To Understand the 2021 Labor Market, We Can Look to 2020
The US labor market is experiencing something it has never experienced before. As we start a new year, however, we can pinpoint the specific trends that drove the labor market at the end of 2020, and that in turn can help us predict how the market might look in 2021.
Identifying and accepting these trends can enhance a company’s speed of execution and productivity, while having a very positive impact on company culture. Not addressing these trends could hurt a company: Staffing practices are evolving, and if you fail to adapt, you may not meet your customers’ expectations.
Leaders managing hiring strategies across all industries should study the following labor market trends:
Trend No. 1: Remote Work Is Increasing in Popularity
While on-site work (manufacturing, logistics, operations) will never go away, the significant shift to remote work cannot be ignored. Only 7 percent of US employees were able to work from home before COVID-19, according to Pew Research Center. Now, Gallup reports that 62 percent of US employees have the ability to work from home.
While the COVID-19 crisis certainly accelerated the trend toward remote work, it’s clear that work-from-home arrangements are here for the long haul. A study conducted by researchers from Harvard Business School, Harvard University, and the University of Illinois revealed that at least 16 percent of American workers will keep working from home at least some of the time long after the COVID-19 crisis has receded.
This rise in remote work could very well be the biggest workplace shift resulting from COVID-19. Preconceived notions around remote work have been dispelled by the large-scale shift. In fact, many people find working remotely even more productive than working from the office. With no commutes, impromptu meetings, or water cooler conversations, workers find themselves more focused on completing tasks. This confirms what the research has long shown: Working from home can make people more effective, not less. In fact, a 2o14 study by economics professor Nicholas Bloom found that remote workers completed 13.5 percent more tasks than their in-office counterparts.
Companies are also seeing increased savings on office space, utilities, equipment, and more, making the benefits of remote work far-reaching.
Trend No. 2: Flexible Work Schedules Are Necessary
The 9-5, 40-hour week still exists in many companies, but today’s workers demand flexibility. In a recent study commissioned by GigSmart, 78 percent of people said scheduling flexibility is an absolute necessity when searching for a job.
COVID-19 has also created a caregiving crisis for working parents. Many remote workers with children have found themselves having to take on the role of parent and teacher while clocked in at home. With employees facing an unprecedented amount of pressure, offering your workers scheduling flexibility can be an easy and effective way to cut stress and keep individual performance high.
It is important to note that workplace flexibility doesn’t just mean working remotely. It encompasses a variety of working arrangements — for example, flexible shifts to manage homeschooling, paid time off, temporary work, and more.
A solid work/life balance is necessary for both employers and employees, even if it comes at the expense of a traditional 9-5 workday. The workplace has evolved, and people want flexibility to manage their career paths, develop new skills, and grow professionally and personally. People will continue to work hard, but offering them more freedom as to how that work gets accomplished can really pay off in the long term.
Trend No. 3: W-2 Only Hiring Model Is Over
The days of only hiring W-2 employees are over. Companies are finally challenging the status quo and the outdated biases that come with it. This is happening because many companies are still hesitant to add permanent jobs without knowing what the immediate future holds. Recent research by Gartner found that 32 percent of organizations are replacing full-time employees with contingent workers in order to save money, and the use of contingent workers will likely continue expanding well into the post-COVID-19 landscape.
To remain fully staffed in the current climate, companies will need to embrace multiple types of labor, including W-2 employees, 1099 contractors, and third-party outsourced solutions. Companies with total talent staffing strategies will not only save money, but they may also be able to fill positions faster, reduce turnover, and outproduce their competitors that haven’t adjusted to the current times.
As companies are looking for more flexible labor solutions to keep up with the COVID-19 economy, workers are also increasingly seeking flexibility and control instead of rigid, traditional employment arrangements. This alignment of employer and employee wants is the very reason why the gig economy is one of the fastest-growing segments of the labor market.
What’s the punch line? More and more American workers want flexibility, and an increasing number of companies are looking for flexible labor solutions. As leaders, we need to react.
I challenge you to ask yourself the following crucial questions:
- Does my entire organization need to be composed of W-2 employees?
- Do a majority of employees need to work on site within a commercial office setting?
- Is a physical location the best option to sell my product or service?
If you can’t answer all three questions with a resounding yes, it’s time to consider alternatives.
Trend No. 4: Finding Skilled Workers Is Still Difficult
Unemployment numbers are high, but it’s still hard for companies to find those workers who have the specific skill sets they need. According to a report from the National Federation of Independent Business, 89 percent of companies looking to hire reported they were unable to find many qualified applicants for their open roles in December 2020.
To combat this, more and more companies are now looking into gig economy solutions. This does have its benefits for the employer beyond simply sourcing talent: With gig work, companies can sample several workers in action before committing to a full-time hire, allowing for more informed recruiting decisions.
It remains uncertain how 2021 will play out, but much depends on how quickly the COVID-19 crisis resolves. Regardless, every company, across industries, must take into account the trends changing today’s labor market. Going forward, it will be critical to diversify your staffing strategy with a healthy mix of W-2 employees, third-party outsourced solutions, temporary workers, and independent contractors, all working on site or remotely as needed.
By acknowledging these trends, I believe you will save your company money, secure the best talent, fill positions faster, experience less turnover, and consistently outproduce your competitors.
Rich Oakes is president of GigSmart.