News from the White House about the labor market has been promising but tempered with caveats. The labor force participation rate, a representative estimate of the number of people in the overall workforce, has normalized, and there has been a strong labor demand — jobs have been created and are available. Some concern remains about labor supply, but the data seems to indicate that supply and demand have largely equalized or are trending in that direction.
However, these broad, overarching statistics can provide only a surface-level view of the real situation. A closer, qualitative viewpoint will offer a clearer picture of where the hiring market truly stands.
To that end, in partnership with the global decision-intelligence company Morning Consult, we surveyed 400 participants who function as either hiring officials or primary decision-makers in their respective companies. The result is the "Hiring Managers: State of Hiring and Retention" study, which was created to assess the current state of the hiring market and learn what measures organizations are taking to retain their existing workforce. Here are some highlights from the survey.
Limited supply, high demand
One of the biggest concerns among hiring managers in 2023 is the limited availability of qualified candidates. According to the study, 57% of the surveyed hiring managers feel there is a limited talent pool of qualified entry-level professionals, while 56% felt the same regarding qualified experienced professionals.
The problem isn't with the overall supply of people who want to participate in the market; the problem is that there's a skills gap. Companies need candidates with certain skills, but there's a shortfall of candidates who actually have those skills.
There are at least two hypotheses to explain the variance between need and reality:
One generation is retiring from the workforce, another is on its way in, and still others are occupying an increasing proportion of the labor market. According to recent data, the Baby Boomers represent 19% of the labor force, Generation Xers occupy 36%, and Millennials make up 39%. In a few more years, the Boomer population will be less than 10%, Gen X and Millennials will hover around their current figures, and Gen Z will have moved in to occupy about 20% of the pie.
As the demographics shift, so does the availability of certain competencies, qualities, and occupational knowledge. Broadly speaking, each generation tends to hold particular attitudes toward work and classes of skills. As the Boomers leave, for instance, they're taking a lot of competitiveness with them, as well as decades of experience that have helped to inform key decision-making.
Most people are probably familiar with obsolescence when it comes to products, but skills can also grow obsolete over time. After all, who is still touting their ability to operate a mimeograph? The rapidly evolving nature of computer technology, on which virtually all industries rely, has put the problem of skill obsolescence in stark relief. For example, the general shift to cloud computing means there's less need for on-premises IT staff, and experienced IT pros specializing in on-site or legacy systems have seen their skill set devalued relative to cloud experts.
Rapidly aging skill sets are a common problem across sectors. In particular, the rise of artificial intelligence chatbots has been disruptive to numerous professions. Both existing professionals and active job seekers may have to incorporate AI expertise into their list of proficiencies if they want to thrive in current and upcoming hiring markets.
Attracting the new crowd
Given the shifting demographics of the hiring market, hiring managers have changed their offer packages to attract a new crowd of younger job seekers who prioritize work-life balance. At the top of the list of changes are money and flexibility, with 67% of respondents now increasing their salary offers, 55% providing flexible hours, and 41% allowing flexibility in where their employees work. Other common changes include:
- Expanded health benefits (34%)
- More paid time off (33%)
- Potential for fully remote work (31%)
"Given the shifting demographics of the hiring market, hiring managers have changed their offer packages to attract a new crowd of younger job seekers who prioritize work-life balance."
The impact of supply vs. demand on hiring practices
The study reveals that the current state of the employment market has overwhelmingly affected how managers approach the hiring process. More than 41% of respondents say they've had to expedite hiring just to fill open roles, a reality reflected in how they're going about finding candidates at all. Three of the four top activities for finding hiring candidates are entirely digital — job boards (74%), company website (56%), and social media posts (41%) — with employee referrals (63%) being the one outlier. The top recruiting tools are also digital:
- Job boards (55%)
- Social networks (50%)
- Candidate feedback surveys (41%)
- Applicant-tracking software (32%)
Some companies are using the opposite strategy. Rather than expediting hiring, they're thinking about halting it. The current state of the hiring market has compelled 39% of responding hiring managers to reconsider the need to fill open roles, 33% to slow down their hiring, 24% to implement hiring freezes, and 23% to downgrade their hiring budgets.
What are they doing, then, instead of hiring? They're looking internally. Most hiring managers (73%) are upskilling current employees instead of wading through a pool of candidates that may not possess the qualities that companies need to add to their workforce. Upskilling also provides other advantages compared to external hiring, namely:
- Higher engagement: Upskilling an employee demonstrates that the company has invested in their growth, which implies that it envisions a future that includes the employee. Implications of this sort go a long way toward making employees feel appreciated, and appreciation is a key component in helping employees feel more connected with both their work and their employer.
- Better retention: In general, engaged employees are loyal employees. Their work situation provides them with esteem and value, so there's less reason to go looking elsewhere for employment.
- Increased productivity: Instilling an employee with the skills they need to accomplish higher-level tasks equips them with the means to do more and do better.
Leveraging digital resources during the hiring process
When hiring managers do decide to hire externally, they vet candidates by identifying red flags, such as grammar errors, typos, or irrelevant experience on resumes. That's ordinary. But what is relatively new is the proportion of hiring managers who are using online and other digital resources to streamline the recruitment and hiring process. For example, 55% of respondents say they check candidates' social media to identify red flags in their demeanor. If a candidate tends to interact negatively with others online, that could negatively affect their application.
Perhaps a more interesting development is the difference in interview methods. Half of the recruiters who participated in the study say they have used a hybrid in-person/remote interview format in the past year, and an almost equal proportion (47%) say this hybrid approach is a shift away from their ordinary practice of doing primarily in-person interviews.
Acknowledging the state of the hiring market in 2023 is crucial for understanding the needs and values of existing employees and high-potential candidates. To attract and keep the talent your organization needs to thrive, you should provide the compensation and environment that today's job seekers want.
More tips about attracting and retaining talent:
- Whether you're dealing with a scarcity of candidates or a lack of qualifications, you'd do well to implement strategies for hiring during a shortage.
- Engagement is essential for retaining your current workforce. But do you know how engaged your employees are?
- If you're among the hiring managers who are reconsidering their external job postings, you may be interested in the advantages of recruiting from within.