Businomics Blog

Hiring Retirees to Cope with Tight Labor Markets

The Wall Street Journal has a good article (subscription required) about companies re-hiring their retirees to cope with tight labor markets.  These companies often use the retirees for part-time or temporary positions.  The article featured Schneider the "transportation and logistics" company (which I would have called a trucking company), but the Immigration and Naturalization Service recently announced plans to bring back retirees to help clear the agency's backlog (reported by the AP).

I've posted before on the importance of bringing older workers into the workforce, (such as here).  I think it will take some experimentation to get work the bugs out of a retire hiring program.  Your retirees are likely to want more flexibility than when they were regular employees.  A big part of why they will return to work is to feel that they are doing something useful, so make sure to express your appreciation.  It will probably help if you facilitate social networking among your retirees.  Some retirees find that they are cut off from their old social connections; work can help them.

We're still a few years away from the real labor crunch, but it's coming.  The businesses that thrive in the next decade will be those that are experimenting now.

Professionals Working from Home

The Wall Street Journal recently ran a column by Sue Shellenbarger (subscription required) about professionals working from home.

This subject should be on the strategic planning radar screen of all companies with employees.  Here's why:  in the decade from 2010 to 2020, there will be no net growth of the working age population.  That's because the baby boomers will be leaving their working years, and their children (the "echo boom") will have already entered their working years.

If your long-run business plan has growth of the number of employees next decade, you will have to steal those employees from some other employer.  How do you do that?

I'm not sure how best to do that.  I'm pretty sure that you don't know, either.  But I know the way to learn is to experiment.  Try some folks working from home.  Try hiring some retirees who get more flexible hours.  Try tapping into non-traditional labor sources, such as immigrant  communities.  Try using some high school grads where you previously used college grads.  Try different things, because there may not be one best strategy.  Even if one strategy proves best, you'll have to work out some bugs.  You may find that if you hire work-at-homes, you need different hiring criteria, different monitoring systems, different compensation systems.  The time to work out the bugs is now.

I've talked about this in my speeches to corporate executives, and I don't seem to get much traction.  I fear that many business leaders are thinking, "Yes, that's a problem, but I retire in three years, so it's not MY problem."  Actually, if a person is thinking that, he doesn't deserve the label "business leader."  But if a business is to survive, someone at the top needs to sponsor some experiments to figure out how to deal with the labor dearth of the next decade.

Middle Class Jobs Declining? Maybe Not

Are middle class jobs on the decline?  Stephen Rose has an interesting article in the Wall Street Journal on the subject.  Imagine a day when relatively few women worked, and when they did, they earned less than men earned.  Now change women's attitudes so that they are more eager to enter the work force, or change employers' attitudes so that they are more willing to hire women.  What happens to average wages?  Well, wage per worker may go down, as the new women bring down the average.  That could happen even if the wage gap is narrowing, and even if women are gaining wages, and men are also gaining wages.

Stephen Rose goes into the subject of middle class jobs by looking separately at men and women, and by level of education.  His key finding won't fit the spin from either party's econo-hacks:

"For three-quarters of the workforce (women and the top half of male earners), economic growth translated into earnings gains. But for male workers in the bottom half of the earnings distribution, the decline of unionized manufacturing employment has led to the drying up of some middle-class jobs for those with no post-secondary education."

There was a day when high wage jobs were available to low skilled people.  Those days are over.  Gone.  Done.  Sorry.  It was fun while it lasted, but it is no more.  Technology changed it.  Trade changed it.  But there's no going back.  Both national-level politicians and local chamber of commerce boosters seem ignorant of this fact, as they try to "create jobs" or "bring in an elephant" employer.  Here's the new bottom line: high skilled people will find work at high wages, and low skilled people will find work at low wages.

Career Advice: What Smart Young People Need to Know

Got a bright young person in the family?  If so, steer him or her to Marc Andreessen's blog, where he has a series of posts with career advice.  Start here, then go here, and then here.

Looking back on my own career, which I've conducted without the benefit of Marc's advice, I've been at my best when I was (inadvertently) following his guidelines.  One of my sons turned me on to Marc's blog, and I'm forwarding the link to the other son.  Highly recommended.

Labor Surplus or Shortage: The Jamaicans of Mackinac Island

Michigan has the highest unemployment rate in the country.  That would typically indicate a surplus of labor.  But on a recent visit to Mackinac Island, the resort community in the straits between Michigan's upper and lower peninsulas, I met some of the 500 Jamaicans working there.  Yes, 500 Jamaicans working in one small community of the state with the highest unemployment rate.  These are not Americans of Jamaican ancestry; these are residents of Jamaica who come up to Mackinac Island for seasonal work.

Now why are Jamaicans working there instead of Michiganders?  (Actually, there are also plenty of native-born Americans at work, but let's focus on the 500 Jamaicans.)  I can understand a laid-off auto worker, used to $27 an hour plus generous benefits, not jumping onto a low-wage service job.  But unemployment rates are always higher for less educated people, and for younger people.  So what are the young men and women of Michigan doing?  Why aren't they taking all of the resort jobs on Mackinac Island?  They could get home to family on long weekends; the Jamaicans are away from home for six months.

