In recent years, job candidates have controlled the market, but trends are re-emerging that have not been seen in decades. Interest rates hikes have caused new shifts. Are we in for a reversal of roles?
A quick recap to set the scene for 2023. As an employer during The Great Resignation, you probably couldn’t avoid the scramble to attract and retain talent. You might have been forced to magnify salaries to stop the flow of quiet quitting. Australia’s wage growth rate shot up for the first time in years. We saw the dawn of more flexible work arrangements. The gig economy got a turbo-boost. It was a candidate’s market.
Post-pandemic, more people are now engaged in work (a growing participation rate). At the close of 2022, we’d reached the lowest level of unemployment since 1974, at 3.4%. Seasonal fluctuation typical at the start of a year saw unemployment rise to 3.7% in January.
Staffing was stabilising and recruitment slowing. However, nine consecutive interest rate hikes since May 2022 have disrupted expected patterns. Inflation has risen to 7.8%—the highest since 1990. The result is a sharp rise in the cost of living. Businesses have less to invest in salaries and are reining in their spending as supply costs shoot up. Whispers of a potential recession triggered fears of job freezes or layoffs.
The fast pace of inflation means today’s higher salaries are not buying more for Australians, but far less than they could a year or two ago. Real wage value has dropped by 3.9%. Households are feeling the pinch as house values fall and mortgage repayments rise.
Of course, that means workers are seeking ways to increase their income. Qualtrics released a survey in November 2022 of 1,020 full- and part-time Australian workers. Half the respondents said they were cutting discretionary spending like eating out, entertainment and travel. Over half the respondents hoped to work more overtime or extra shifts, and nearly two thirds (many of them parents) were looking for a new job or salary to increase their take-home pay. A higher proportion of workers, especially those with casual jobs, now hold multiple jobs to keep the wolf from the door.
But perhaps more importantly, workers are more hesitant to leave their jobs. When financial uncertainty hovers, job security becomes a high priority. Those who left a stable job during the pandemic may now regret their decision.
The low unemployment rate means more jobs than workers, but because workers are holding onto the jobs they have, recruitment is dipping.
As workforce mobility slows, you might breathe a sigh of relief at stronger staff retention, but there are still hurdles to navigate.
Difficulty filling current job vacancies stems from a lack of candidates with the right qualifications, rather than a lack of job seekers. Finding skilled workers is now the challenge, particularly in industries that need qualified professionals.
On the one hand, skill shortages can drive demands for higher salaries. On the other hand, the reality of inflation means that employers across the board have less capacity to meet high salary demands. It could yield stalemates for candidates who want to negotiate salary.
Job adverts are still on the rise, showing that job creation remains strong in Australia despite inflation. There are still almost double the number of job vacancies than before the pandemic. Employers are growing rather than cutting staff numbers, suggesting optimism for business growth rather than recession in the coming months.
The Reserve Bank of Australia predicted in November 2022 that inflation would peak at around 8%, and numbers would start to fall early this year. This means we might begin to reap the positive effects of a stabilising economy in the year ahead.
The worker population is increasing. Government has significantly increased permanent migration visas nationally from 160,000 to 195,000 places, with planned increases in states and territories from 11,200 to 31,000 visas. In particular, these will address gaps in nursing and technology, and may ease the competition for candidates.
You’ll probably begin to see a shift back to motivated job seekers rather than the opportunistic ones of the pandemic.
Government stimulus packages during the pandemic resulted in a surge in construction, healthcare, education and trades growth. These industries are now feeling the shortage of qualified professionals.
The tech industry experienced radical shifts during the pandemic as organisations recognised the importance of e-commerce and digital traffic. Government spending on cyber security will keep qualified professionals like cloud engineers and programmers in demand, but there is likely to be less hiring activity.
Hospitality, retail and recreation were affected most by closed borders, which caused a drop in younger workers (under 35) working low-paying jobs. This is likely to be alleviated in the coming year, since Australia remains an attractive workplace to the international community. However, as consumer spending slows, these industries are likely to generate less revenue, so this job market will be impacted both ways.
The rising cost of living has resulted in candidates losing some of their negotiation power in a less generous job market. Despite pressures easing on employers, the low unemployment rate yields fewer active job seekers, so you’ll still need to be wise about your recruitment strategies.
Research shows that today’s job candidates are looking beyond salary when considering a job. They’re looking for an enjoyable, meaningful place to work. You’ll need a well-rounded value proposition that considers workplace culture and values, employee experiences and opportunities for growth to keep attracting the talent you need.
According to Dr Crissa Sumner, Employee Experience Strategist for Qualtrics, it’s critical in the current environment to know what matters most to employees and customers. Understanding those needs will help find and keep customers, attract and retain talent and mitigate risk.
Job flexibilities that emerged during the pandemic are now expected. Employers that want arrangements to return to the way they were before are likely to experience pushback. They would do better looking for new ways of working. Where remote or hybrid working is not possible, flexibility of the benefits or rewards package can make the difference, for example:
paid parental leave
sign-on bonuses or incentives
As the cost of living rises, candidates value job security more highly. When workers know they could be with the same employer in a year, two years, or five years’ time, they’ll be more likely to actively develop their skills and career. Not only does upskilling help with employee retention, but studies show that workers who have opportunities to build their careers are more satisfied and, consequently are more loyal employees.
The rising cost of living is changing job market trends. While a global recession is unlikely, a slowing economy sees a highly engaged workforce holding onto existing jobs, while looking for ways to increase income. Recruitment has slowed but many industries are still on the hunt for qualified professionals. Employers would do well to retain a focus on employee propositions, flexibility and job security as they shape recruitment strategies in the year ahead.