Wages Trail Demand for Skilled Temporary Employees

By SHRM Online staff Apr 21, 2011

For the second consecutive quarter, the Yoh Index of Technology Wages has shown modest gains as demand for highly skilled temporary workers increased while wages for these same workers stabilized.

The Yoh Index for the first quarter of 2011 followed fourth quarter 2010 results that showed a clear bottoming out of falling technical wages in information technology, life sciences, engineering, health care, aerospace and defense.

“First-quarter [2011] results confirmed our Q4 [2010] report that the bottom may have been reached, and wages for this vital component of the American employment market are strengthening, ever so slightly, as the industry stabilizes and American employers search for ways to post gains in a recovering economy,” said Lori Schultz, president of Yoh, a staffing management consulting firm that services high-tech industries, in a statement about the latest index results.

Since 2001 the Yoh Index has been benchmarking temporary wages for highly skilled employees. The company says the index serves as a bellwether of longer-term economic health by assessing demand for technical skills in a knowledge-based economy.

While the index fell 3 percent from December 2010 to January 2011, it rebounded 1.15 percent and 0.08 percent in February and March 2011, leading to a Q1 average index performance of 110.4—nearly a 1 percent gain over the 2010 fourth-quarter index. The January 2011 decrease reflected the same results as the Bureau of Labor Statistics (BLS) and payroll surveys, which blamed slackened first month demand on poor weather in key markets nationwide. Weather anomalies can have a significant impact on the on-demand market of hourly based temporary employment.

“Stabilization, while preferred over reductions in employment demand and wages, does not immediately translate into a vibrant labor market and illustrates ongoing employment weakness in the economy as a whole,” according to Schultz. “This is not surprising when you consider that while Q1 overall employment figures were widely reported as an improvement with some 216,000 jobs added to the U.S. economy, at current job creation levels the country will require eight years of growth to replace the 8.8 million jobs lost in the recession.”

Maintaining Momentum

While a non-robust but consistent employment market will moderate consumer optimism, it does present a number of opportunities for companies to maintain Wall Street momentum. This momentum can be sustained through smart employment practices that control labor costs while fueling key enterprisewide initiatives designed to drive growth and seize competitive advantages.

One such area is in mergers and acquisitions (M&As). In 2010, companies held more cash on their balance sheets than at any other time for at least 58 years, the Wall Street Journal reported.

With corporate coffers flush and organic growth difficult to find, M&A activity is heating up and expected to reach a boiling point in a number of industries in 2011.

“First-quarter [2011] M&A deals, such as AT&T's intention to purchase T-Mobile, demonstrate the willingness of companies to acquire growth by putting cash on hand to work,” said Schultz.

Highly skilled temporary workers serve as a hedge to risk in active markets. At the same time, business demands for growth are evolving along with demand for skilled labor.

In technology, for instance, cloud computing and application development are boosting demand, even outside of what some might describe as the bubble of Silicon Valley.

“Cloud computing and web application development is for real, as seen in increased demand for these technicians across the country,” said Schultz. “While far from frothy, the demand in these areas is one factor that is stabilizing falling wages and providing for more consistent future employment markets.”

Enterprise resource planning (ERP) also is showing renewed strength.

“Not everything is going to the cloud,” Schultz said. “Higher risk, back-office processes will remain within the enterprise. And Yoh is seeing consistent demand for traditional ERP technicians who can build and deploy solutions quickly.”

Inflation, Talent Wage Increases

While commodity, food and fuel prices are spiking, inflation is unlikely to increase wages for highly skilled employees significantly in the near term, predicted Schultz.

“To date inflation has been walled off from the economy as a whole and employees, still stung by the harsh realities of the recent recession, are reluctant to push for wage increases in light of the number of professionals still underemployed or absent from unemployment numbers through long-term joblessness,” she said.

However, the recession has had the unintended effect of loosening the bonds between employees and employers, she noted. As the economy recovers, employees are becoming more willing to consider change.

“For the first time in years,” said Schultz, “we are seeing a willingness of some full-time employees to shift to the temporary market as a strategy to improve career and income prospects. As other workers see this success, it is likely to begin a domino effect of wage acceleration.”

For employers, the implications are obvious. “The ability to benefit from highly skilled workers at historically attractive rates and at historically high talent levels is an open invitation to tightly control costs while spurring growth and profitability,” said Schultz. “Skilled temporary workers provide tremendous flexibility in a still hardening economic recovery, where corporations need to deploy unimagined creativity to maintain growth, dividends, and competitive advantages in a less than robust demand environment.”

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