Labor Market Power Dynamics: September 2024 EN:Insights Forum

At the September EN:Insights Forum, Executive Network members heard about SHRM’s latest research exploring the state of employer-employee relationships in the U.S. labor market, drawing on insights from workers, job seekers, and HR leaders. 

“Employer and employee power dynamics are a key driver of workplace behavior,” said Ragan Decker, Ph.D., SHRM’s manager of Executive Network and SHRM Business research. “In our new research, we found that 57% of HR leaders say it significantly influences their employer’s decisions, and 50% of workers say it significantly influences how they behave at work.” 

Here are five critical insights from the research.

Research Insight 1: Employers and employees are deeply divided about who holds the upper hand.

Who holds more power today—workers or employers?  

Unemployed job seekers

• Workers: 13%
• Balanced: 6%
• Employers: 81%                                                               

Workers

• Workers: 18%
• Balanced: 20%
• Employers: 62%

HR leaders

• Workers: 57%
• Balanced: 20%
• Employers: 23% 

“This data really highlights how important perceptions are when thinking about power dynamics in the U.S. labor market,” Decker said. “Despite labor shortages, many workers and job seekers are feeling like employers hold more power.” 

Research Insight 2: Many workers—especially unemployed job seekers—don’t feel confident that they could find a new job with similar pay and benefits within three months. 

Workers Who Feel Confident About Finding Comparable Jobs

Unemployed job seekers

• Not at all confident: 46%
• Somewhat confident: 42%
• Confident: 9%
• Very confident: 4%

Workers

• Not at all confident: 21%
• Somewhat confident: 35%
• Confident: 25%
• Very confident: 18% 

“With such low confidence about finding a comparable job among workers and job seekers, why do so many HR leaders say the labor market is strongly or moderately in favor of workers?” Decker asked. “HR leaders cite rising expectations among employees and the talent gap as two of the top factors affecting that balance of power.

Research Insight 3: Just 29% of HR leaders say they’re satisfied with the availability of qualified candidates when filling their open positions. 

Factors HR leaders see affecting the balance of power:

• Employee expectations and demands: 64%
• Availability of skilled workers: 62%
• Economic environment: 58%
• Generational attitudes toward work: 55%
• The organization’s financial performance: 55%
• Government regulations/labor laws: 38%
• Tech advancements affecting the workplace: 24%
• Strength of labor unions: 8%

“According to SHRM’s most recent talent trends research, one in four organizations are reporting that full-time, regular positions they’ve hired for in the last 12 months required new skills due to changing technology,” Decker said. 

“HR leaders feel it is more of an employee-driven market because they’re struggling to meet workers’ expectations and feel there is a lack of qualified candidates. Workers tend to feel it is more of an employer-driven market, partially because employers aren’t meeting their expectations, and may feel that they’re lacking the skills needed for many of the jobs that are open.” 

Research Insight 4: Workers have higher expectations for the organizations where they work and feel comfortable demanding more from their employers. More than 60% of workers say they hold organizations to a higher standard than they did five years ago, and 85% say workers should feel comfortable demanding more from their employers.

Workers would quit, even in an employer-driven market due to unmet expectations with: 

• Compensation: 70%
• Benefits: 57%
• Advancement opportunities: 47%

“I think it’s important to think about what this actually means in terms of behavior,” Decker said. “Despite some misalignment between HR leaders and workers about who holds more power, workers do have higher expectations and are even willing to leave their jobs if their expectations aren’t met.”                                                 

Research Insight 5: Organizations are motivated to adapt to the evolving employer-employee power dynamic amid a talent gap.

Organizations have responded by increasing: 

• Starting salaries: 42%
• Training and development: 41%
• Base salaries or wages: 38%

“Our findings underscore the reality that—for all their value—the metrics most often used to measure U.S. labor market health do not necessarily align with the perceptions of individual workers. Organizations should be mindful of this gap when developing strategies to attract and retain talent,” Decker concluded.

Justin Ladner, SHRM Senior Labor Economist: Pandemic Effects Are Softening, but Big Demographic Changes Loom

Justin Ladner is a SHRM senior labor economist. His work centers on examining labor market trends and emerging issues facing employers and employees. He has extensive experience researching occupational mobility, personnel training, recruiting, and retention, being particularly passionate about leveraging data and analytics to inform real-world policy improvements. Ladner holds a master’s degree and Ph.D. in economics from the University of Michigan.

One point Ladner emphasized is how the aging workforce in the U.S. will influence the labor market in different ways. 

“Organizations are going to be employing people who are older workers, and the timing of their important life decisions has changed. Now, childbearing is concentrated in people’s 30s and even 40s. That means the needs of people having children are going to be really different. Increasingly, those parents are providing caretaking services to young children while simultaneously providing them to older adults. This will drive the decisions people make in terms of: Where do they work? How long do they work? When do they need to take time off? What reasons do they need to take time off? 