I have nothing against the Jamaicans.  From what I saw, they are friendly, hard-working people.  My hat is off to them.  I simply don't understand why there's an opening for them in a high unemployment state.  Perhaps, just maybe, the workers of Michigan aren't willing to work if they cannot get a very generous pay and benefits package.  If so, I am very pessimistic about the outlook for that beautiful state.

Wage Growth Steady Despite Tight Labor Market

Wages and benefits are not accelerating despite the tight labor market:

The benefits change shifts around a bit, but the blue line, which totals wages and benefits, shows great stability.  This despite the low unemployment rate:

I think that companies are feeling pressure to keep costs down, and they worry that going out to hire just any warm body may result in costs greater than value of the labor.  In fact, I think the biggest limitation on economic growth right now is availability of labor.

Implications for Federal Reserve policy:  steady labor cost increases reduce the itch to tighten, but the steady unemployment rate reduces the urge to ease.  Forecast for short-term interest rates: steady as Ben goes.

Business Implications: What should a company do if it wants to hire but is having trouble finding the workers they need?  Take a look at my 6 Steps to Hiring in a Tight Labor Market.

Employee Performance: Measuring to Reward Success

Labor markets are tight.  It's important to retain your best employees.  But  who are the best employees?

That question is tough.  A recent article in Business 2.0 magazine helps employers get a handle on employee performance.  I liked the article from its opening line:

"Let's be honest:  Most performance reviews are a joke."

Couldn't have said it better myself, but then the article describes some online services that help bosses improve their measurement of employee performance.

Imagine this:  you allocated you bonus pool so that your best employees were very motivated to stay.  You wouldn't even have to get rid of the worst employees to see improved results overall.  Just retention of the top performers and normal attrition of everyone else will give your organization a shot in the arm.

In a tough, competitive economy, you need to measure performance as well as it can possible be measured.

Employee Retention

Labor markets are tight, as I've mentioned several times.  Ken Tanner has a great, short summary of the case for focusing on employee retention before hiring.  Read it here.

Ken does hands-on consulting for companies that need to improve their retention.  For you do-it-yourselfers, my tips for employee retention are here.

Employment Solid, Labor Markets Still Tight

Job growth continued at a solid pace last month, and the unemployment rate is still low:

The recent pace of job growth is 1.5 percent over the last 12 months.  The population is growing not quite so fast, so unemployment has dropped:

Note that this chart goes back to 1960, and shows pretty well that it's fairly unusual to have unemployment as low as 4.5 percent.  If you're a worker, enjoy it.  If you're an employer, you've got problems.  (Imagine the AOL voice speaking up when you open your employment processing software, saying, "You've got problems.")

My economic forecast is for the pace of job growth to slow gradually, and for unemployment to gently increase to about five percent over the next 12 months.  But business leaders should still be thinking (in this order) of employee retention and hiring.

Hiring Good Employees: Not as Easy as You Think

The most dangerous part of the hiring process is what you think you know, but which might not be true.  I just finished reading Michael Lewis’s Moneyball, a best seller from a few years back that EVERY business manager should read.  The book is officially about baseball, but if you can’t relate it to your own business, it may be time for you to retire.

Baseball has more statistics than almost any part of your business, except your sales department.   When I was growing up, my best friend never read a book, but he studied the Dodger statistics every day.  While most companies were managing on no more numbers than you’d find in a quarterly financial statement, baseball fans were devouring detailed daily statistics.

Surprisingly, though, baseball management was ignoring most statistics.  As Moneyball explains, baseball managers and scouts had traditional ways to looking at players, and pretty much ignored the hard data available.

Billy Beane, General Manager of the Oakland A’s, hired a quantitative analyst who pored over the research of many amateur baseball analysts.  Then he went digging in the data himself.   The result was player arbitrage.  Take the expensive players that other teams wanted, replace them with less expensive players who had the right stats.  Billy Beane won more games than average, with fewer dollars of salary than average.  Anywhere else you’d call it efficiency.

So do you just “know” how to spot a good customer service representative, just like baseball’s old scouts just “knew” how to spot a standout minor leaguer?  Any chance that you’re judgment would stand up to statistical scrutiny?

Beane (actually his quant guy) also learned that some of the traditional statistics don’t do the best job of describing values.  They ended up ignoring fielders’ errors.  Instead of batting averages and RBIs, they focused on less common measures, such as on-base percentage and slugging percentage (a weighted average of bases per hit).

The business lesson here:  what you think you know may not be true.  The metrics you are using to justify what you are doing need to be subjected to tests and validation.

This is a great book to read after, or even before, Competing on Analytics, which I reviewed earlier.  If it motivates you to rethink your hiring strategy, take a look at this post: The 4 Steps to Using Metrics in Hiring Decisions .