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04 Dec. 2019 | Comments (0)
It is not news that the US labor market is very tight. That is, with the unemployment rate near historic lows, employers are facing significant recruitment and retention difficulties. What is less known is that the labor market is tighter for blue-collar and manual services jobs than for the highly educated white-collar jobs. The exact opposite of prevailing trends in recent decades. As employers raise worker pay to attract talent, most of the wage acceleration is occurring in blue-collar and manual services jobs, where wage growth is already above prerecession rates. Wage growth for management and professional workers, which includes close to 40 percent of the workforce and most of total compensation, is accelerating more moderately, again, an almost unprecedented outcome in recent decades (Chart 1).
Chart 1 – Wage growth by occupation group, Private sector wages and salaries from the Employment Cost Index, annual rate
Source: Bureau of Labor Statistics and calculations by The Conference Board
The Conference Board Labor Shortages Solutions Survey provides additional detail on how companies are affected by the recent recruiting and retention difficulties. With blue-collar occupations facing some of the most severe labor shortages, it is not surprising that the effects of the labor crunch are being felt more severely by companies composed of mostly blue-collar workers (see Chart 2, in which most of the blue bars are larger than the corresponding white bars for each outcome). As part of the survey, we asked 225 business leaders, mostly HR practitioners, about the specific business outcomes that had occurred as a result of recruitment and/or retention difficulties.
Based on results, 85 percent of companies in “mostly blue-collar industries” reported recruiting difficulties versus 64 percent among companies in “mostly white-collar industries.” Further, almost a quarter (23 percent) of companies in mostly white-collar industries report having neither recruitment nor retention difficulties, whereas this is true for only 8 percent of companies in mostly blue-collar industries.
We find that companies that employ mostly blue-collar workers have been much more affected by labor shortages than mostly white-collar companies. For example, 37 percent of blue-collar-heavy companies reported a measurable adverse impact on the company’s bottom line (profitability) versus just 9 percent of white-collar-heavy companies reporting the same effect. As a result, employers of mostly blue-collar workers report being more active in pursuing solutions to labor shortages.
When compared to mostly white-collar companies, a much greater share of mostly blue-collar firms saw lowered morale and employee engagement and increased employee attrition. Blue-collar-heavy companies were also more likely to report candidates not showing up for scheduled interviews and a decreased candidate conversion rate. Not surprisingly, we find that 29 percent of mostly blue-collar companies have lowered output or turned down business due to lower capacity, consistent with the National Association of Manufacturers’ (NAM) finding that 28 percent of manufacturers have declined new business opportunities due to a lack of workers.
Chart 2 - Business outcomes as a result of recruitment and/or retention difficulties
Overall, regardless of a company’s make-up of workers, about 90 percent of survey respondents indicated that they were operating with unfilled positions as a result of labor shortages, while most had experienced increased employee workload or overtime, and about half had suffered from lost institutional knowledge.
Looking ahead, as challenges around sourcing and retaining top talent continue to increase labor costs, more companies will start to feel the squeeze on profits and added pressure to raise prices, outcomes that have not yet fully materialized, especially among companies more dependent on white-collar occupations (Chart 2).
The range of business outcomes and their uneven impact across US companies suggest that there is no universal approach to solving the labor shortage problem. Instead, companies will have to employ a range of recruitment and retention strategies, often in combination, to enhance their workforce. In a future blog, we’ll discuss the solutions gleaned from The Conference Board Labor Shortages Solutions Survey and from subsequent interviews of HR leaders. Both our survey and discussions with practitioners provide numerous examples of practices and initiatives that are being implemented toward the successful recruitment and retention of workers.
 Mostly blue-collar (white-collar) industries refer to those for which more than 50 percent of survey respondents identifying with that industry responded that the general distribution of workers in their company was mostly blue-collar (white-collar). Mostly blue-collar industries refer to: agriculture, forestry, and fishing; mining and quarrying; manufacturing; construction; and transportation and storage. Mostly white-collar industries refer to: financial, insurance, and real estate activities; business, consulting and professional services; education; healthcare, pharmaceutical; computer, technology, and information services; and government, public administration, and nonprofit.
 Chad Moutray, A Hiring Engine: A Breakdown of the Job Openings in Manufacturing, National Association of Manufacturers, May 2019.