in or leave a job stems from
their treatment or the perception of
their treatment by their supervisor or
manager. Employees quit bosses, not
companies. In a Hays study involving
almost 2,000 employees, 43% said
their company's culture was the
primary reason they were looking
for a new job.
Employees cited a lack of communication
and the inability to provide
feedback as creating the perception
their opinions were unimportant and
not valued. Additional studies have
shown that close to 80% of employees
who quit their jobs point to a lack of
appreciation as one of the primary
reasons for leaving.
The challenge facing employers
with employees who may become
easily dissatisfied and consider leaving
a job that they perceive as not meeting
their expectations is not insurmountable.
Adopting an employee-friendly
culture is a simple and inexpensive
fix. Expressing genuine appreciation
and treating employees as the valued
assets they are should be part
of all managers' and supervisors'
daily routine.
Sincere efforts to make employees
feel like they are part of the company
and to remain truly engaged with
employees on a daily basis can reduce
employees' motivations to move on
for perceived greener pastures. The
third and final headwind confronting
employers is how to reconcile
wage increases with currently high
inflation rates, while not knowing
how long high inflation will persist.
Current estimates are that the median
wage increase in 2022 will be 3.4%. In
a survey of more than 1,400 companies
conducted by human resources
advisory firm Willis Tower Watson,
employers anticipate pay raises in
2023 to average 4.1%.
With inflation averaging approximately
8% over the past year, peaking
at 9.1% in June 2022, employees are
rapidly losing ground. However, inflation
remaining flat year over year in
July 2022 may provide a small ray of
18 DECEMBER 2022/JANUARY 2023 ■ www.CPAPracticeAdvisor.com
RICHARD D. ALANIZ
Senior Partner
Alaniz Schraeder Linker Faris Mayes, L.L.P.
ralaniz@alaniz-schraeder.com
hope that it may begin to decline soon.
But even if the Fed's interest rate hikes
are successful in reducing inflation
over the coming months, inflation will
still likely outpace the wage increases
provided by many employers.
Once an employer grants a wage
increase it is difficult if not impossible
to claw back if economic conditions
deteriorate. Thus, cautious employers
are often slow to significantly
raise wages based on the difficulty
of determining long-term trends
and their implications. According to
compensation data and advisory firm
Pay Scale, 51% of workers believe that
they are paid below market even when
they are paid at or above market rates.
This means that even without
the impact of inflation, employees
are likely to perceive their compensation
as falling short. Employees who
perceive themselves as underpaid are
more likely to leave their job.
Employee raises have averaged
3% or so over the past 10 years.
Unless inflation subsides to the 2%
to 3% level, employers are going to
see employee demands for wage
increases far beyond this historical
3% average. In fact, some employee
advocates are counseling workers to
seek wage increases equal to inflation
at a minimum and preferably 3% to 4%
above the inflation rate to make up
for lost ground. This is one headwind
that will require deft maneuvering by
employers in the midst of an uncertain
business climate. ■

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