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It’s an unfortunate fact for those of us who argue people should not be lumped in with a business’s “assets” - treated like “human capital,” “human resources” or “headcount.” By the economic laws of supply and demand, people are not that different from commodities. When there’s an oversupply, they cost less and the “buyer” has outsized leverage. When demand outstrips supply, the “seller” has the upper hand.
Sellers clearly now have that upper hand. A seemingly innocuous line in the U.S. Bureau of Labor Statistics announcement this week escaped the attention it deserves: “The ratio of unemployed persons per job opening was 0.9 in October 2018, a series low.”
Let that sink in. On average, for each job in need of a worker, there is 0.9 people on the market. Or, if fractions of “full-time equivalents” are not your thing, for every 10 jobs open, there are just nine people searching. It’s musical chairs in reverse, more chairs than people circulating around the seats.
This excess demand and limited supply was hard to imagine a decade ago, when the economic downturn turned really nasty. It was then we started using the proper noun “Great Recession” - capital “G,” capital “R.”
In July of 2009, that same Labor Department ratio went as high as 6.6. For every 10 jobs available, there were, on average, 66 unemployed people. 56 of them were going to stay unemployed for a while. Ten were going to have to accept deals - pay, commute, hours, travel, 401K non-match - more on their new employers’ terms. And most of those hired felt lucky not to be among the 56 who did not get a seat.
It was a time when, after a decade of leaders becoming familiar with the emerging concepts of “employee engagement,” they suddenly didn’t talk about it that much. They didn’t think they needed to.
At the back end of the recession and for about a half-year thereafter, the normal and healthy leverage that employees have over employers - more people quitting than being cut loose - was reversed. Never mind the costs of captive disengagement, it was hard to persuade leaders to embrace a strategy whose lead promise was to help them keep more of their employees when they didn’t want to keep many of their employees.
And then things started to improve. Slowly. Painfully slowly. By December 2010, there were 50 people circulating around 10 jobs. A year later, it was 39. It was 34 by the end of 2012, and 28 a year after that. Then 18. Then 15, 14, and last December, 12. Parity was reached in March of this year: 1.0 unemployed people per job opening, or 10 people for 10 chairs. For most of the year since then - thus not a fluke - it’s been at 0.9.
Employers are frustrated at the empty chairs. Police departments are struggling to find officers. Anyone who’s been in a burger joint lately has noticed the too few employees scrambling to fill orders as the supply of teenagers wanting a job is running low. The Federal Reserve Bank of Chicago’s entry in last week’s Beige Book even highlighted anecdotal evidence of increased “ghosting.”
“As they have for some time, contacts indicated that the labor market was tight and that they had difficulty filling positions at all skill levels,” the Chicago Fed reported. “A number of contacts said that they had been ‘ghosted,’ a situation in which a worker stops coming to work without notice and then is impossible to contact.”
The extreme seller’s market is unlikely to last. Economists are increasingly fretting that the next recession could be around the corner. Aggregate wage increases are finally starting to reflect supply and demand, but there are hints the market for people might be topping out. It’s an important opportunity to decide whether one’s current employer is the best ship in which to ride out a storm. The conventional wisdom suggests staying put, in hopes one’s tenure will shield against future layoffs. But outside of a seniority-based bargaining agreement, length of service doesn’t mean what it once did. And if a company panicked during the last recession, it will probably do so in the next one.
For leaders, falling over themselves now to attract and retain people with attention and perks and all the other signals that the company is committed to keeping them for the long haul, the question is whether they are prepared to maintain that tone when it once again becomes a buyer’s market. The best and best-performing companies do. They offer a relatively stable social contract because it’s part of their core intentions. Or because they realize employees reciprocate whether they are treated like commodities or like people, and they have memories that last longer than recessions.