“Another big uncertainty is just how accessible immigration will be, especially in the next 10 years. That will play a big role in terms of how quickly the labor force will grow and how much we will be able to combat the aging population. Immigration tends to bring in young, prime working-age people. That level of uncertainty will be interesting to track going forward.”

Here are some excerpts from Ladner’s comments during the September EN:Insights Forum.

How has the evolution of labor market conditions since 2020 shaped the balance of power between employers and job seekers? 

Right before the pandemic, the labor market was healthy and increasingly tight. There were a lot of job openings, unemployment was very low, and wage growth was strong. Then the pandemic hit, and we had a sudden wave of layoffs of nearly 20 million people, followed by a pretty quick recovery. As we entered 2021, we saw very rapid growth in job openings, which increased willingness for people to voluntarily quit and look for different employment opportunities.

A lot of it had to do with the proliferation of remote work and people considering different dimensions of work that went beyond income. That persisted into 2022, and the labor market continued to be tight well into 2023. Job openings peaked at about 12.2 million in March 2022. Before the pandemic, the average was about 4.5 million. It was just hugely unprecedented. 

Throughout 2024, there’s been real tension around the idea that the labor market has been surprisingly resilient during this period of very high interest rates. We’ve gotten more clarity that the labor market has been loosening in the last couple months, with the gap between job openings and unemployment becoming considerably narrowed. At the beginning of the year, there were 2.6 million more job openings than there were unemployed people. Now it’s about half a million, but we still have a labor shortage.      

What sectors are struggling the most in terms of job shortages?

Health care is the No. 1 sector seeing shortages, and that’s been unsurprising for a lot of reasons. The pandemic era was extremely difficult for health care workers. It led to a lot of attrition and early retirements. Another issue is that demand for health care services is continually going up as the population ages, which is something that’s very likely to be an issue going well into the future. Construction is another sector that has been steadily growing. It’s a sector that goes through booms and busts, so we can’t really project what that’s going to look like in the future, but it’s a sector that’s looking quite strong as well. 

We’ve seen some job losses in the manufacturing sector, particularly durable goods. Information technology has been weak as well. 

What effect have these conditions had on job security and wage growth?

Job security has varied a lot during this period. In 2020, job security was a huge issue, particularly in sectors affected by forced closures, such as leisure and hospitality. This persisted into 2021. Meanwhile, government hiring has been quite consistent throughout this period, so job security there has been good. The Great Resignation was a great showcase of people feeling very confident in their jobs. As the Great Resignation ended in mid-2022 heading into 2023, it’s become more unstable for certain groups. Tech is a very high-profile example. 

Wage growth was very strong in 2021 and 2022, and even though it’s cooled off quite a bit, still remains above average. In terms of worker perceptions, people in general felt negatively about their wages because inflation was so high during 2021 and 2022 that real wages actually fell. Wage growth is now outpacing inflation, but those lingering effects are influencing how people view their wages because there are still quite a few people that are now, in real terms, earning less than they did before the pandemic.

How have labor market conditions evolved in 2024?

The health of the labor market is a key indicator that the Federal Reserve has been closely tracking when considering potential interest rate cuts. (Editor’s Note: The Fed cut interest rates by 50 basis points on Sept. 18.) If wages are rising rapidly, cutting rates runs the risk of encouraging higher inflation, which the Fed has been working to curtail. But if you maintain high rates for a long period of time, that constrains investment so that companies aren’t growing as fast [and] hiring starts to fall off, and that leads to a poorer job market.

In just a few months, we’ve gone from a period of uncertainty to understanding that the labor market has definitely cooled down. It’s at least back to what it was like right before the pandemic, and unemployment is actually a little bit higher. There’s good evidence that the labor market’s loosened, and as a result, there are widespread expectations for several interest rate cuts going into next year.

What key labor market trends do you foresee for 2025?

One thing that definitely will affect the labor market is the pace of those expected interest rate cuts by the Federal Reserve. Lower interest rates can help a lot of sectors, especially where borrowing is important. In terms of the labor market, health care labor is going to continue to be strong. Manufacturing has seen employment shrink a little bit, and we’ll see if that’s a long-run trend or a short-term shock. 

There are a lot of long-term trends that are going to be important in 2025. One of them is that for many, many decades, we’ve been going through a prolonged period of demographic change. A lot of this relates to the Baby Boomer generation. Baby Boomers were entering prime working age in the early 1970s and then began exiting it toward the turn of the century. So we had this big growth in the labor force between 1970 and 2000, followed by kind of a stall in the growth of the labor force as Baby Boomers were moving out of prime working age.

Going forward, there is this concern that the labor force will not be able to grow fast enough to meet demand for labor, so that will be another trend to look at in 2025. One thing that will be really important here is whether or not we are finally going to see a recovery in labor force participation among the oldest age groups.

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