With a 9.1% unemployment-rate as of August 2011, it would seem that the United States has an oversupply of labor that should allow companies to find qualified, permanent employees very easily. Unfortunately - and perhaps paradoxically - this is not exactly the case.
For a variety of cultural and economic reasons, large and small firms are having difficult times with searching for such staffers to suit their long-term needs. First, fewer people have the needed skills in today's high-tech world. Second, it became common long before the so-called Great Recession for people, especially young people, to change jobs every few years. As the Wall Street Journal noted:
During the recent boom, it was common to hear advice that frequent jobs changes were the way to take advantage of the fast-moving economy, maximize personal opportunities, and use leverage to get pay raises. Long over were the days of professional loyalty-employees to employers, and vice versa- when people clocked life-long careers at the same company.
Career advisor Penelope Truck once wrote to her Generation Y audience - those who will form the backbone of your future workplace:
Here's a summary of the new employee of today's workplace: Most will change jobs every two years. Most will start their adult life by moving back in with their parents. Most say that money is not their number one concern in evaluating a job.
You think it's a recipe for instability, right? But what else is there to do? Work at IBM until you get a gold watch? There are no more jobs like that - companies are under too much pressure to be lean and flexible (read: layoffs, downsizing, reorgs), so workers have to be, too (read: constantly on the alert for new job possibilities).
In fact, stability is a big goal for new workers today, precisely because the old paths to stability don't necessarily work.
However, stability is a goal not only for workers - but also for companies. Frequent turnover leads to inefficiencies, lost institutional knowledge, and a lack of long-term camaraderie among the staff. Ideally, at least in the past, companies had always strived for long-term permanency when it came to hiring. But that does not seem to be likely today.
As we read recently in the Philadelphia Inquirer, U.S. companies are hiring more people as independent contractors or other long-term, project-based workers rather than as permanent employees partly because of the lack of stability in the labor market:
Burned twice since 2000 (the dot-com recession and the recent bad-mortgage recession), companies have been reluctant to hire permanent employees...
Estimates of the group's size vary, from 7.4 percent, or 10.3 million independent contractors, as the U.S. Labor Department reported in 2005, in its most recent study, to one in three workers, according to Michigan researchers.
It's an economic version of the chicken-or-the-egg question: Are there fewer and fewer permanent employees now because staffers do not trust their bosses (and may want to work for themselves one day) or because the bosses do not trust their staffers (and need to cut costs to remain competitive)? We'll let you decide.
Still, the fact remains that instability is increasingly the only stable thing in the current market for quality, permanent labor. Large corporations, of course, have an easier time adapting. If five people in a department of fifty leave on a given week (or if qualified candidates are unable to be found for five positions), then the other forty-five will divide their tasks to ensure that the work is completed. In addition, the five empty desks in a room of fifty are not a costly drain in terms of office-space and overhead expenses.
But the story changes for small- and medium-sized firms. If five people out of seven leave, then it will be impossible for the other two to cover the work adequately. Furthermore, the company will now need only a third as much office space - in other words, they will be wasting money, say, by paying for three rooms when only one is needed. But the firm will likely be stuck in its long-term lease.
In a frantic, high-tech, fast-moving world, companies need the ability to adapt to changing needs just as quickly - whether in terms of staffing, office space, or anything else. When little today can be guaranteed over the long term, firms need as many short-term, flexible solutions as possible:
- Flexible office-space in Philadelphia and elsewhere allows companies to use - and pay for - only as much room as they need, when they need it. If your firm has a changing number of the aforementioned contractors or project-based staffers all the time, then you will need different amounts of office space in any given month. In such an environment, it is important not to lock yourself into a fixed, unchangeable, long-term contract.
- Virtual offices in Philadelphia or any major city let firms use rent space only when they need it. For example, a start-up company, a new consulting-firm, or a newly-graduated lawyer's practice might be run by one or two people from home most of the time. However, they may need to rent temporary space for a few days or longer for meetings with VC funders, potential clients, or paralegals. Virtual offices provide the needed professionalism at a fraction of the price.
- Business-support services in Philadelphia and throughout the country can also address frequently-changing administrative needs. When employees and contractors frequently come and go, it can be difficult to know how much administrative support will be needed. Will payroll, benefits, and other items need to be processed this month for five or fifty people? Should you have one or two assistants or secretaries? Needs are always changing, so it is important to be able to pay only for exactly what you need at any given time.
A tough economy can have long-term, societal consequences in ways that are far beyond what companies may see on a day-to-day basis - but those executives who can foresee the changes (like the increasing prominence of non-employees) and adapt accordingly are those who will come out ahead.