According to the Bureau of Labor Statistics most recent report released on March 10, 2023, the unemployment rate for March was 3.5 percent. The unemployment rate has hovered at this level over the last 12 months, ranging between 3.5 percent and 3.7 percent, except for in January 2023 where it dipped to 3.4 percent, which was the lowest rate since 1969. During times of low unemployment, employers may struggle to meet their hiring and retention needs for a skilled workforce. Without a skilled workforce, industries find themselves struggling to maintain production levels to meet customers’ needs and sales or growth goals.{{RELATEDLINKS}}

As an economic development consultant, there are so many interesting things we get to experience and learn about when working a project. I always enjoy conducting labor analysis studies, interviewing existing industries, and chatting with company representatives to better understand what they are struggling with and ways they have overcome obstacles to be successful.

The current low unemployment rate and tight labor market is a large obstacle that companies are currently working hard to overcome. There are so many innovative things that companies are doing to ensure that they are identifying, recruiting, and hiring the best labor available, improving the workplace environment and culture to help retain their existing workforce, providing employees opportunities for growth, and utilizing technology to operate as efficiently as possible during lean times. Following are some of the key steps that companies can take:

Offer competitive wages and desirable benefits: Offering competitive wages and benefits helps with job recruitment and retention in a tight labor market. It is important to conduct regular wage and benefit studies to ensure your company is offering competitive wages and desirable benefits. A labor study may help a company determine that it needs to pay wages in the 75th percentile of the market to recruit more effectively and prevent turnover. The cost of hiring is significant, so putting measures in place to help hire AND retain quality employees is important and can help protect the investment and training you have poured into existing employees in the long run.

Companies that create a culture that offers opportunities for personal and professional growth are more successful in attracting employees who want to be challenged and invested in their jobs. A strong benefits package geared toward the characteristics and values of the local workforce can be just as valuable as paying above average wages. I met with an employer who was struggling with high turnover. Company leadership expressed frustration since they were paying above average wages and offered what they deemed to be a solid benefits package that covered 90 percent of their employees’ health insurance costs. Most of their workforce is in their 20s and do not go to a doctor’s office on a regular basis. Their employees do not consider high healthcare coverage a game changing benefit. While conducting employee interviews, it was discovered that their labor pool valued nontraditional benefits such as pet insurance, more paid time off, and a flexible work schedule over high medical coverage. This is just one example of how simple adjustments to a benefits package can help target employees in a tight labor market and increase employee retention by offering benefits that competitors may not offer.

Create a positive work culture: Company culture is becoming significantly more important in recruiting and retaining employees. Companies that create a culture that offers opportunities for personal and professional growth are more successful in attracting employees who want to be challenged and invested in their jobs. Your company should set clear core values and a mission statement and share them with job candidates. State these values in the employee handbook and post them around the workplace as a constant reminder of the company’s desired culture. Leadership can help create a positive work culture by holding regular performance reviews to create an environment of support and improvement. In return, leadership can provide its employees with opportunities to provide their thoughts and ideas on issues and ways to improve operations and the working environment.

Tap the underemployed: The underemployed is a great, untapped pool of candidates that can help meet a company’s workforce needs. Historically, there has always been a portion of the workforce employed in jobs below their skill level, or part-time workers who would prefer a full-time job. Many employees were laid off during Covid and re-entered the workforce in a position lower than their skills and experience level based on market conditions.

To identify the underemployed, Human Resource departments should look beyond an applicant’s current position and analyze the candidate’s work experience over a longer period. Look for and identify signs of career progression. Candidates with specialized experience such as educational credentials and certifications they are not utilizing in their current jobs may be underemployed. A deeper level of evaluation can help identify candidates that are currently working in a position they are overqualified for based on prior work and educational experiences.

To identify the underemployed, Human Resource departments should look beyond an applicant’s current position and analyze the candidate’s work experience over a longer period. Institute automation: Automation is also a solution that addresses labor shortages. For example, in the material-handling industry, employers have been able to utilize automated material-handling equipment to improve production capacity and meet delivery deadlines with a reduced workforce. Automation enables employers to reallocate employees, who were working in repetitive jobs that can be automated, to other, more specialized positions that need to be filled by humans. Automation technologies not only increase productivity but also allow workers to move into more technical, higher-paying positions.

Automation can also help with job retention by improving the workforce environment and workplace safety. This year, I toured a heavy manufacturing operation that required employees to engage in repetitive, hands-on tasks involving close contact to heavy industrial equipment. The company has plans to upgrade this manufacturing line with high-tech, automated equipment that will require less manual labor and reduce the risk of accidents. Employees will have opportunities to be trained to run the high-tech equipment, which will lead to job progression and higher wages.

Provide training: I conducted an existing industry labor interview with the head of a staffing agency that specialized in filling positions for his clients in a market with a 2.9 percent unemployment rate. We discussed what hiring and retention issues his clients were facing in the current market. He emphasized that his clients that were offering above market wages, competitive benefits, a safe workplace, and training and growth opportunities were not having significant issues hiring and retaining workers compared to his clients that were paying average or below average wages or had an environment that required heavy manual labor in less than ideal conditions. He shared additional thoughts on the importance of training first-line supervisors to help retain workforce.

Lower-level employees have the most interaction with first-line supervisors. It is important that first-line supervisors, especially employees that have recently been promoted into these roles, receive adequate soft skill training to be successful managers. Soft skills such as communication, adaptability, development and mentorship, conflict resolution, and problem-solving are not always innate but can be taught. A company’s first-line supervisors can set the tone for all operations level employees and help create a positive, productive work environment.

Automation can also help with job retention by improving the workforce environment and workplace safety. To continue with the topic of training, a solid, well-communicated training plan is a valuable tool for job recruitment and retention efforts. Training is a sign of a company’s investment and commitment to its employees’ growth and success within the company. It is an opportunity for employees to continually improve their skills and knowledge base so they can transition to higher-skilled, better-paying positions. In return, well trained employees tend to be more confident, motivated, and engaged in their work. These qualities can lead to increased productivity and retention of an existing workforce, especially if the company has a precedence for promoting qualified workers from within.

Employers can offer customized training plans based on their workforce needs and preferences. Training plans can include several options such as on-the-job training, classroom-based training provided by internal instructors and/or external vendors, or web-based learning that employees can participate in at their own desired pace. Employers may also want to offer tuition reimbursement that will encourage and reward employees that are interested in furthering their education at a technical school, college, or university.

Another avenue to help employees gain experience is through attending trade-related conferences where they can learn skills related to their jobs and network with peers. A company’s goal when developing a training plan should be to make sure that everyone has an opportunity to continually learn in their current roles and be ready to grow into new roles.

In Summary
With creativity and commitment, businesses can overcome the challenges of meeting workforce and production needs during periods of low unemployment. Improve recruiting and hiring practices. Create the best workplace environment you can. Develop an environment where employees feel physically safe and are committed to providing feedback and contributing to making the company a better, more successful place. Invest in production efficiencies. And finally, provide training and growth opportunities for your employees so they are committed to you for years to come.