Amid a pandemic that has forced business shutdowns, created supply chain issues and rejiggered the economy and job market, employers are facing challenges like nothing in recent memory. One of the problems to be solved: employee wages, which rose by an estimated 2.7 percent in 2021, are expected to climb another 3 percent in 2022, according to Kiplinger. Many companies, ready to staff up again after the large-scale layoffs witnessed over the past 18 months or so, are finding employees reluctant to return at or near their previous wages. All of which has forced them to strategize on navigating wage inflation.
This shouldn’t come as an enormous surprise to anyone who has been paying attention. Prior to the pandemic, the U.S. economy – and business with it – had enjoyed a good run. Even now, expected wage increases are projected to fall short of the 2022 Social Security cost of living adjustment (5.9 percent), the largest COLA since 1982.
What’s important to note is that these developments figure to be largely temporary. The federal government is generally favorable to business, and as the economy gradually stabilizes, the job market should follow. The question employers need to ask themselves in the meantime: What should be done until then?
First and foremost, you need a long-tail plan for staffing. Start by assessing your business needs and current staffing status. Are you in a position to wait for the economy and job market to normalize? Take a hard look at your company so that you understand your margins. Where can you afford to pay more? What can be categorized as nonessential expenditures until a recovery is in full swing? You will need to have a clear picture of the ebb and flow of your new business, which may dictate increases or decreases in staff needs.
Begin evaluating your current staffing structure, as well as individual employees. Are they performing at optimum levels? Could your staff be leaner, or at least more efficient? Indiscriminate cuts are risky. Hiring new employees is costly and time consuming, which can create a drag on productivity and depress profits in the long term. If you anticipate an uptick in business sooner rather than later, riding out the storm may be the safest approach.
Keep in mind, a contractor who $55 per hour. last year may now cost $75 per hour. That, in the short term, is the price of doing business. But PeopleCaddie anticipates a not-so-distant future when wages come down again. In order to compete for top talent and maintain viability (let alone thrive) in the interim, companies must assess and, if necessary, restructure – not just staff but perhaps their entire operations.
Boom times always follow lean periods. Take stock and adjust as needed so that your business is in position to take advantage when the eventual turnaround arrives.
How can PeopleCaddie help? Navigating wage inflation might be easier with the support of a talent cloud.